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How to Finance Your Growth A Metrics Based Approach - Martin Macmillan

How to Finance Your Growth A Metrics Based Approach - Martin Macmillan

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Martin Macmillan presented this at the Pollen VC Google Growth Summit in London on the 21st September

Martin Macmillan presented this at the Pollen VC Google Growth Summit in London on the 21st September

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How to Finance Your Growth A Metrics Based Approach - Martin Macmillan

  1. 1. HOW TO FINANCE YOUR GROWTH: A METRICS BASED APPROACH MARTIN MACMILLAN, CEO
  2. 2. How to Finance Your Growth: A Metrics Based Approach 2 ABOUT POLLEN VC MARTIN 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. 3. 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. 4. 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. 5. 5 UA HAPPINESS $2$1 How to Finance Your Growth: A Metrics Based Approach
  6. 6. 6 50c$1 UA MISERY How to Finance Your Growth: A Metrics Based Approach
  7. 7. 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 +
  8. 8. 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 1 11 21 31 41 51 61 71 81 91 101 111 121 131 141 151 161 171 181 191 201 211 221 231 241 251 261 271 281 291 301 311 321 331 341 351 361 PROFIT & LOSS DOES NOT EQUAL CASH-FLOW Days from launch
  9. 9. 9 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 money trapped in the payment system Platforms release your cash… How to Finance Your Growth: A Metrics Based Approach
  10. 10. 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
  11. 11. 11 LTV CALCULATION ASSUMPTIONS How to Finance Your Growth: A Metrics Based Approach $1.50 LTV
  12. 12. 12 LTV CALCULATION ASSUMPTIONS How to Finance Your Growth: A Metrics Based Approach $1.50 LTV 365 Day max.
  13. 13. 13 LTV CALCULATION ASSUMPTIONS How to Finance Your Growth: A Metrics Based Approach $1.50 LTV 365 Day max. $1.00 CPI
  14. 14. 14 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
  15. 15. 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 1 11 21 31 41 51 61 71 81 91 101 111 121 131 141 151 161 171 181 191 201 211 221 231 241 251 261 271 281 291 301 311 321 331 341 351 361 LET’S GET BACK TO LTV Days from launch
  16. 16. 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 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 16 NET CASH POSITION Net Cash Position first becomes Positive First App Store payment hits bank account Spending $1,000/ day on ads
  17. 17. How to Finance Your Growth: A Metrics Based Approach 17 USING REVENUE RECYCLING NetCashPosition -$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 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16
  18. 18. How to Finance Your Growth: A Metrics Based Approach 18 USING REVENUE RECYCLING NetCashPosition -$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 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 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
  19. 19. 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!
  20. 20. How to Finance Your Growth: A Metrics Based Approach 20 LTV MODELLING PollenVC 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
  21. 21. IF YOU WANT US TO MODEL YOUR LTV AND CASHFLOW PLS EMAIL US! martin@pollen.vc @PollenVC

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