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HOW TO FINANCE YOUR GROWTH: A METRICS BASED APPROACH MARTIN MACMILLAN, CEO
HOW TO FINANCE YOUR GROWTH: A METRICS BASED APPROACH
MARTIN MACMILLAN, CEO
How to Finance Your Growth: A Metrics Based Approach 2
ABOUT POLLEN VCMARTIN MACMILLAN, CEO & FOUNDER
Pollen VC provides a new type of growth capital for
app developers who are ready to scale
We enable developers to fund advertising by
unlocking the value in app store revenues early
Our model is a flexible and non-dilutive alternative to
equity financing, allowing developers to retail control
while growing their business
Our mission is to get start-ups to think about capital
efficiency, using the right type of funding for the
right purpose
3
Everyone knows the stories about a few apps that go
viral with no promotion.
For the 99.9% of all other apps launched, it’s necessary
to spend to acquire users.
THE REALITY IS THAT YOU NEED TO SUPPORT YOUR APP WITH PAID UA
How to Finance Your Growth: A Metrics Based Approach
4
Let’s start with the basics…
UNIT ECONOMICS OF PAID UA
LTV - Lifetime Value
• Expected value of that customer
over it’s lifetime, i.e. total
amount earned
• What does it mean for app
developers?
• How long is a lifetime?
CPI - Cost Per Install
• How much does it cost to acquire a
user?
• Where do I find these users?
• How do I target these users?
• When do I pay for these users?
How to Finance Your Growth: A Metrics Based Approach
5
UA HAPPINESS
$2$1
How to Finance Your Growth: A Metrics Based Approach
6
50c$1
UA MISERY
How to Finance Your Growth: A Metrics Based Approach
7
RECIPE FOR SUCCESS
Understand what it costs to acquire
a user
How to Finance Your Growth: A Metrics Based Approach
How long before you receive the
revenue?
The revenue they will generate
VS +
How to Finance Your Growth: A Metrics Based Approach 8
$1.60
$1.40
$1.20
$1.00
$0.80
$0.60
$0.40
$0.20
$0.00
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PROFIT & LOSS DOES NOT EQUAL CASH-FLOW
Days from launch
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THE PROBLEM: PLATFORMS ONLY PAY OUT REVENUE UP TO 60+ DAYS AFTER YOU’VE EARNED IT.
LAUNCH You’re earning money from day 1
This is your moneytrapped in the payment system
Platforms release your cash…
How to Finance Your Growth: A Metrics Based Approach
10
HOW TO USE THIS TO YOUR ADVANTAGE
Unlock the value of your earnings
rather than using venture capital to
fund growth
Think of your accrued
app store earnings as an
untapped asset
How to Finance Your Growth: A Metrics Based Approach
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LTV CALCULATION ASSUMPTIONS
How to Finance Your Growth: A Metrics Based Approach
$1.50 LTV
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LTV CALCULATION ASSUMPTIONS
How to Finance Your Growth: A Metrics Based Approach
$1.50 LTV
365 Day max.
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LTV CALCULATION ASSUMPTIONS
How to Finance Your Growth: A Metrics Based Approach
$1.50 LTV
365 Day max.
$1.00 CPI
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LTV CALCULATION ASSUMPTIONS
How to Finance Your Growth: A Metrics Based Approach
$1.50 LTV
365 Day max.
$1.00 CPI
1,000 Installs daily
How to Finance Your Growth: A Metrics Based Approach 15
$1.60
$1.40
$1.20
$1.00
$0.80
$0.60
$0.40
$0.20
$0.00
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LET’S GET BACK TO LTV
Days from launch
How to Finance Your Growth: A Metrics Based Approach
-$100,000
-$80,000
-$60,000
-$40,000
-$20,000
$0
$20,000
$40,000
$60,000
$80,000
$100,000 Se
p-1
5
Oct
-15
No
v-15
Dec
-15
Jan
-16
Feb
-16
Mar
-16
Ap
r-16
May
-16
Jun
-16
Jul-
16
Au
g-1
6
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NET CASH POSITION
Net Cash Position
first becomes
PositiveFirst App Store
payment hits bank
account
Spending $1,000/
day on ads
How to Finance Your Growth: A Metrics Based Approach 17
USING REVENUE RECYCLINGN
et C
ash
Po
siti
on
-$400,000
-$320,000
-$240,000
-$160,000
-$80,000
$0
$80,000
$160,000
$240,000
$320,000
$400,000
Weeks After Launch
0 4 8 12 16 20 24 28 32 36 40 44 48 52
Net Position w Revenue Recycling Net Position
-$100,000
-$80,000
-$60,000
-$40,000
-$20,000
$0
$20,000
$40,000
$60,000
$80,000
$100,000
Sep
-15
Oct
-15
No
v-15
Dec
-15
Jan
-16
Feb
-16
Mar
-16
Ap
r-16
May
-16
Jun
-16
Jul-
16
Au
g-1
6
How to Finance Your Growth: A Metrics Based Approach 18
USING REVENUE RECYCLINGN
et C
ash
Po
siti
on
-$400,000
-$320,000
-$240,000
-$160,000
-$80,000
$0
$80,000
$160,000
$240,000
$320,000
$400,000
Weeks After Launch
0 4 8 12 16 20 24 28 32 36 40 44 48 52
Net Position w Revenue Recycling Net Position
-$100,000
-$80,000
-$60,000
-$40,000
-$20,000
$0
$20,000
$40,000
$60,000
$80,000
$100,000
Sep
-15
Oct
-15
No
v-15
Dec
-15
Jan
-16
Feb
-16
Mar
-16
Ap
r-16
May
-16
Jun
-16
Jul-
16
Au
g-1
6
Recycling
revenue allows
you to achieve
same UA
spend on 20%
of your
starting
budget or
spend 4x more
on paid UA
with same
budget
c.$20,000 required
c.$80,000 required
How to Finance Your Growth: A Metrics Based Approach 1919
Reinvest earned LTV directly into advertising
Acquire more users faster
Extract LTV on a daily basis
A NEW WAY…
Extract your LTV as you earn it, to fund
your advertising spend and fuel your growth.
Keep your VC money in the bank!
How to Finance Your Growth: A Metrics Based Approach 20
LTV MODELLING
Pollen VC is creating a set of tools using readily available metrics of retention and ARPDAU to help developers understand and model LTV
Understand payback periods, and how to measure
Model financials based on metrics to show how much UA you can fund, and how quickly you can grow
If your cohorts are not delivering, chop the marketing spend and redeploy elsewhere
IF YOU WANT US TO MODEL YOUR LTV AND CASHFLOW PLS EMAIL US!
@PollenVC
