The Art of Scaling Games: When to scale your game?

um essentially once you plug all that cohe data in we'll just tell you like where are you in terms of fundability and then we'll break it down in terms of like why why what what what key indicators tell us give us confidence this is one that's unreleased um this is this is a a debut for the two and a half Gamers uh podcast but our benchmarking our benchmarking tool yeah so like I said we've got a bunch of I think right now maybe like over like 200 over two or 300 corts for 2024 that we've looked at like across all these different games it's 4 a.m. and we're rolling the dice M drops knowledge made of gold and Ice fix with ads making those coins rise jack up designs worlds chasing the skies with a two and a half Gamers the midnight crew talking UA ads and game design to M feel sh bringing the inside we're rocking those vibes till the early daylight a master eyes on the priz tracking data through the cyers space SK Felix ta ters like a wizard in disguise

Jacks crafs LIF us to the high two and a half Gamers talking smack slow hockey stick got your back ads are beautiful they like the way click it fast don't delay aha aha [Music] aha hello everybody well Welcome to our special episode my name is mat lerich I'm Felix Brer and we are your hosts and we have a special guest kitki from pvx Partners welcome to the show can you give us a little bit introduction about yourself and the company and then we're going to talk about what are what is the topic yeah sure hi M Felix um it's really great to be on the show um as much I mentioned before my name is ritky I recently founded along with my two

co-founders a company called pvx Partners um it's a platform trying to help gaming and consumer companies scale um our Flagship product is a credit line that helps developers fund their marketing um in in a way that is very flexible um to help them scale and is also risk participative in the downside case where everything goes wrong and the campaign fails so um I've I've spent the last 12 years uh working in a mixture of marketing and finance roles um most recently at the Indian real money gaming company called mobile Premier League or MPL where I focused on International growth and and corporate development actually mon uh I think we met for the first time when I was working there and we were doing diligence on a potential Target together so it's good to have it come full circle exactly nice okay good so uh before we go into the topic okay let's let's talk about the topic is when to scale your game or when is it the right time to scale your game because

this topic and this question comes up a lot in different discussions we talk about it on the podcast when we reviewing a different games and uh I well I have an answer which is a little bit vague but kind of works because I I was I am in the gaming industry for 11 years I kind of when I see the data I know what to expect let's say and I'm looking at different kpis but what are the kpis you are looking at rki and how are you kind of working with different companies because I mean it's a I I assume it's a very long and an interesting process yeah for sure no I'm happy to app on this and I know that you and everyone has like you know the key sanity metrics that they they focus on to to kind of give them conviction um to to scale up um I think the way that I will be presenting here is more you can

call it like high level picture um but I think it's a really important view for any decision maker or capital allocator of the business to understand very intimately before they go and ramp up and spend millions of dollars on UA right um so I can get to how we work in a little bit later but of course I actually did put together a few simple slides if you don't Minds going through them yes that would be awesome cuz we like visuals and visuals is that's important important and uh people love it as well yeah let's let's get you some visuals nice let me know if you can see it yes all good we see we see see perfect this is awesome yeah so um like I said I prefess this this is a high level highle picture and um and uh I hope I hope it's not too basic but um we'll ask questions we'll ask questions okay okay so um I thought it would be good to bring up a

familiar case study that you guys covered recently in hexas sort by Magic great Episode by the way um so I'm using at Magic's you know Revenue Trend chart here to illustrate the ramp up uh in Daily I AP revenues but on the episode Felix you discovered or you you kind of like brought brought up that calculated yeah you calculated you calculated that it was actually like only 30% of the total revenue was being generated by the IAP so that was kind of like the mind-blowing moment where I was like okay these guys are killing it um and so uh I think I'm taking a rough estimate of 30% I across the timeline probably not accurate but let's just for Simplicity sake they started off like the only way to see this is that it's a banger right so in January 2024 they started with like $10,000 of Revenue a day and then ramping up for the next three quarters to half a million dollars a day and I think looking back um like looking back it's pretty obvious to highlight that this is what everyone

wants but in order to produce this outcome um you really need to be in a ready State all the way back in January 2024 to have built the conviction and be financially prepared to like scale it in this way um so I I think another way to frame the question of the day is really how can you build conviction and be financially prepared um to scale your game yeah nobody's ready uh well not nobody but a lot of companies they're not ready and there's oh let's scale I have this I had this situation when we discussed let's scale because it looks great in terms of the ROI in terms of the numbers um cpis whatever else and then we start scaling and then after six months like hey well we need to scale down because the our cash flow is is almost dead we need we don't have money for for salaries afterwards I mean the question is right like everyone can scale but the issue is scaling profitably right like that's that's the

problem right like I could scale anything but you know if I had a billion dollars actually you'd be surprised at how many companies we we see that actually are scaling but then like really shouldn't be scaling at at that point in time or maybe they got a little bit too excited by the early metrics and and and then they've like rolled that back U but it's really important to kind of look at it like um a common set of metrics that everyone can kind of universally accept as okay this is us doing the right thing versus not yeah um and obviously it starts with the soft lunch right when you're in that soft lunch phase um you know the in Mobile gaming in particular you're fortunate enough to have the ability to track test and iterate the game like quite quickly so it makes complete sense to take advantage of that and soft launch and then test your acquisition and monitization metrics well before you go out and and burn a bunch of money um and the goal here I think I would argue is to be able to track your cohort performance and Achieve profitability

and consistency so during that soft launch period like your operational team should have quite a long list of like checklists that they should be validating I'm sure you could do a whole podcast on on this entire topic but essentially you've got all the standard sanity checks around economy balancing retention and monetization benchmarking like UA marketability testing and I'm not an admon expert Felix but like I I assume you'd look at like viewer rates and completion rates and Impressions per Dow Impressions per Dow and OD Vier rates those are the ones yeah yeah so all of these are super critical and you should definitely do the honorable thing in making sure you go through this in like a meticulous manner um but like the outcome we're looking for if all of this goes swimmingly is cohort profitability and consistency like I mentioned um and here most companies fail because there's like oh wait we don't need to be in soft loue for six to 9 months everything is working it's like

yeah well okay but I would like to see how the courts over time and progress over time and and to have that I'm then afterwards I'm able to build Global launch strategy or Global launch plan how much money we want to spend because then everybody's like well tell me what's what should what's the payback period we should aim for I like I mean come on guys like this is a discussion I mean you should have and then we look at the data and then we say oh look okay my bank account looks like this we need to get the money back sooner okay based on that I'm able to build a global L strategy and how much money we should spend because if like that LTV Evolution tells a lot and if you don't have those cohorts at least like you I mean five to 10 that's that's ideal scenario you know companies are not that patient in s Lun to have this so yeah but but yeah for for the

soft launch that's that's um the kind of where should companies are aim for yeah I think there's a couple things I would also highlight in that soft launch period which are like super critical like one is getting your instrumentation right like ensuring that when you're looking when every like your marketing team your product team the business and management team are looking at the metrics they're looking at the same metrics and that's actually the source of truth you don't want to be looking at your mediation dashboard or your like your Facebook ads manager like dashboard and then it's actually the wrong thing yeah and you're you're optimizing towards different metrics I think that's super critical the other thing is that I think you know if you have enough budget and the luxury of testing you should test quite Broad in like different GEOS different channels and a breadth of creatives as well because that'll give you a sense of how how scalable this can be um in the in the immediate next steps and um and then try to get some

benchmarks I think um is also another one right like back at MPL I would I would be calling my relationship manager at meta and like Google and be like look trying to get a sense of where the Cs CS are at um and then and then sensor tower for for some of the monetization retention metrics right yeah absolutely yeah um so I wanted to dive into a little bit of the basics if if I might if I may and clarify what I mean by cohort profitability so like if you take an arbitrary period of time like a month or week or day and Tagg all of the new users during that period and then measure the lifetime value generated over those users um over time you'll have a bunch of cohorts that you can track right and compare and the way that we would recommend um recording the value that's generated by them is essentially trying to get as close to cash as you can so whatever their users pay or what you're getting through your IA Revenue minus the processing fees

like platform fees um on Google Apple stripe Revenue C what wherever you're getting your revenue and then you take this as your net revenue and and then blend blend across organic and paid users and then divide it by your marketing dollars um I would even argue throw in like the creative costs uh to the relevant campaigns on there as well just to make sure you have like a really like Fair uh conservative number here um but essentially you know once you do this over time if your cohort is good it'll reach 100% net Rass and that that effectively means you paid back your marketing investment and then beyond that just just to stop here for a question like ma since I work on the admon side like out of the clients you've helped in the what is it 11 years how many people actually do this well uh not a lot but then they quickly realize you can't look at Cross data because then oh wait a second this is not exactly the money that comes to my to my bank account so

the net Ras and it's easy to to calculate this based on the the platform fees but then there is like you said like the cost of uh creative production then there is a team and then there like a lot of different things and suddenly it's that you are very far from profitability and then you suddenly you're very surprised that money that comes into the bank account is not not enough yeah yeah and you want to have the clearest picture of whether or not you're profitable or not so when you put a dollar in you're going to get more than a dollar out right so um that's what this curve represents once you hit 100% rows beyond that that's your profit margin right yeah and I think the fundamental thing to understand here is that if you knew for a fact that your marketing dollars would return sorry one other last aspect here is that if you

track this cohort over time and then you track your user your payer retention and that basically goes to zero at some point in time your users churn out completely this ASM tootes like horizontally ASM tootes towards a figure and we would call that a predicted terminal roas figure so it's important to like there are some tools that um that that can help you that can help you kind of predict this um I Know M you maybe use cohort um they're really good at this um we have a as well uh but it's important to kind of estimate where this where this kind of lands up but the fundamental thing to understand here is that if you knew for a fact that your marketing dollars would return a terminal Rass number quite consistently then you're essentially acquiring an asset it's similar to like buying a Government Bond it pays you an annuity like you're acquiring a a group of users that will pay you over time and quite predictably so the metagame game that all of the biggest consumer

businesses play in corporate finance is stacking as many of these cohorts as possible for as long as possible like that's the name of the game and um I think that's that's quite important to know that sounds amazing what's the error margin on the predicted terminal Ros it really depends on how much data you have on it right like so it's it's a the larger your sample size the more the more you can do um I'll take you through kind of how we do it at at pvx later on but essentially if you if you if you have enough data that correlates to your game like a certain version of your game um and also category like other games in your category or genre you can kind of build a data science model that does this quite accurately and um and if you can do it very accurately it's it's very very like useful information so if I asked it a different way per $100,000 of UA spent how much does the error margin of the predicted terminal Ras

decrease that's a great question um it's it I don't think it's based on how much you spend it's based on how many sample sets of cohorts you have and there's a trick with this right this the standard cohort kind of duration is a month but you could technically slice this down to a week weekly cohort or a daily cohort right and suddenly if you have three uh if you've been doing it for a year and you're doing this on a daily basis you have 365 daily cohorts yeah and you can measure the variance and and and the statistical variance between them and and get to a pretty pretty U pretty accurate predicted ter terminal Ras number I would say okay yeah anys as as complicated as it gets like this is the this is the volume play right so you need to have certain amount of data to be able to say statistically significantly like okay this is what we're looking at and this is the the basically what you can expect

which is pretty normal but pvx partner puts his money where its mouth is right so I guess there's a user number or cohort number that you guys are looking for before you're like hey I'm quite confident that we're not going to have an error margin over X basically yeah so typically we like to see businesses uh with 9 to 12 months of data and we can be quite quite confident in that but um to give a slight correction we are not in the business of predicting the predicted terminal roas yeah because okay our business we don't take the upside up all the way all the way here we we just make our we just we're betting on you getting to 100% net roas and enough money beyond that to pay our interest right so there's a margin of safety kind of element here whether you get 180% Rass versus 140% Rass makes very little difference from our upside as a business but um but it makes a lot

of difference for the buiness for for the company and we want to make sure that the company is trying to spend optimally so that they can make as much profit as possible yeah yeah so moving on like the second thing as I mentioned is core profitability but the other thing is consistency and this is a really kind of like distilled way to look at it that you can eyeball but um uh we're not looking so the point here is that we're not looking for the latest and greatest cohort um we're trying to get Comfort on how volatile the future cohort outcomes could be by Looking Back historically so um take for example on this left chart this is one game one and then the right chart is game two let's say this top curve is the latest cohort of game one like it's the highest profitable cohort amongst the two games but I would much prefer I would have more conviction in investing in if on the right chart this this top curve was the latest cohort because

there's a lot more consistency in this right chart versus on the left right so a lot of gaming companies that we deal with they're like I've got a banger cohort I'm ready to scale yeah but I would say hold on one second let's let's let's see whether or not that plays out in a few more cohorts and then whether we can rely on that otherwise it's just going to go wony and you might lose a lot of money yeah because this on the right hand side is stability basically and uh it this graph feels like the company or the game knows what they're doing on the left hand side it's like oh well we try million different things and see what sticks it's like uh it's it should it could be random also one good cohort doesn't mean anything you need to have yeah like multiple good cohorts to be able to say oh wait a second I this we have something here how how do you link this basically I guess this is a question for you Ma

like when you're doing UA and you're always like in our chat group saying like oh yeah look at this creative we just got cpis down by 50% well if you have a banger creative or if you start doing you know lying in the creatives yeah which helps a lot right how do you get that into this because that could drastically reduce it but it could also be fake information or it's misleading it's misleading it's it's it's good for let's say five or six months at the best and then when the the winner creative dies then well you're the square one basically so if you have a killer creative that's great start but then you need to be able to produce multiple of these which yeah which then it's like that's the pressure on the creative and UA team to come up with all these ideas and test them and and before we scale and that's why what I'm always talking about on the reviews you need to have the the creative depth as well multiple different concepts that work across different channels I was in the

position few weeks ago like where we discussed scaling on uplo or like starting appla campaigns for this you can't have only one creative winner because then you start scaling and then after three weeks you you will see the drop and the decrease in the performance and this and even the spin so I was I was pushing for for more testing on the creative side to be able to get at least three or four so one works and then you start refreshing to creatives and just put this into the campaign so you prolong the kind of the the life cycle of the campaign and that's really important yeah and and I would argue also that like you're like that winner or hero kind of campaign or creative you should always be testing them like in parallel with other other new Concepts because then you'll identify better like the the next one that's going to take over right yeah and I think a lot of folks are just super happy with their creative and they're like I'm going to ride this out until it essentially dies

and then you have no backup or lead lead in into it's like wish thinking right like yeah yeah no because people people get excited and they're like oh wow this is great now now we should push it's like yeah we can we can push but not like 100% more or 10x more or whatever slowly because you don't have the next winner and we are not testing enough we're not producing enough so it's not the right time yeah um another way to look at the consistency one is like if you have enough cohorts you can you can take a look at this statistically and essentially if you take the predictable or the predicted terminal roas of each of your cohorts and plot them across a normal distribution curve like if the curve fits pretty well within a given band of spend then you might be able to build conviction by taking a look at what like the net Rass would be atga -2 standard deviation so back to statistics 101 yeah essentially atga -2 standard

deviations from the mean essentially 98% if you were to produce another Cort 98% of the time it's going to be above the Nega -2 standard deviation Mar so if your negative -2 standard deviation is already profitable then the next one is probably profitable right um and this is if you have the luxury of sample size um and oftentimes at the very beginning you don't but uh but yeah you can you can you can take a look at this like a year a year after and be like yeah I did a great job um so I guess the the thing is like I I would I would urge people to go and figure out how profitable and consistent your cohorts are and uh and see how much value you would expect to acrew over the lifetime um and if you haven't reached 100% roas on any of your cohorts I I think you should be heads down and trying to figure out how how to get there before scaling up yeah I mean if if you're cohorts are not profitable

then I'm not sure if you should spend that much money or money at all that's like that's that's most important part yeah um but going back to like hex aort um like at the inflection point prior to scaling up essentially this is what they probably saw right they were just like they're probably thinking I've got good cohort metrics yeah they look consistent I should try to put more money into this cash printing machine before you know a competitor builds something that will eat into my market share or cpms inflate maybe because of competition or maybe because the the platform itself is just inflating and and making it harder for me to defend my profit margins right so my argument would be that if you if you built conviction and you you you are able to try to scale you should like Now is better than later to to do that yeah and um yeah you never know what else will will will happen so I think at this

point a team should suddenly be hyperfocused at you know how how can I like like how can I scale further and the first thing I think they're going to ask themselves is how are they going to fund this growth um if they're if they don't have it right yeah it's usually the UA managers are not there they like ah let's scale and then the the sea level like the sea level people like always oh you know what let's let's check if we have enough money to actually scale sometimes you people are not business oriented enough to understand like there is not unlimited amount of money on your bank account yeah and I think it's it's worthwhile kind of like going in and trying to understand like what are the actual like sources of capital that are that are like reasonable to to to kind of draw from so I wanted to just do a very simple simple kind of like walk

through of like the common growth strategies uh to finance growth right so if you're a self-publishing game and you are showing awesome metrics I would argue that you have three or four options yeah um the first option is like you mentioned how much B how much cash is in my bank and is in your balance sheet right yeah and this is technically the lowest direct cost of capital um but the problem is as you pointed out as you scale up your payback periods are inevitably also going to be pushed back right if you're spending $100,000 a month today and you're getting three months payback you can anticipate that if you're spending a million dollars it's going to be more than three months payback and what this means is that more and more of your Equity or your balance sheet is going to be tied up in the marketing payback cycle and the best case scenario here is that you do scale up to a million $10 million a month but you'll eventually

reach a level of spending where it's completely depleted your bank account and by the way this also means less money for new product development less money for hiring less money for strategic initiatives and that's not great for the like the long-term you know options for the company as well so uh yeah people still still um forget that you spent the money comes into your account let's say in free six months but then there is also the the another 45 days from come getting the the money from Apple and Google which very few people count with and that that's the problematic part add Revenue net 30 net 60 depending on some networks exactly so yeah yeah there's definitely a working capital kind of like drag over there but it's it's it's um exacerbated when you're trying to spend double or triple the marketing dollars as well um and so

a lot of people run to venture capital right that's the next one over here um and raising Equity capital from VCS has a big Pro in that the money is not guaranteed back to the investors right you take money from invest from VC they're not like asking for it back right away there's no fixed repayment schedule it's highly flexible capital and if you have good investors you know they might be able to help you in more ways than just just Capital yeah which they'll happily do because they're aligned with you on the equity side um the issue with VC capital is that it's dilutive it's equity dilutive which means that you now have less ownership in your company and you have new investors to report to yeah um yeah AKA selling your soul a little bit yeah I've heard you refer to that way but it's okay selling your soul to nice people is yeah that's fine yeah that's making joking there's also a risk to it right

like if you look at for example uh Grand games is a good example now they spent six months raising their last round right and I know from speaking to a lot of CEOs that basically people in the industry took notice because basically their metrics were so good that was like shooting off a flare gun and I know a lot of companies that we've reviewed have taken a lot of creative Liberties and inspiration from that game right yeah so those six months probably cost it quite much in terms of competitor I guess yeah yeah it takes time to raise Equity Capital like and if you really are gung-ho on doing that my advice would be to preempt your investors and get them excited about your early metrics earlier on right get them get them get them hooked before you really need to ramp up um because that would be the right yeah that's already too late to start ramp to start that discussion yeah um the next one is debt right so there are a lot of debt instruments and

I think it's um and you that you can use to explore to fund growth um and the biggest I know it's kind of like a bad word sometimes um because a lot of people think of think of it as like kind of a a bad thing but I think the biggest benefit here um is that debt is a capped instrument right let's be uh let's be clear like you don't have to give the lender such a significant amount of your of your upside um like you would for an equity investor and the price is agreed upon upfront it's usually transparent those are all great things right but the main issue with debt and why people don't really consider it especially as I've seen in the in the uh in in the gaming sector is it has recourse and what that means is that if you miss a payment just like your mortgage and you can go into default which means they can take your company like they can take your house or whatever you've decided to secure and that's not like is that a risk worth taking for you like do do you want to there um but yeah what are your

thoughts on that well probably also issues our debt don't really know how the gaming industry works right like having someone explain to them that's sitting in a office like oh yeah we just had a bad cohort and we changed our payback period from 90 to 180 they don't care yeah no chance no chance they'll understand I don't think they understand what a cohort is right I exactly exactly yeah no no way watch any Soprano's episode for like we'll go down the conversation yeah but I think there's one thing with debt that a lot of people don't anticipate a lot of Founders don't anticipate the covenants and so if you're not familiar with what covenants are they're basically conditions or restrictions on the borrower that are designed to help the lender feel good about your financial standing and the most common Covenant is like an ibit da Covenant which is like hey you you can borrow this money but your I iida cannot fall below a certain amount which is

completely paradoxical to the point of growth right like going back to my first cohort profitability slide like if you knew for a fact that your cohort would produce 200% roas in two years like who cares if you're negative negative iida this year if you're going to be 200% the next year right like it's absolutely the right thing to do for the company because you're GNA make more money than if you didn't spend that money um so European [Laughter] um yeah but the bank is not going to see it that way they're going to see it as you're breaching IA governments and that you you know that means that you're non financially stable and I'm going to pull the plug right um and finally we arrive at uh at cohort financing which is kind of definitely the the one that people understand the least and is the least common I I would say um so basically cord financing is a form of credit that that's generally only secured on your

cohorts um the cohorts that are being financed so at at pvx we offer cohort financing for user acquisition so the way that it works is we would lend say like 50% of your marketing budget uh your monthly marketing budget and then we would take a 50% net revenue share uh from the roas that it produces until we get our money back and plus a little bit of interest um and because it's structured interest uh so okay so the the way to think about it is it's about like 10 10 to 14% annualized cash cost so let's say if it was 12% for easy math annualized cash cost and your paybacks were three months it would be a 3% cost if it was six-month payback it would be 6% cost it depends on how long the cord actually lasts yeah so if yeah if you make money in one month it's 1% for you exactly okay exactly and I can lend you $10 million

and it'll be like that 1% for that month yeah yeah but then you SC as you scale and we discussed this that your payback prolongs and but you're scaling you're spending more money so I mean then you from you go from three months to six months and then you make 6% I mean that's kind of fair yeah I mean uh I guess what you're monetizing here is risk right but just uh for me to understand better like what's the average interest actual cost in percentage terms of your current clients because I guess it's different that's more I can give you an average but it's not it's not a really indicative number because it's I've got clients that pay back in two months and I've got clients that pay back in 14 months so if I average that out it's kind and especially if you wait the amount of spends it's going to come up to a not like not a very I'm just curious if you yeah want to shout it out uh like maybe five to 7% yeah like that yeah yeah because look so you work

with different gaming companies and different games and very different uh payback periods there you go yeah and and what this buys you well okay one one one other important thing to say is because it's structured this way it's a non-recourse instrument which means if the cohort fails like the cohort never reaches 100% yeah let's say it only reaches ever 80% I'm only going to get 50% of 80% yeah right and and the company doesn't owe me that remainder 20% they just owe me whatever the cohort produces so in that way we're taking risk alongside the company because we're we're we're um we're in the cohorts with them and that's why you don't work with everyone because you actually you know like you want to make money I mean you still need to pay bills and you still need to also pay yourself and then every everybody it's just that's what people don't really don't really understand sounds like a really good deal because

you know the US interest rate is what four and a half right now so if you're average to six that's quite good yeah and yeah so like again um if you were comparing us to a bank it's going to be at a premium the interest yeah but that bank is is a recourse product right this is an unsecured product that's that's why you pay that premium and the reason why we frame this as a scaling up product like a product for company who's ready to scale is like a bank is not going to touch you when you're trying to look for to double or triple your spends right they think that that's like too unstable but we're we understand the cohort mass and we want to take that risk with you now you mind just asking a basic question here CU just I understand like so basically if the risk-free rate is four and a half and you're offering six like why not use invested in treasury bonds take all the risk away um well to be to be to be honest the the fair that

that 4 and a half% is uh annualized APR right so if you were to annualize that you would compare that to a 12% that or the 10 to 14% that I mentioned so it does come at a premium devils in the details there we go yeah yeah no I'm not I'm not trying to Market myself to be the cheapest instrument but like that's that's the fair comparison yeah yeah yeah yeah but then yeah there's also I'm I'm pretty sure yeah there's also not only Pros but cons and I think what you mentioned is that you need to have a lot of data to be able to actually provide this type of financing yeah yeah so typically like I mentioned 9 to 12 months of data is what what our what our like sweet spot is yeah however we are getting better uh at modeling early stage cohort cohort uh cohort so basically as our database scales our underwriting database scales we understand specific genres better like for example we have about like 30 or 40

merge games in our database and I've and I and I've taken a look at all of their historical core data yeah and um you get a little bit better at at uh predicting kind of what each one is and we do like retrospective testing uh to see whether or not our predictions are correct we're not like perfect there yet but like I mean I wouldn't say that we're at a at a level where we're there the confidence level is is is high enough yeah um like should definitely be higher than 90% if I if I can't afford a loss but um we will get there as we get more and more data and because of that we are launching a new product it's called PBX early which basically can can can underwrite you with three months of data yeah with only three months of data yeah what's the ceiling usually in terms of financing that you can go up to or minimum because I guess you know need to make it worth your time as well right minimum and maximum yeah we need to make it worth our time and uh we need the the developer or the the

publisher to to have tried enough kind of different kind of campaigns and channels for us to understand the stability better um so typically it's around 100 $150,000 per month in Spence the PDX early product is lower it'll be like 50,000 um but our Flagship product is about 150,000 minimum spense we have a very um a very close relationship with our investor which is General Catalyst um General catalyst is a San Francisco based um uh you know VC fund and um and you know we we focus on they they they invest in all sorts of businesses and they typically go for relatively large scale deals because it's a multi-billion dollar fund um but we focus our sweet spot is really like anyone who's spending $2 million a month or less um so that that's the that's the starting range yeah but as they scale to $5

million a month $10 million $5 million a month we collaborate with General Catalyst to to to to facilitate them so basically Sky's a limit yeah yeah they they they fund companies that are spending you know you know over 20 million 20 million a month easily yeah nice um yeah that's that's kind of all I had with about like the the uh you know when when I think it's it's appropriate to scale or when it's a good time to scale um but I think you you had also asked like what does the process look like or sorry your question yes that what like what does the the process look like and how do you actually go from working with companies to to fund them and yeah like what are you looking at because that's the meat yeah yeah like me me and MAA come to you we we're two 20year olds just out a university and we

have a we have a merge game and uh we're excited yeah but yeah but we are spending 200k per day uh per day that yeah per month per day that would be interesting yeah no so we have like a proprietary intelligence um like database called uh Lambda and um essentially what this what this does is it basically what we just discussed in terms of cohorts yeah if you plug in your MMP like if you use like apps Fier or singular or adjust or whatever um or even if you if you want to plug in your like historical transaction ledgers from like an S3 bucket or a gcp bucket we can import that data onto here and basically visualize all of the cohort information that you would ever want to see um so the cord analysis is is is what we typically look at so we would plot your data and we would by the way this is just composite data from a couple of companies that we've we've taken a look at like maybe four or five but uh so the numbers might not make a lot of sense but the curves ESS BL out

for the European users or Watchers okay okay oh good okay so so so this is this composite data shows that like all of these uh cohorts are kind of projecting towards profitability um at different different uh payback rates like yeah between five to nine eight months and this is validated this is net roas this is validated on on their their actual transactions um and their marketing spend um you can see kind of the shorter lines over here um are kind of degraded compared to like the longer lines which means um you know there's some cohort degradation and the payback periods are probably going to be longer and another way to kind of look at this is on a month-on-month change basis so this is basically incremental net roas per month so at month six like this is around 10% incremental versus month five yeah and what this means is basically like this

thing is printing money like every every month is is returning 10% even after it pays back um which is which is a good sign for your kind of profit margins yeah and you'll see that this kind of ASM tootes at a certain level like usually I mean this is outstanding actually but like usually we would say it's good if it if it's above 5% per month at least for the first the several months after they've paid back yeah um I'm not going to go into all of these details but basically this is the marketing spends against the payer CS um pretty simple graph um yeah you know these are the payback periods and this is the statistical kind of Devi like the standard deviations that I was just mentioning before what this means is basically like at two standard deviations it's like 9.5 months payback which means if you were to do spend at a similar rate and this was had enough data in it um you can expect something below a 9.5 uh 9 five payback period on your next

one um we take a look at retention metrics I'm not going to go through all of them but it's basically like okay net revenue payer retention arpo retention transaction retention we take a look at the CAC data um we look at correlations between like if you spend more what is your M1 M3 M6 roas look like if this is relatively flat that means that there's a lot of inelasticity in how much you can spend right so like the more you spend it doesn't really change this number is a great sign um and but you should be looking at this you know ideally at a month six level um we look at it on a channel basis so these are all the channels on a row like row as per Channel a huge grain of salt here knowing that half of this is like iOS and like we don't know how they're attributing and um and um so like huge grain of salt there I I'll admit um but like other than Channel

data this is interesting if you trust if I looked at the Android data on this yeah and these were like quartile performance ranges so like for example adjo gets you like an M1 Rass at 75th perc or the median at like 14% and somehow cash kick is like way better I don't know if this is actual real really reliable but um it tells you like how the ranges of of profitability for each of these Channel each channel uh and I will stop you here both of these are different channels than let's say appla integral and Facebook and and Google they're rewarded U UA channels and obviously those are always higher R Us on the first months but then depends on how it actually evolves over time because you have different rewards in in these UA channels and then people turn and then suddenly your LTV projection does doesn't really go anywhere and yeah

exact makes sense as well so yeah and this yeah that's why I think what you said on the month six R and how how everything evolves over time that's really important we see here clearly we're still waiting for Unity to roll out its new ml models yeah yeah yeah this looks terrible I don't know I think this is just dummy data uh to be hon don't worry they've announced that they're rolling it out soon so everything's going be fun still no this is this is good because then you see the Trends on the marketing channel which is important you need to get the context on that as well okay okay nice and then the last you get the revenue split uh uh per per Channel which is pretty standard yeah but the revenue split by cohort is also quite interesting so like what you want is what I said like you want to Stack these cohorts as much as possible so these like tiny you know thin layers over time if you have great payer retention they actually stick around for a long time and then and then you're able to kind of Stack these like really great cohort Towers um and um obviously by by

platform and by by by Yeah by monetization type and by by Geo so you get all this Rich information and like I said what this at least can help you do is try to build that conviction on the cohort on the cohort analysis before you try to scale up um this is Free by the way so anyone can anyone can go and do this and use this um okay you you build a calculator as well like how how you can uh I think it's on on your website right how can you actually calculate if you are uh eligible for funding or like how your cohorts evolve over time and you can do a lot of different activities uh on the website that you have there thank you I appreciate you might be the one of five people who has ever tried to try to do that I really appreciate that I think my CPO also really appreciates that um but

yeah this this is another way to kind of look at it um essentially once you plug all that core data in we'll just tell you like where are you in terms of fundability and then we'll break it down in terms of like why why nice what what what key indicators tell us give us confidence this is one that's unreleased um this is this is a a debut for the two and a half Gamers uh podcast but our benchmarking our benchmarking tool yeah so like I said we've got a bunch of I think right now maybe like over like 200 over two or 300 coords for 2024 that we've looked at like across all these different games and um so it's going to narrow down if you narrowed it down by C like by by category and genre but um like for example this again this this is demo data but like if you were to take this as true your M1 this game compared to other the the game's genre Pier set um and and category Pier set is

performing really badly in month month one roas but for some reason over M3 m6 and M12 it gets better in terms of the percentile range so like the percentile is 61% at M12 but like 15% at M1 so they must have some kind of retentive retentive capability uh which pushes them this way but again if I was if I was the CEO of this business you know I wouldn't worry too much about the M1 it's a leading metric but what you really care about is that is that latter lad kind of like raw yeah people always ask me oh you know these are the numbers is it good is it bad how do we compare against uh the other companies and I always say look you need to look at like here like month one 3612 I had um we had a game we worked with Yak on on it and it was great the first seven days with Ra was like 70% wow everybody was like

oh my God this is so good but then the next 30% it took us 11 months to actually get that back so that's not good yeah I like that's not really that great so that's why you need more more data points to be able to compare like where you stand actually and what more in justicial ODS mate yeah absolutely yeah so so I think like right now we're we're still a very young company the database is is modest but as we build out and and take a look at more companies this will be a much more Rich kind of like source for you to compare against yeah it's not perfect I I I'm not reporting that but like um it's it's somewhere right like I don't have to call my I don't have to call my you know Facebook relationship manager as often if if I had access to this um this data right you can also see it on a Channel basis again with a grain of salt attribution is last click 7day

attribution most of them and I don't know how it's being done on the scad network to be honest it's Wild West it's wild west don't wor yeah and um and some other metrics like pay retention Revenue retention payback period so you can really compare like a lot of people are like hey what is a good you just asked me like what's the payback period that that that you really get like I don't know this one says 6 point you know median is six yeah right so it's a it's it's one data point to take a look at um so this hasn't been rolled out we will roll it out soon definitely let you know nice um and the last one which uh is is going to be rolled out is basically if you plug your data in and you have limited data we will pull together our data science model based on the other companies we've seen in your category and genre and your historical data most importantly and forecast uh what the next 12 months on each of these cohorts

look like eventually this this can help you find that ASM toote that terminal roas predicted Rass ASM toote but as you mentioned Felix it takes you know more the more data you have the more accurate this will be um and this translates directly into your financials and essentially for a finance person like at the end of the year you know December they're like okay what's your budget mate what's your what's our marketing budget every month if you put in your marketing budget this will plan out the future cohorts what what they'll look like based on your historical performance and you can tell that Finance person this is what this is what the revenue every month is going to look like yeah um and they can do that planning so that's the tool that we're again this is all for free um we hope that it'll be useful and uh and yeah uh hopefully we'll be able to see more more Pro more fundable cohorts okay this oh my God this is great so how long does it take from again like from to go through all of

these like Felix mentioned we have a great game we are spending some money we plugged in the data now we want to we want to scale yeah so if if you if you wanted to get cohort financing from from us yeah um this process takes 24 hours like doing the underwriting and uh and actually spitting out whether you're fundable or not it will what you don't see over here is what's the price how much you can you you we can we can extent you in the facility what's the financing period and all of that that will be out in 24 Max 48 hours and typically after that um and let's say you were fine with the with the uh with those terms usually uh an agreement will take you know a minimum two weeks I'll I'll give myself two weeks and then that month itself we can fund so if you wanted coord funding you could technically do it within the same month yeah in 30 days right okay and basically

you send the money in the bank or does it have to be spent in some way or is just money in the bank money in the bank money in the bank you tell me you tell me I want I look I'm spending a million dollars give me $500,000 you get 50% of this I transfer that directly into your bank the next month you ask me for another million dollars but your previous your first cohort like owes me $100,000 then I just net that off so I I send you $900,000 instead of a million so that's that's how it'll work until yeah O Okay so yeah nice I mean it's great so how how people can can contact you and say say what we just said like we have we have a great game but we need money yeah yeah I mean first of all if if you're you're just more curious about the broad topics and I'm happy to talk to you you can just add me on LinkedIn and ritky from pvx um but if you if you're really keen on the financing just

go to our website um www. pvxp partners.com and there should be a get terms button and uh it'll take you through the process real real real quickly oh man okay so we we'll also add some some notes into the description with the link uh to the pvx partners.com as we usually do and also link to your email and Linkedin profile as well yeah and anyone who wants to email you use the subject heading ASM tote because we've messed it's the word of the day we mentioned it the most I well I don't know like the the last episode I watched from you guys was like hex why he hexagons because they're best ofon or whatever so yeah every glad every everyone gets gets gets a new word for each episode exactly H okay thanks ritky for coming again um thank you very much guys for listening uh if you have any questions please uh comment under the YouTube video it's

going to be uh the visuals there join the SL Channel and I see you see you next time thank you very much see you guys thanks again guys thank you [Music] [Applause] [Music]