💸 UA financing Secrets: Scale your game without selling your soul
This episode of Two and a Half Gamers dives deep into UA financing with Jeff Cohen from PVX Partners, unpacking how mobile game studios can scale without giving up equity. Jeff breaks down the mechanics of non-dilutive funding, explains why not all financing partners are created equal, and reveals the traps founders fall into when choosing a lender.
Founders' guide: How to choose the right UA financing partner
https://pvxpartners.com/blog/how-to-choose-the-right-ua-financing-partner-a-founders-guide
Key insights include:
UA financing ≠ publishing — best for post-product market fit games with proven ROAS curves.
Funding scale: PVX clients receive between $500K and $2M/month, with the largest hitting $4M/month.
Market potential: UA financing is projected to hit $2.5B by 2027.
Flexibility matters — some lenders force you to take capital every month, even when you don’t need it, which burns cash.
Hidden costs: setup fees, legal fees, bundled SaaS tools you don’t need.
Risk management: Understand secured vs unsecured loans. With PVX, the risk is on them if funded cohorts don’t pay back.
Alignment is key — avoid lenders whose primary business isn’t lending (publishers, VCs, SaaS providers with side financing).
Scalability: Choose a partner who can grow your facility with you so you don’t stall at scale.
Main takeaway: Treat UA financing like raising equity — vet the partner’s reputation, structure, and incentives as if your studio’s future depends on it… because it does.
Get our MERCH NOW: 25gamers.com/shop
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PVX Partners offers non-dilutive funding for game developers.
Go to: https://pvxpartners.com/
They can help you access the most effective form of growth capital once you have the metrics to back it.
- Scale fast
- Keep your shares
- Drawdown only as needed
- Have PvX take downside risk alongside you
+ Work with a team entirely made up of ex-gaming operators and investors
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This is no BS gaming podcast 2.5 gamers session. Sharing actionable insights, dropping knowledge from our day-to-day User Acquisition, Game Design, and Ad monetization jobs. We are definitely not discussing the latest industry news, but having so much fun! Let’s not forget this is a 4 a.m. conference discussion vibe, so let's not take it too seriously.
Panelists: Jakub Remiar, Felix Braberg, Matej Lancaric
Special Guest: Jeff Cohen
https://www.linkedin.com/in/jeff-cohen-29930455/
Join our slack channel here: https://join.slack.com/t/two-and-half-gamers/shared_invite/zt-2um8eguhf-c~H9idcxM271mnPzdWbipg
Chapters
00:00 Introduction to UA Financing
04:09 Understanding UA Financing
06:57 The Need for UA Financing
09:53 Choosing the Right UA Financing Partner
12:30 The Business Model of UA Financing
15:29 Pricing and Interest Rates in UA Financing
18:36 Flexibility and Facility Size in UA Financing
22:58 Understanding Risk Management in Lending
25:32 The Importance of Counterparty Risk
29:10 Aligning Incentives Between Lenders and Borrowers
32:46 Navigating Secured vs Unsecured Loans
39:06 Evaluating Lenders: Key Considerations and Red Flags
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Matej Lancaric
User Acquisition & Creatives Consultant
https://lancaric.me
Felix Braberg
Ad monetization consultant
https://www.felixbraberg.com
Jakub Remiar
Game design consultant
https://www.linkedin.com/in/jakubremiar
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Please share feedback and comments - matej@lancaric.me
Listen and follow along
Transcript
If you could bootstrap your way to a point where you can get to UA funding, I think it becomes the best option.
And in fact, most of actually the companies we're working with have raised VC funds.
So
it's not like this is replacing VC funding, it's more replacing
growth equity funds.
I still think it's 100% better than the other option because you again retain the shares and stuff.
The thing that I wanted to mention here, the
devil in the details, is that you need somebody competent to spend it.
It's 4
Mate, you aim as your eyes on the prize.
Tracking data through the cyberspace skies.
Felix stacks colors like a wizard in disguise.
Jackups crafter realms lift us to the highs.
Two and a half gamers talking smack.
Slow hockey sick, got your back.
Ads are beautiful, they like the way.
Click it fast, don't delay.
Uh-huh.
Uh-huh.
Uh-huh.
Uh-huh.
Uh-huh.
Uh-huh.
Uh-huh.
Hello, everybody.
Welcome.
This is a very special episode.
All the special episodes, but it's a very special, extra special episode.
Cause today we're gonna talk about Jakub.
What are we going to talk about?
We're going to talk about UA financing.
Very good.
And that's why we have Jeff from PVX on the podcast as well.
He's going to explain a lot of stuff that Jakub doesn't really understand.
And he will ask a lot of questions because Jakub is also a founder, right?
And maybe you are.
Oh, yeah, sure.
We are all founders.
Anyway, welcome.
My name is Matteo Ancharid.
I'm Felix Broberg.
And I'm Jakub Remer.
And
we are
your host.
And we have Jeff as a special guest.
Welcome, Jeff, to the podcast.
Could you please introduce yourself to the audience?
I mean, we know you for a long time.
So
I almost jumped in there a bit too early, so I uh apologize for that.
I'm Jeff Cohen.
I lead the origination team here at PBX.
What that means basically is I'm the main person in charge of finding the companies that we want to invest in.
Prior to joining PBX, I led the Corp Dev team at HOMA, which I'm sure a lot of the listeners of this podcast are familiar with, the big French publisher.
So it's a pretty good chance if you're a founder and exec in the mobile gaming space, I've probably reached out to you at some point in the last five years about either acquiring your company or investing into it.
So I apologize for that if you weren't interested.
About a year ago, I joined PVX.
And what PVX is, is one of the early pioneers in the UA financing space, really targeting gaming companies.
Over the past year, we've signed up 20 plus companies that we're currently working working with on a monthly basis, funding typically between about 500K and 2 million a month per customer.
I live in the States, in New Jersey, but pretty active on the European Gaming Conference circuit, as you guys know.
So if you like what you hear today and you want to learn more, please come up.
I'll be at Gamescom.
I don't know when we're putting this out, but
come say hi.
Awesome.
As we like to tell our listeners, PVX partners, the simplest and most effective credit line for marketing.
You've got the tag on.
on there you go
definitely so you wrote an article about um
how to choose a the right ua financing partner and what i said before the because yaku is a founder i mean we are all founders it's a founder's guide
no no i'm just trying to grab the reality of me being a founder i mean of course
of course so what's what is this all about because Before you start, let's say, well, Yaku is not really a founder in that case.
I'm a founder.
I just bought an app and let's say I want a UA financing like who should I who should I talk to how should I kind of pick the the right partner for for myself and well I guess that's what we'll be talking about the whole time so maybe we'll dig into it point by point but let me I guess take a step back and tell you what what is UA financing because I think you know a year ago when I started at PBX I think a lot of people honestly didn't didn't really even know what UA financing was it wasn't something that was common out there actually the first thing I would usually get asked when I would reach out to people would be like is this the same thing as Pollin VC?
So shout out to Martin for building a pretty incredible brand over there.
The mindshare that they had was pretty amazing.
For what it is, it's not the same thing as Pollin VC, but we can get into that.
What UA financing is, is it's a relatively new form of non-dilutive funding that's become available for consumer apps and for games.
For non-I guess non-finance folks, what non-dilutive means is just that the capital is offered in the form of a loan in exchange for
more buzzwords.
So
they give you back money plus interest rather than equity where you give people money and they give you a piece of their company.
So you don't give Jeff shares from your company?
Yes.
PBX will never take any percentage of your company.
That's what I always say.
You don't really sell your soul for money.
No, that's right.
That's it.
To be honest, the reason
we're hearing more and more about it now is because it's a solution that's really needed in the market.
So as you guys know better than anyone and the listeners to this podcast know, I mean, UA has gotten more difficult.
Many companies, unless you're working with Mate, I suppose.
Exactly.
Thank you.
Many other balance is tougher and companies have seen paybacks expand and it's just more challenging.
Because of those challenges and also like the lack of sizable exits, I would say in the space, we've seen a real pullback of growth capital coming into mobile from the private equity and VC side the past couple of years.
But like very few VCs are willing to write you a $20 million check to fund UA in 2025.
You know, unless maybe you're one of like a handful of sick companies in Turkey.
Unless you're brand new,
expecting when Turkey comes up.
You seem to still be able to get money, but generally speaking, it's really tough out there for founders.
So what's happened is that UA financing has become a very compelling option for these companies and kind of filled that hole in the market.
UA funding ends up being a very capital efficient way for companies to scale.
Because if you think about it, you access additional funding as you're financing as you need it.
You don't have to forecast and say, hey, I think this year I'm going to need to spend 20 million on UA.
Let me go raise 20 million, you know, right
at once.
Because at that point, you may find yourself in a situation where you thought you needed 20 million, but you really only needed five.
Well, now you just raised 20 million and you didn't actually need it.
You can't just go give that money back to a VC.
They're not going to give you that part of the company back.
Yeah.
Yeah, they got the shares instead.
Yeah.
So it ends up being just a very efficient way to fund yourself.
Overall, you know, it's still a fairly nascent market, but it's growing pretty rapidly.
I mentioned we've done 20 plus deals of this kind and have, frankly, another 10 plus we'll sign in the next month or so.
I saw a recent report by Invest Game that, full disclosure, PBX was like kind of funded that report as well or sponsored the report.
But it's a great report that I recommend everyone check out.
They're expecting the market to be 2.5 billion by 2027.
So
I hope they're wrong and it's higher, but that in and of itself is a massive number.
100%.
I think,
well, as you mentioned, UA is tough.
Well, UA is dead for eight years at least.
It's been dead since I joined the industry, pretty much.
Exactly, exactly.
Do I get that right there?
As just said in the beginning, he probably didn't know.
And I guess a lot of people don't know even that there's this option.
Because if I understand correctly, most of the people that even, I think I had this conversation literally this week with someone.
they're like oh we need to find a publisher yeah
to to like solve the marketing problem or the marketing question so the marketing question is the like the the money question usually yeah both actually okay so it depends to be totally honest it depends where they are at the stage of the project right so one of i guess if i'll be completely objective a downside of ua funding is that you need to have the game built right we're not giving you funds to build the game we're also not necessarily funding soft launch we're not funding right away when you go to global launch.
We need to see, you know, several months, whether it's six months, 12 months, whatever it is, we need to see some quantum of data to make sure that we get our money back.
So it's not like, I'm not here to say that publishing is dead or this is 100% better than publishing.
It just depends on for different companies at different stages.
If you could bootstrap your way to a point where you can get to UA funding, I think it becomes the best option.
In fact, most of actually the companies we're working with have raised VC funds.
So
it's not like this is replacing VC funding it's more replacing growth growth
i still think it's 100 better than the other option because you again retain the shares and stuff uh the thing that i wanted to mention here the the the devil into detail is that you need somebody competent to spend that money because that's not on the publisher side yeah like nobody see anyone
for us soon so we're not to worry about it no no but like that that's one of the big differences
but assuming that what you said that the companies you get into contact with or like most of the clients, I guess, are already past that point.
Do you need to see like positive ROI campaigns or like somebody that, like,
oh, yeah, we have a great game, by the way, lend us 20 million, like, we spend it.
I guess that's not the conversation, but like, oh, we have a great game, we have the ROAS, like, like we used to say on the podcast, like, if you have a game that's printing money, you know, get the mortgage and run it through if you know how to do UA, why do I do need a publisher?
So, this is pretty much a better option than the mortgage.
Yeah, the games we're funding are post-product market fit.
You know, they're not in soft launch.
They have proven ROIS curves, proven metrics.
It's now just about putting more fuel to the fire.
Yeah, I was talking about this, the DROS
cohorts and how that works with DJ when he was here on the last episode.
That was a great episode.
So let's say I have a game and I'm meeting the cohort criteria.
How much money can I get?
Well, I guess first of all, I didn't really want to make this necessarily a pitch about PBX.
It's too late.
I mean,
we typically work with companies between, you know, starting at around 100K a month and then, you know, up to 2 million a month when they start working with us.
Once they start working with us, they can scale up into the several millions per month.
I think our biggest customer is spending $4 million a month.
So
we can support higher than that.
Okay, that's pretty cool.
So like, okay, well, then why
writing the article now?
I mean, right now, I mean, PVX is not a new company now so you are on the market for some time so how to choose the right ui financing partner like why is it now the yeah yeah so interesting candidly we're we're you know you guys may have noticed this as well we're seeing more and more folks entering this this market i think even today i saw another announcement of of a new fund i guess just to be clear taking my pvx hat off this is great overall for the space obviously i think pvx is the best option out there and you know we'd love to work with every company but having competition in the market is clearly going to be beneficial for publishers in terms of pricing and the terms that they're able to get.
But what really drove me to write the article and write it now was honestly this frustration that I was having because I talked to a few different founders and they a couple of them had made comments to me sort of along the lines of like, well, money is money.
And you know, at the end of the day, I'm just going to take the cheapest rate.
And that's kind of all I care about, which I get to some extent.
But like now, having done 20 plus of these deals, I think that mindset is pretty flawed.
Obviously, pricing is important.
So I'm not trying to sit here and say, don't care about price, but I think there's a lot of other things that people should consider.
And so I kind of put this together in a bit of frustration one night, and then it turned into a blog post.
And actually, the founder that said that to me, I think we are going to end up working with him.
I'm not going to say who it is, obviously, but
so I'm happy that we will hopefully win that deal.
Yeah, it's really meant to, the article, if you, you know, Joel will post it in the show notes or something.
It's not meant to be like a a pitch for PBX.
It's really meant to say, okay, these are the things that I think you should consider as a founder looking at UA funding, whether it's PBX or someone else.
Yeah, look, Jeff, I think it's very important, and that's why I like to educate the industry, and that's why we also started the podcast because there was a big hole in knowledge and like knowledge sharing in general.
Because if the industry is, you know, getting all the information from different sources, they're always more educated.
They make better decisions, whether it's PBX, whether it's somewhere else, but at least they have the information so they can make the decision and they know.
So, yeah, tell us all, tell us more.
So,
yeah, we just learned that Jeff won't take your shares and he will lend you money.
What makes Jeff lend you money in the first place?
That's the question.
Was that a question?
Your audio is that you were making videos worked with mine.
Is this always how it is?
Basically, how does it work for you?
Like, I guess that would be one of the questions for people getting into the.
How does it work for us in terms of what i mean so so our process as a business model you know when we
so how it works for us as a business model i mean we we uh we lend money and then we get the money back plus interest and that's the interest is
pretty much it yeah that's the basic
the simple math of it right
and it's that simple like nothing else in it or like you know you tell me it's a bank bro it's a bank
of capital and we have a funding provider and and we we then lend out the money and and we make money off the interest when it comes back.
Basically, I mean, that's the long and short of it, essentially.
Yeah, but speaking of interest, why is not the lower interest better?
Yeah.
Why is not?
Because obviously, that's.
I mean, generally speaking, all else is equal.
If everything else we're about to talk about is equal, then yes, like obviously having lower interest is better.
But one, pricing can be pretty complicated.
Like every fund has a different way of calculating interest, when it's paid, how it's paid.
So for founders who aren't super financially sophisticated, it's actually fairly opaque.
Which is Yakoup, as you might have told you.
Yeah.
So like the first thing you should do, or I recommend to everyone who's comparing different rates, is to calculate the IRR for each offer that you have to make sure you're, and I, Yakub, I see your head spinning.
I'm going to explain what that is.
You want to make sure you're calculating kind of apples to apples.
What IRR is, it's kind of a nerdy finance term, but it's a relatively simple Excel function.
What it does is take into account the time value of money and when the capital is actually returned.
So like for example if you have a lender that charges you 10% on a loan but the 10% interest is paid month one versus another lender that pays that charges you 10% on the same loan but the interest is paid in month 10, you're paying the exact same dollars of interest but the effective IR like the IRR is going to be significantly higher on the first loan.
So you want to make sure you're you know you're comparing apples to apples.
Once you've done that exercise, you know, you can you can actually know which option is the cheapest.
It's sometimes sometimes not the one that from the eyeball test, just like based on numbers on a page, you might think it is.
That's one thing to point out.
The second thing I guess I'd look out for is calculate the total dollar amount of interest that you'll have to pay under your different offers.
So like if you think about, for example, if one lender requires you to take a minimum drawdown, or for example, maybe requires you to fund 100% or 70%, whatever some percentage of their spend, of your spend every month through them.
Then, and while the other, while another lender might give you flexibility to say, hey, some months you can take zero, some months you could take whatever percentage you want, the one with less flexibility may actually cost you more because they're effectively forcing you to take capital.
Okay.
May actually cost you.
Draw something I just drawn in the middle of that.
The drawdown.
Yeah, what does this mean?
So, the way the UA financing works is every month you request or you get a certain amount of capital.
When we put together these credit facilities and we make an announcement, hey,
we are funding Malpa Games and it's a $20 million facility, we're not writing a check, $20 million and handing it to Malpa Games.
Every month they come and say, hey, we spent $2 million, we want you to fund $1.5 million of that.
So we wire them $1.5 million and then we get that money back over time.
But with PVX, for example, we are very flexible.
So we say any month you can take 0% up to eighty percent
so you have complete flexibility to manage your capital like let's say you have some months where you did a really live ops and you have a bunch of revenue coming in or you're a subscription you have a big subscription renewal you don't need to take our capital if you don't need it whereas there may be some other models out there where they say hey we'll give you funding but you every month have to take a hundred percent of whatever you spend well
this is the hidden part okay so you require
hidden it's just not saying they're like obfuscating these things it's just the reality of like no, no, but like, as you said, like the beginning goes, it's like, we lend you money, we take on the interest.
It's quite simple, but this doesn't matter.
But you have to spend the money.
You have to spend the money, basically.
Yeah.
In this case, you have to lend the money.
Yeah, so in the case of PBX, in every of these cases, we know how much you spent.
So it's not like you could come and say, hey, we are going to spend $2 million.
We give you $2 million.
And then they're like, turns out I bought a Ferrari and we spent 500K on UA.
It's like, well, that's not how it works.
Deal done.
Yeah.
A couple of other things, I guess, I'll mention around pricing just real quick.
So one, watch out for like hidden fees, like stuff like if there's a setup fee or like non-refundable legal fees or a fee to close down the facility.
They're just adding on, and it may not seem like much.
It's like, well, it's a $2,500 setup fee.
Okay.
But on, you know, on a percentage basis, that could be 5%.
Well, when you're, you know, if you're calculating IRRs, it makes a difference.
Last thing, I guess, is like bundled offerings with SaaS tools or something like that.
Just want to make sure, are these if you're taking the capital because you want to use the tool like just make sure it's the tool you actually want to use or is there maybe better or cheaper alternatives out there so you're not locked in just because they're giving you like a certain rate.
So you that's all
you can be forced to lend.
You can have hidden fees.
Any other hoops that you need to watch for?
Those are probably the main ones I would say.
I mean, I'm sure as the market gets more mature, people will find different ways to screw people.
Let's say get creative.
Just like anything else,
like any bank,
they'll figure out ways to extract money from customers.
Yeah.
I guess one of the things we talked quite a lot about putting on my UA hat, because I've been listening to Matteo when he talks on this podcast, is how payback periods are getting longer and longer.
Like, what sort of category of games do you usually finance the most?
Is there a specific trend there, or is there any type of payback window that you kind of prefer?
Or what's the story there?
We're pretty agnostic in terms of category.
So we don't come from like a top-down place and say, hey, we love the merge genre.
We really want to fund merge games.
We tend to look at the data and if any game has the kind of ROAS performance data that passes our underwriting criteria, we'll fund it.
And in terms of the payback that we expect, we look at the data for that as well.
So we'll kind of see what the game is projecting to currently.
And then based on looking at kind of the ROAS curves and running sort of all of zj's analytical wizardry we'll we'll come up with a payback period that we're comfortable with kind of accepting felix well you know what you can do you can plug your data into pvx lambda and you will see if you're eligible for funding there you go yeah okay jokes aside jeff you mentioned facility twice i have no idea what that means yeah that was the other word i wanted to ask Yeah, that's that's yeah, I guess that's a funny way.
Facility is basically just like the credit lock.
I don't know why in private credit, they like to have these fancy terms for things like basis points instead of saying percentages.
And I can also like throw in fancy psychologics terms that you don't know shit about.
I don't know.
It's very easy to do these conversations.
Back in the day, so I'm sorry I'll throw some words out there.
Facility size is quite important.
So like we allocate money for you.
That's what it means, yeah?
Yeah, when I say facility size, I mean like the line of credit that you can spend, right?
Like because if you come to us and you're spending per k a month on UA, we're not going to say, okay, here's 10 million, you could just go spend it as you wish.
You know, you'll probably get a credit facility of like 2 million or something like that.
But what's really important is that you want to make sure when you're picking a partner that you have a partner that can that can scale their facility size with you.
So like the last thing you want to do is go through the whole process of putting a facility in place and then hit your credit line pretty quickly, your credit limit, and basically have the lender be unwilling to expand it because they may, let's say they have a $50 million fund and then you all of a sudden are 10 or 20% of that fund.
They're probably not going to want you to have, you know, be too much exposure to their fund for their own risk management.
Switching lenders is not as easy, I would say, as people think.
You know, you're likely going to have to pay off your outstanding balance before you close the facility.
And even in a best case scenario, like it's going to cost you time, money, and legal fees, and just operational headache in order to switch lenders.
So, like, you're looking at probably a few months at minimum.
And as you guys know, if you have like a well-performing creative or you see positive ROAS, like the last thing you want to do is slow down because you know you went with a sub-scale lender, you know, that maybe couldn't, couldn't grow to what you needed.
Well, I left finance 10 years ago.
I'm hearing so many terms that I haven't heard in 10 years.
Yeah.
So good, yeah.
It's like when you say facility, I was like, okay, well, I just close the storage facility next on the next street.
It makes sense.
Lenders, like if we take all the fancy versions, basically like your mortgage can get bigger if you need it because suddenly you can get bigger mortgage if you don't have the stuff for it basically.
So that's super super good, of course.
Like doesn't make sense if if you are into like that's the first place why you approach this whole thing, I guess, because you want to scale it up, not just you know stay on some yeah but then like what happens when you you want to scale it up and then hit like the ceiling and then suddenly everything goes to shit and then you need to scale down.
Because I mean things happen obviously.
Yeah, but like based on just modeling you just lend less.
But if you're not flexible enough, then you can do that.
Oh, yeah, like if you're forced to lend, you're not in a good great place.
I think that was the part where all Guy Richie movies flashed in front of my eyes.
Yeah, that's when we send in the downy owners.
No, I think
there's a bit of nuance here to understand.
So
every lender is going to have risk limits, right?
So like meaning for every deal that they sign or we sign, they're going to have a total exposure that they're willing to assume and a payback that they're going to allow the company to stretch to.
So like for PBX, for example, when we sign a deal, we set a threshold ROAS curve, kind of like we talked about before, based on historical performance that we'll expect them to outperform that threshold ROAS curve.
Like risk management is basically risk management.
Exactly.
So in our contracts, we lay out clearly what happens if one of those thresholds is breached and kind of what the consequences are.
There are some other lenders, I believe, in the market or some of our competitors where they may not explicitly have thresholds like that in their contract, which at first, you know, you might say to yourself, wow, though, sorry, PBX, that sounds a lot better.
Why are they- They're going to send a guy reaching us.
Hopefully, not that.
I don't think anyone's doing physical harm, but I think it adds a lot of money.
I think it adds a lot of unknown risk for you as the borrower, because if you don't know what the lender's risk controls are and how comfortable they are at different paybacks, you're at risk that you might have your payback go from like four months to six months, which you're totally comfortable with based on your ROAS curves.
But your lender decides for some reason that doesn't fit their risk model.
So they just they decide to pull pull their funding.
So not having that clearly communicated and put in a contract upfront, I think is opening would open folks up to a lot of uncertainty and potential
challenge in you know once yeah I can I can already hear that that that way there with like I altered the deal don't force me to alter it again
for what I what I'm I'm kind of hearing it it reminds me my discussion with Xeno Frontier Ads and he he basically said look if if you're a UA manager and you're gonna run a U rewarded UA network you need to ask a lot of questions and you need to interact the like the the rewarded UA partners do I really need to do and it sounds like I really need to do my background check on all the all the partners
way, way before I kind of go to bed.
Not on a background check, but I think the counterparty risk is sort of real here.
And this is a bit of like an interesting take from me, maybe.
And it's kind of a hot take, so sort of spicy, maybe.
I'd say from first principles, you always want to make sure incentives are aligned.
So in my opinion, I think you want your lender to be lending you money because they're in the business of lending out money and then making money when they get paid their interest back.
Not because they're using this as like some sort of loss leader, you know, way to hook you in, to monetize you in some other way.
I'd say we've seen over the past six months a bunch of different competitors enter the market.
And like without, I guess, mentioning specific companies, because I have respect for all of our competition, I'll paint some like edge case, worst case scenarios.
So
let's say your lender is a publisher themselves.
Well, publishing is a much higher margin business than lending.
Owning and publishing a successful game, you're going to make literally 100 times the amount that you'll make if you're just providing a game with UA funding.
So this is a purely hypothetical example, but let's say this scenario.
You start working with a publisher.
As a publisher,
you're working with a publisher using, like, under UA financing agreement, not a publishing agreement, UA financing.
You scale up your spends from half a million to $3 million a month.
The game's crushing it.
At that point, you've hit your credit limit.
You go to them, you say, hey, I want to increase my credit line.
I think I could scale from 3 million, you know, to 10 million.
They say, no, sorry, no,
we can't increase your credit limit.
Well, actually, we'd like to make an offer to buy you.
Well, now you're potentially in a pretty bad, you may be in a bad spot because it's going to probably be tough to get other UA funding because you have a bunch of outstanding debt.
You may be in a position where you have to take an offer or sell your company when you don't want to.
So that's one example.
Let's say your lender is a VC.
So we've seen a lot of, you know, seen or heard a lot of VCs
getting into this business, and I understand why they would.
If they're not your VC, meaning they're not on your cap table, well, do you really want all of your proprietary data to be shared with someone who is also literally in the business of funding your potential competition?
I think that's probably not something I would necessarily want to do.
If they are your VC, so meaning they are one of your investors, this situation I'd say is a bit more nuanced.
It may seem great to take non-dilutive capital from someone already on your cap table.
But already already diluted you.
For founders, I guess, you know, listening to this, I actually think that may be a bad idea.
So if you think about it, your VCs already have board seats and a fair amount of power within your company.
Exactly.
I'd be pretty careful giving more power to any one institution where they then own equity and they have the debt leverage over you.
Because at some point, and you hope this never happens, but your interests and their interests may not be fully aligned.
Like what if you want to take an offer to sell and they decide they don't want to?
Well, the last thing you want to do is just have them have additional leverage over you.
And then I guess the last thing I would say, like if the company is a SaaS company or doing, you know, selling you an analytics tool or something like that, I would question, okay, how committed is this business to actually being in the lending business?
Are they getting into UA financing just because they want to onboard you as a SaaS customer and they're willing to kind of give you a small amount of capital at potentially a lower rate to sign you up as a client, but then they don't actually want to scale with They just want to have you as a SaaS customer.
I'd potentially be wary of that situation.
To be clear, you know, I don't think any of the companies entering the space today, and I intentionally didn't use names, I don't think any of them have bad intentions or plans to hurt companies that they work with.
But like, I do think it's always in life
important to be careful to make sure incentives are aligned.
Like, there's, there's too many.
Can I say a fun example that I had with a client?
I think it was two and a half years ago.
It was a mediation provider.
I'm not going to say who, but you probably know who it is.
And the client I was working with, they got offered to stay on a mediation platform to be paid out six months of that network's earnings, like estimated earnings for the next six months if they spent it on the UA platform.
And then every six months, they basically redid that deal to make sure they always stayed on the mediation platform, which meant that they were always locked in.
Yeah.
Pretty uh yeah, I mean we've seen so many examples and I guess I won't name them but you probably can but like companies that that sort of have been bad actors in the space or just like built built businesses using other businesses again won't name names.
Well welcome to the gaming industry.
Exactly and it's fine.
There's nothing
again if they're giving you a better price than LL SQL and you go in knowing the risks and understanding it, there's really nothing.
It's fine.
But it's just things I would be like thinking about.
Yeah, no, like, I just want to make clear to everybody why we're talking about this, because we are in the space for a long time.
We are getting really old, so we've seen all of this, but people are coming into the industry and they don't know.
And when I talk to some of my clients as well, they're very surprised.
Like, I didn't know these guys are
not really nice guys.
Even though there's this option, basically.
Exactly.
Or there's an option like this.
So it's not like we are kind of cheating on people.
It's just throwing the kind of multiple options out there and the possible outcomes of it.
Just to make it clear.
Yeah, like, but I think from my perspective, like, the whole space is pretty much changing very much because even if you take the whole publishing thing that we've been talking about, like most of the times that I see and like talk to some of my clients, it's basically publishers are funding the teams to build prototypes for them these days rather than just being the marketing analytical machine of the previous five years or whatever.
It was always like, we need UA, whatever, something something so we find the publisher this is I think is much more towards the like we have the lottery tickets with our developers so we fund their you know lottery ticket and that's it because like the days of sending hundreds of prototypes to a publisher are over basically so that's not the case here but yeah like was sorry sorry to bargain but the last example that you mentioned Jeff like that's real like a SaaS company having this kind of lending facility which is still the priority for the company to be a SaaS company and keep you as a client
Okay, that's interesting.
It's not a bad thing.
Think about it, like CAC, right?
Like, yeah, it's not a bad CAC, right?
Like, it's pretty good.
It's quite clever.
No, no, like for the for the company, yeah, but uh, not for the, I guess, the developer, because again, no, it can actually be a great value proposition for the developer.
I would just, I would just make sure that you know where their incentives are, know that they are long-term in the business, know that they can scale with you.
But yeah, if you're working with a company already and they're going to give you financing at a very good rate, then it may actually be a very good option.
No, like I understand.
But just in this kind of a ladder of like you having worse and worse and worse leverage, this is like literally one of the worst ones.
Yeah.
Yeah, exactly.
Yeah.
And
so if I well, not if I'm the founder, but I want to know if like I screw up and like things go wrong,
is there kind of like anyone that kind of can share the risks with me?
Because I mean, it's that's pretty, that's pretty important.
Yeah.
So, this, this is something I think you know, people don't really think matters until it does, and then it's kind of at that point the only thing really that matters.
I mean, people always think about the positive situation where it's like, oh, if I make the money back, how much interest are you going to charge me?
Blah, blah, blah.
But they don't tend to think about the scenario of like, well, life doesn't work like that.
Life doesn't work like that.
Yeah.
So I guess getting, this will get a little like nerdy finance per second, but broadly speaking, there's two types of loans out there.
So one is like secured and unsecured.
Some UA financing is done as an unsecured loan.
This is typically what we do at PVX.
And so what that means is that the loan is actually not backed by the assets of the company, but rather only from the revenues from the cohorts in our funding period.
So what that means in practice is that if the revenues from those cohorts don't end up being enough to cover the money that we lent you, we actually assume that risk.
However,
there are some other offerings out there that I've seen that are fully secured by the assets of the company.
So what that means is that if the cohorts that
this lender funded don't pay back, you actually are legally obligated to figure out a way to pay them back off the
balance sheet, the cash on your balance sheet.
And if you don't, that lender will be able to put you into bankruptcy or take over your company or figure out some way to legally get get their money
dudes that's cool yeah and that's that's a risk and now just to be to be clear because i always like playing devil's advocate or kind of giving giving both sides of it i'm not saying that taking out a secured loan is necessarily the wrong thing to do in fact actually i've talked to some very smart people in our in our space who if they're confident enough about the cohorts and you have a good enough cash buffer it actually can make a lot of sense to take out a secured loan in order to get cheaper funding.
You should just be clear on what those risks are and understand that when you compare the different pricing structures.
So, like, I've literally had customers who have come to me and been like, well, I have this cheaper offer from XYZ, and you know, what can you do?
This is cheaper than you guys.
And when I dig into the details, it's a secured loan.
So, they're comparing an unsecured loan from a secured loan.
I'm like, well,
it's not the same thing.
Like, I'm not going to be able to compete on pricing with that because there's literally the risk.
So, yeah, like, if someone wants to take that, to go down that route, I think that's totally fine.
They should just know the risks, you know, the risk that they're taking up from.
And do I get that right, Jeff, that if scenario one happens, which unsecured on from you, cohorts doesn't pay back, you take a loss, or what's the was the setup there?
Yeah, so under under PBX specifically, if the cohorts don't pay back, usually we have the ability to cross-collateralize across cohorts in our funding period in most of our contracts.
So we could pull from cohorts that have paid back in order to pay off cross-collateralize.
But let's say,
let's say the, you know, all of the cohorts, basically the camera happened, it blew up.
We would then take that risk.
So we wouldn't have to do that.
So a little bit of switcheroo basically into the past and then there it goes from there.
Or, you know, different months, different cohorts.
Much different, but still.
I mean,
like, still, still, still, I guess, lower every
lower leverage over the company because it's an unsecured loan rather than a secured one, which again, guy richie dudes can come in.
Yeah, it's just a totally different product.
It's like,
you know, a mortgage versus high-finance.
Let's do it this way.
Like your mortgage rate, because it's secured by your
like,
you know, you're going to get a mortgage at whatever 5% or 7%, whatever it is these days.
But like your credit card, they're going to charge you 25% because it's unsecured.
It's actually the perfect example.
They're completely different products and completely different pricing.
You're talking about the guy riches dudes.
I mean, it's it's gone almost come down like to to the reputation.
So that's it's still money, right?
So like does it really matter?
Felix just said like there's no, it's high finance.
There's nothing like Kai Richie's dudes.
He's from finance, man.
This is obligation.
Fair.
He's from the Richie Clapham.
Kai Richie's aside.
I think
I think the, you know, call it whatever you want, the fund's reputation or just how well, you know, what.
how well you know the fund.
I think it matters.
When founders raise an equity round, it's pretty common knowledge or pretty well understood at this point that you want to dig into the VC that you're taking money from.
You want to understand their portfolio.
Who have they backed in the past?
How did they treat companies they invest in?
Do they add value?
You know, how does the partner act as a board member?
Is he really a pain in the ass to work, or he or she kind of a pain in the ass to work for, or sorry, work with?
How do you get these background checks, by the way?
Just ask for references, or you figure out who, you know, you figure out who they're working with.
You know, we put out deal announcements for pretty much most of the deals we do.
And we are actually, a lot of times, we push people before they sign with us to speak with people that have worked with us.
We say, look, you want to understand how we treat the companies, our portfolio, how we operate, please talk to literally any founder we've worked with because I think that's the only way that you, you sort of know what you're getting yourself into.
You know, frankly, like when you're dealing with a lender, they're, if you pick the wrong one, they could actually make your life pretty miserable relative, even relative to an equity investor.
So definitely always ask for references.
If possible, ask for references for companies that have stopped working with them.
The industry is pretty nascent, so there may not be a ton of small role.
I've seen stuff where equity investors can make your life pretty miserable for hand, so I can understand that.
For sure.
I mean, you want to make sure if shit goes bad, you want to know how they're going to treat you.
Because how badly,
you know, if things go well with a credit agreement, it's like we're going to give you money, you're going to pay it back, we're going to high-five at conferences, and like everyone's going to be happy.
Like when things go poorly, when they're like, hey, our row has just went down 30%, like, what do we do?
You know, like, you you want to make sure the lender treats you in a way that is reasonable and fair and doesn't, like,
come and take your company or something.
You just want to make sure that they operate in a way that you would want to be treated.
Okay.
And when I was reading the article, I mean, to this point, fine.
I mean, thanks for explaining all the stuff.
But the last point is like ease of use.
And I was like, okay.
Yeah, this one.
What does that even mean?
This one's one's a little vague, but generally speaking, you want this to just be as seamless of a process as
possible and have it make sure it doesn't create operational burden for you.
So like, you know, PBX is structured as a company that then owns a funds.
Like we are building a whole bunch of internal tech, internal tools, you know, Q the PBX Lambda mentioned, but like you, you want every process in this to be very seamless and productized.
Like you don't want to have to go back and forth on spreadsheets every month to say like, how much did you actually spend?
Like send us the receipts from your ad networks.
You want everything to be incredibly smooth.
So, you're not adding burden to your finance team.
You're not adding burden to yourself.
That's kind of the main thing of what I mean by that.
It's a little vague, but like, the whole process from like the negotiating the term sheet, the dot, everything should just be incredibly smooth, you know, as easy as it is to deal with.
I guess, I guess, the follow-up question here is about deal velocity, right?
What's the quickest deal and what's the slowest deal that you've been a part of?
The quickest deal we've done is probably between four weeks.
It's probably around four weeks.
Meaning, like
the day that I first met the company to like us funding them money was four weeks.
The slowest, I mean, well, we have had deals that have dragged on for months, but that's not on our side.
That's like just either negotiating.
That happens though.
It happens.
Yeah.
Size of the company matters as well.
Yeah, I'm quite curious, like, as you said, like, about the big deal that you mentioned there.
What's the smallest deal, like, for people to understand, like, if, like, if it's, you know, worth their time or whatever, like
we typically have a threshold of like if a customer is spending over a hundred thousand a month and has at least six months of data sort of at that scale,
we can start to consider it.
Usually we'd like to see bigger scale and more cohorts, but that's kind of like the low end of the thresholds of where we'll where we'll start to be able to sharpen our pencil.
Okay, so yeah, yeah, I hope you are not there yet as a founder.
Me, me neither.
For a friend, you know.
For a friend.
Asking for a friend.
No, but I think like this for us as founders and even as small founders was helpful.
What should what are like the last thoughts or like main takeaways like that like founders should think about?
Yeah, yeah, yeah.
So I think the,
you know, the theme of make sure you and your lender are aligned is a crucial one.
Make sure they're able to scale up with you and are aligned that when you as the company spend more and push out your paybacks, they should be happy.
You know, if you're going from spending a million a month to 3 million a month and they're like, well, maybe you should scale a little slower or giving you something like that, like that is probably a sign that maybe they have not structured their business properly in order to be able to support you.
That's number one.
Don't treat this process like you're opening a new credit card.
It's not like a faceless, nameless company that you're dealing with.
I would argue treat this kind of very much like an equity raise.
Consider the reputation of who you're working with, how they've treated people they've worked with in the past.
Make sure you talk to people that have worked with them, ask them for references, figure out who they're working with.
I mean, this is a small industry, we all know everyone.
That's kind of it.
If anyone wants to talk about UA funding, I'm very open to chat, whether you work with us or not.
Ultimately, yeah.
Felix likes to ask this: what are like, let's name like three red flags that everybody needs to like
watch for?
Like three red flags when you're talking to the financing partner like fortune land.
That sounds to me like the number one red flag.
Yeah, yeah, yeah.
If they have goons standing next to them, but that's like afterwards.
The number four.
Oh, man.
I don't know.
I would say, like, just know what, know what kind of contract you're getting into.
Like, if it's a factoring contract and they're taking over your Apple and Google account,
that can be fine, but that's just a different type of financing.
I would look at for some of the things I talked about earlier, like the price around pricing, just like the hidden fees or whatnot.
Not that there's anything wrong with those things, just know that you're paying them, right?
Like just calculate that into the sort of effective interest that you're paying.
Another red flag I would say, these are kind of all going back to the things we've already talked about, but like, it's just around the facility sizing.
Like if they're giving you a low rate, but they're like, well, we can fund you up to like half a million a month, but like, you know, if you get bigger than that, I don't know if we'll be able to scale.
Like just red flags around how big their fund is.
Because again, I think you want to work with someone that can work with you to get you to the finish line.
Like you don't want to have to like work with someone when you're spending 100K to 500K, and then find someone else when you're spending 500K to 2 million, and then find someone else when you're spending 2 million to 10 million.
You kind of just want to find one person, never have to deal with this again, and just like work with that person for, you know, for the duration.
So, basically, make sure that your lender has risk assessment management covered.
Yeah, exactly.
Make sure they're going to be around, make sure they have the funds, make sure they're treating people right.
Awesome.
I mean, Piaco, you know what you should do?
Sure.
Of course, I'm starting to do unsecured loans business, for sure.
And I will put the blog into the show notes, definitely, and also your details.
So, guys,
if you wanna chat with Jeff,
here's your guy.
Thank you very much for coming.
Yeah, thanks a lot, man.
Thanks a lot.
Did learn a lot today.
It's been a long time listener.
Excited to, you know, it's like a dream come sure.
Sure, sure.
Happy to have you.
Thanks for coming.
Okay, dear listeners, join the Slack channel.
If you have any questions, definitely put them into the comment section on the YouTube or just join the Slack channel and then we can discuss different things there.
Thank you very much.
See you next time.
Bye-bye.