The Good, The Bad and The Ugly of UA Financing

money is flooding into cohort financing. They're selling it as an easy no-brainer and easy money to scale, but my business, you know, nearly died once, and that leaves some scar tissue. And so, I I read my cohort math and my P&L obsessively. and seeing so many new lenders suddenly rush in to offer cohort financing. You know, as a scaling pub, my survival instincts are kicking in and I'm a little suspicious. I'm Josh Chandley, president and COO of Wildcard Games. Joining me to decode the real math on UA financing are two experts in the area. I'm Phil Moore, um the CEO and co-founder of Metica. Metacica, the core business is helping companies to get even more out of their mediation platform, in particular if they're on max. And we normally drive

between 10 and sometimes up to 30% uplift. We did tip our toes a bit into coort financing, and I can explain in a minute why we did that and where we're currently at. To the companies we're already funding at this point, don't worry, we're not going anywhere. we will keep supporting you, but we're not bringing new people on board the way we used to do that. And um yeah, I'm happy to explain why and what we've learned during the process.
So, my name is Martin McMillan. Uh I uh I founded one of the well, the first lending business to allow UI financing back in 2014 called Poland VC, which we led almost a billion dollars. We had zero credit defaults in 10 years and we sold that business in 2024. Since then I well I wear two hats now. So first of all I started Mobile Finance Collective which is a free to join community of CFOs in mobile gaming and apps cuz I noticed a real lack of connectivity between those folks particularly talking

around subjects like financing. And then uh I also uh run my own um boutique debt advisory business helping people figure out what kind of debt and how to raise it and where to raise it from called Poland Capital. So I've been very deep in the space since 2014.
Yeah. Billion dollars. Wow. So Martin, when someone says UA financing, what are we really talking about? And and why is cohort financing almost always the first thing that comes up these days?
Right. So this is for me this is like the Hoover and the vacuum cleaner, right? You know, UA financing is just how you finance UA. You can finance it with your own cash or factoring or or bank credit or you know all these different instruments, but I think the market thinks of when people talk about UI financing, they think cohort financing. So that that's the first thing to get out there, I guess. To Phil's point, there are lots and lots of people have come into this market recently. When we were doing Poland VC, we were using a product just a very fast

revolving credit line based on platform receivables. That's actually quite a different instrument to cohort financing. Um, but obviously as more and more people come in, there are slightly different variance of it, but the core proposition is largely the same where people look at your previous data and they lend you hoping that you can replicate what you've done in the past
and scale it. The whole point I guess is you can use someone else's money to do the heavy lifting in terms of scaling user acquisition rather than you know the pre2022 game of just raising equity and using equity to put into Facebook ads which is frankly what most people did
when equity was still a bit cheaper than it is now as well.
That's definitely true. So it sounds like maybe there's there's two key types of UA financing with one more dominant today. So receivables is the pollen VC model. It's been around for is it a decade Martin?
Yeah. Or but but actually there are very

few people doing this or doing it properly now. Our acquirers closed down our business, the poll business in early 2025. So yeah, I think it's fair to say there are very few people doing receivables and 90% of the focus in the market is around financing of future cohorts. I mean, that's interesting to me because you just told me you had a billion dollars lent with no credit defaults. That's a good stat. You're borrowing against money that's already owed. So, if it's so foolproof, why did it scale down?
The thing is it works incredibly well in certain circumstances, right? And and the the reason it's zero defaults is because you're effectively lending against credit risk on Apple, Google, Facebook, etc. Right? So the question is more around if you've got a you do have platform receivables from ad networks or whatever it works extremely well if you've got short break even periods because you can just keep recycling this money in. So most people and where I always advise folks when they're looking at cohort financing is if they've got longer break even periods that could be

anything from you know four five 6 months right out to a year or more then cohort financing is a much more applicable instrument because those break even periods are are a lot longer. So that that's my sort of duration axis and how I think about it.
So that's receivables the old way. V2 I guess is cohort financing. And so, Phil, what's the business case for having Matika or a different cohort financer like front my ad spend and take a cut instead of borrowing money and like how does that work and how is it different than receivables?
So, first of all, we are not doing this for new business or new games anymore. So, I can be quite transparent of what we've learned as well where is obviously different as Martin has said the periods are much longer. So instead of lending precisely against what's owed, you actually need to look at what is the rowers, what are the ad campaigns currently doing, what is the future going to look like, right? So you need

either as the game or as the lender have very good prediction capabilities to truly understand where the business is heading. And I think we've all been there, right? you you have an amazing campaign, you think it's doing really well and you double down, but then the ROAS dips, the ad network will always spend your money even though they might not acquire profitable players for you. But if you truly understand your rows, your campaigns, your payback periods, and you know you can scale, it's a perfect mechanism because [clears throat] what normally happens is you can borrow up to 80% of a cohort. I know some of them do 100%, but I'm not sure if I would sign up to that. But let's say you borrow 80, put 20 in yourself, you can scale very quickly. And if that works, as Martin has said, the unit economics can be phenomenal, even if the interest rates are a little bit higher potentially. But that's the key is you and the lender should really understand

where your UA is at and how the performance is doing and how you can forecast it. Martin's got me thinking now because like the no defaults for that long is just like ringing in my ears like how risky is cohort financing.
I'm a gnarly old credit guy, right? So I was a I was an investment banker back in the day turned app developer and the reason I launched Bond VC because I had this problem myself, right? I was trying to invoice finance my receivables. No one could understood. Cohort financing is is a little bit different, right? like receivables is, you know, you've got a verified contractual receivable from [clears throat] some of the best credit risks in the world. You're advancing money and you recover that money directly. It's just super fast factoring. The thing that was really important there is to be able to recycle this money quickly. So, if you have a bank credit facility where you can submit an invoice once a month, that's no use to you if you've got, you know, 14 to 30day payback periods or a very sort of, you know, aggressively convex LTV curve. we will make you money

quickly. So from a credit risk perspective, it it's different, right? So what you're essentially doing as a cohort lender is I'm looking at the time series data of your UA performance in the past and I'm betting with with some margin that you're going to be able to continue to do that. But you what you just need is is more capital to do it. So it is inherently more risky, which is why it's more expensive. And you know, more expensive can be okay. Think about it like this. You've got you've got 200 grand to put into UA this month. someone else is prepared to come in and provide 800 alongside. So you're getting what four or five times leverage on your existing investment and if it all returns okay sure they make a decent interest margin then you're capped out and your own IRRa or your MOIC or however you choose to do it is massively increased. So it can be if the circumstances are right and both parties really understand what they're getting into, it can be phenomenally helpful and successful for both parties.
If both parties truly understand because

I think your question can be read in both ways. How risky is it for the lender and how risky is it for the games? Because I think a lot of games, at least the ones we've spoken with, I think we looked at about 40 to 50 games in detail over like a year, bit more than a year period. And a lot of games think, oh, it's cold financing, the risk, and that's how it's been pitched to be honest by a lot of providers is, oh, the risk is only in the cohort. But that's often not the case. The lenders want their money back. So, as as Martin said, look, they judge risk with a certain margin. So if it's 80/20, they often at least take the 20% as a margin, the 20% you've put in. [clears throat] So that's the first dips. If I've read a lot of contracts and Martin has probably looked at more than me, is they then go to other cohorts if the original one doesn't pay back. If that's not the case, then there are other collaterals and and so on. So
So sorry to cut you off, but I thought

the part of the cohort financing deal was that they took the risk with you. That's what everyone thinks, but I it's not really the case. Um I mean to some of them, I won't name any names, but they'll tell you, "Oh, we never had a default." And then you ask them further and go like, "Okay, so does that mean every cohort has performed?" And they're like, "No, no, we just managed to recover our money." And that's the key here because you have so many providers out there and Martin probably keeps tap. I think I stopped counting at about 12 or 13. What gains now do is they send a spreadsheet that's not extremely detailed and say oh these are past cohorts will you lend against it and some of the lenders actually have pressure to deploy money so they will lend against very little data which means they can't really judge the risk to the level which I believe is required but then put a lot of terms in that make sure they recover the money ultimately. So that makes it you could argue a bias market, but it could also mean that there's a bit of buyers remorse in here

potentially if the performance isn't what what everyone was hoping for.
I feel even more suspicious now.
Cohort financing is a superb instrument, very innovative when the circumstances arrived, right? But when you hear stuff like, hey, we take the risk on the cohorts with you and we don't take a lean on your business, right? So these are the two things that I hear the most often, right? So first of all, you know, I want to unpack first of those, right? We take the risk on the cohorts with you. Now, what typically happens is in an 8020 situation, if you don't meet the reference cohort benchmark, you go into aggressive amortization, right? Which means that instead of taking 80% of the cohort revenue, they take 100 because guess what? Like any lender would do, they're looking to recover, right? So there's some kind of math built in there around effectively first loss cushion is how they look at it as a lender. The other thing is then around collateralization. So you can see different flavors of this, right? You know, is every cohort individually collateralized and they really do take the risk on the cohort or as you rightly

so in my in my viewpoint personally there's crossc collateralization between the cohort. So if one of them's underwater and another one's a bit ahead then you know isn't it totally reasonable to crosscolateralize? And then I actually saw another one recently which was effectively [clears throat] merchant cash advance documentation dressed up as cohort which basically gave full recourse to all the company's assets. Right? So there's a real spectrum of what's actually at risk here. The second one just cuz it's a personal bug bear of mine. It's like oh we don't take a lean on your business right we only care about the cohorts. Well guess what in those contracts it prevents you from allowing anyone else to take a lean on the business. and they've got primary first dibs on all the cash flows. Go, you've got to lean on the business, right? So,
just not in name. Okay, let's talk about some of these risks and kind of simplify them down. So, so one risk is like let's say they're funding a cohort 80%.

and you have a bad quarter and your total return for that cohort is only 88%. And they were charging you a fixed fee 10%. They will just take that whole 88% and the developer publisher gets nothing. That's the one risk. The term you use is I think cross collateralization. But what the way I'm reading that, I want to make sure I understand it is sometimes if you're not looking at the contract, it might not even effectively be cohort financing where they will instead of taking the risk on that cohort, they will pull from other more profitable cohorts to make back a bad cohort. Is that true? Is that what is that am I understanding correctly?
Yeah. Look, there's lots of different flavors of it. One flavor is you can have the ability to claw back from cohorts other cohorts that you have funded and cross-c collateralize between those. If you have the ability to cross collateralize against all cohorts

whether you've funded them or not then that's basically like a call on the receivables, right?
That's a secured loan essentially.
Yeah.
But it depends how long the coals are, right? I mean, if if you have a hyper casual game, then probably not. But if if [clears throat] you have something that that is a bit more sticky, then yes,
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Sattorii. It's the Japanese Zen Buddhist term for sudden enlightenment. That flash where everything clicks. We're told that Heroic Labs team had theirs when they realized that most studios run live ops like a horoscope. Vague, kind of generic, same advice for everyone. So, they built Sattorii, realtime experimentation, player level personalization, events that actually respond to player behavior. Sayanara to your old live ops stack and Konichiwa to Sattorii from heroic labs. I'm going to ask you guys to sit in my seat for a second. You know, what has to already be true? What do you need to be a good candidate to consider this?
I mean, I can maybe say what we've seen, right? And I would probably argue you are a good candidate because you have a track record. You've got years of data

in particular the games you might want to fund. You at least have more months than the payback period or the row is right. rows break even. So a lot more.
So that's a really good start and the more cords you have for that the better because then you can start understanding a bit how things are performing. That's the past. So it's then also about the future, right? So who is doing the prediction? And that's where at least from what we've seen it gets very thin, right? With expertise with knowledge, right? So who's doing the raw forecasting, LTV forecasting to truly understand what early indicators are giving you the right reading on where a cohort is going to go. So let's assume you as the game have that, right? You understand the past, you can help predict the future. You're on top of your data, even the basics, like do you have a clean MMP? Is your

MMP data up to date? because a lot of lenders only look at MMP data, but as we all know, MMP data can be quite buggy or it's not complete or
or there's fraud in there or Yeah.
or even by accident the developers shipped an update and and and revenue is double counted, right? So, your rowers looks amazing and we have seen that and it just it's not believable. So, I think the key is you need to have your basics right. You need to have your data in order. You need to truly understand your past performance and you need to have a way of of forecasting what future cohorts will do. At least in my opinion, that's the bare minimum. But that's not what we've seen or what we're seeing in the market is people come with very sparse data and get funded.
Interesting. And so I I imagine break even windows are also really important here. You didn't mention that because that's how long the debt clock is is is running for like a really great best fit

client. You know, how long do they have to wait for those cohorts to pay pay back? What's the payback window that seems to work best for this?
Anything from 3 months upwards to about 9 seems to be the sweet spot, right? where the lender gets some comfort that that the payback's happening reasonably quickly. [clears throat] So, we're not over 12 months, 18 months where often there is not enough data and you don't quite know where it's going to pan out. But it's also not so short that you actually would do factoring versus actually doing cohort financing. So, I would say anywhere between 3 and 9 months is is a good rule of thumb.
I I think that's the sweet spot. up to three you do factoring 3 to 9 you do you do co-hort and then you know co-hort can obviously work after 9 and you know 9 to 18 whatever it might be depends on the sort of companies I know I've done a few presentations where I use this analogy of farming and what kind of farmer are you if you think about different genres

so so you know hyper casual to the extent it's still you know it's still around there very very short periods right short break even periods and it's like you're a salad greens farmer right your crop has grown grown up and come to market and you've sold it within 7 to 14 days. And at the other end of the spectrum, you've got something like sugar cane which as a 2-year cycle, right? So, this is long. So, maybe after a year, the green shoots are coming up and after another year, you know, the crop is ready to harvest. And this is all about risk appetite, right? Because there are a lot of things that can happen in farming, right? You could have flooding, you could have drought, you could have, you know, all sorts of things that the ability of that crop to grow. But the risk that stuff goes wrong just is materially higher for longer break even periods. Now that's why that you you as a studio if someone's prepared to finance 12 month break even cohorts with you know six or 9 months of data whatever then that can be a great deal for you because you've got you know genuine additional leverage to that and

if it if it all comes home great the lender is also getting compensated for taking real risk which I also think having been a lender for 10 years is great. So, it's just getting into it and understanding what things really matter here. A lot more can go wrong if if break even periods are pushed out substantially. I think a really key one people often don't look at is also what's the shape of the LTV curve because the more front-loaded it is obviously the less the risk. If you get 70 80% back in in months one and then the rest sort of comes in a bit later then the risk is reasonably low compared to yeah sort of much more flat LTV curves.
Yeah. The the shape or convexity of that curve is super important because it's just basically saying how much risk I've seen I've seen it as extreme as 90% after like 30 to 40 days and then the break even goes to be almost 6 months. So it goes literally like that and then

just very slow trickle up up up to break even. So obviously the lenders are looking at that. It's like hey I got 90% of my money back in the first 30 days or 60 days once it pays out. So that the shape of that curve super important.
It's interesting too because in the publisher perspective the shape of that curve almost means the opposite. If I'm recouping let's say 90% in the first 45 days and then taking six months to break even that probably means my post break even total rorowass is relatively lower because the curve flattens so fast and so my affordability of this kind of a debt product is lower and so I'm I'm wondering of the games maybe you can't tell me Phil and you can nobody off but for the games that you did fund a lot of these ad monetize where they're bringing a lot of that revenue up front or is it a lot AP only.
It's a very good mix. I would say it's probably half half to be honest. I mean, we're coming from the IA sort of corner, so we've always looked that there is a

decent mix, but we've also financed one game that was just is purely and we're still financing them. And because we know the IIA world better, it it was much easier for us to underwrite because the money also comes in more steady whereas IPS there is more risk, right? And you need more data, you need more understanding. But I would argue in in principle if you've done your homework, you can predict, you've got enough history, it works for both equally well.
Yeah. Shouldn't matter. If you've got like a really whaled driven game, then you've got any of the usual dynamics about whale driven games. But as a general point, it's it's as valid for either.
All right. So, let's say you do this. What does it cost? I think the napkin math I've heard a million times now. I feel like it's it's like 1% a month in interest, right? So, if you break even in a month, it's 1%. If you break even in six months, it's it's 6%. 12 months,

it's it's 12%. That kind of sounds almost like a 12% like APR on like a credit card or like a loan. Phil, simplify this for me. If cohort financing was a credit card, what would the target annual interest rate actually be on that credit card?
Again, it depends on the LTV curve and what the payback periods are. And I think that's cuz a lot of people do exactly that math, right?
The annualized effective rate.
Yeah. And I think it's also driven by the marketing as we mentioned earlier, how how these loans are being positioned, how they're shown, because yeah, if you hear one a month, you do the math in your head, right? But then the question is, is it 1% a month for the outstanding amount? Is it 1% a month for the total amount during the whole period of the payback?

And and that really makes a massive difference. So we were lending around anywhere between 14 and 16% IRRa and I think Martin has a great calculator on on his page as well and has done quite a bit of writing right up about that and we've been having conversations for over a year about that is if you break it down to the IRA like what you're used to from a credit card it ranges anywhere from 14 to I mean we've seen some that are over 40% annualized And that I feel is the right way of comparing it. But as Martin has said, there are scenarios where a higher rate might make more sense because you get more money. It's more flexible. It also always depends how much money you need to deploy. And
what we for instance never did was we never forced a studio to deploy a certain amount. We always earmarked a certain amount and we said look the underwriting is for let's say five million annually. But we always worked

with them to understand can you actually deploy that much money right now. If you have to deploy let's say $500,000 each month because that's in your lending contract but you can't do that with the right rows and then all these mechanisms kick in of recouping it suddenly goes through the roof. Yeah. And that's why it's just so hard to pin a number down. But the IRA, as we said, between 14 high
14 and 40 is what I heard.
Yes. So, it's a big range. It's coming down, which is good. It does seem overall as more lenders enter, it is coming down, but it's just so hard. And I think it's on purpose, right, that the transparency isn't quite there because this 1% a month, half a percent, it just sounds great, right? Because you think, oh, this is cheap.
Yeah. Like honestly like I just for the listeners I had no idea that Phil was

going to say a number with a a four to start with that with for an annualized rate. Like I am genuinely shocked. One of the key factors getting the cost up to there. Like the way I'm thinking about it is maybe we have a 6-month break even but we're getting to 90% in a month. And so nine and $10 that I spend, I'm actually paying 6% to rent that money for one month and that annualizes to Is that what's happening? Like how how are we getting to 40% annualized rates?
There are a few ways that lenders quoted and I learned this in the in the early days. Originally, we were just quoting a simple fixed fee because that's what we thought developers wanted to hear. And actually, very quickly, we realized that was incredibly patronizing. And what we needed to do
was be completely transparent and then help people understand. And that proved to be a way better strategy. So
in my Poland days, a developer I was taking turning to a pocket gamer conference and he said, "Oh yeah, um you

know, you you guys were going to charge me like an 18% interest rate and I found these guys to do it for five." I'm like, "Oh my god, cheaper than a bank. This is too good to be true. So what is it you're getting?" And he said, "Well, basically they're charging me 5% per coore, and my my economics was something like I I get 60% back month one, 90 by the end of two and then 105 by the end of month three." And he said, "Yeah, they're just charging me 5%." So I ran the calculation and and and and this is, you know, Phil mentioned a calculator we have on the MSC website, mobfin.co/xirrra. So in finance an IRRa is just like a series of cash flows where the my technical definition is like the NPV is zero effectively the effective discount rate. So essentially you can think of it as like for any series of cash flows it will give you an annualized effective interest rate. So in this scenario this was an interest rate of yeah it was more than I think it was about 45%.

And so this is what really pissed me off is like what the developer thought he was getting is a 5% annualized rate of interest because he thinks percent he's thinking about making games the whole time not about you know comparing financing costs. So what he thought was five ended up being 45. Guess what? He didn't do the deal. for anyone doing this, unless you're completely transparent, you know, it's going to come back to bite you because I mean, how pissed off was someone that you know thought one thing and did another and fortunately didn't do it. So, in fairness, everyone's getting away from fixed fees and IR targets or much more talked about effective annualized targets, whatever. And you can model these things out. Now, the great thing about coral financing is it's flexible. It's effectively like a revenue based finance loan. If your revenues return quicker then great better for the lender and if it takes longer then the lender is also along with you right so I'm not dissing the product I think that gives an inherent a lots of inherent flexibility but when it comes to calculating the cost of it more people

now quote this on a it may be an interest rate basis on the outstanding balance any credit fund funding any of these lenders is going to have an IR target and so back filling it to an IR target whereby depending on the repayment amount flexes to hit an IRA target is in my view totally reasonable and then from the borrower's point of view if I'm paying 18% or 22% for money whatever how does that factor into my rorowass calculations and technically you know if you look at demand economics and my my first ever economics lesson doing an economics degree and about the only one I remember is your marginal cost and marginal revenue so you know your points of max efficiency whatever is when your marginal cost equals your marginal revenue. So if you think of that in gaming terms where CAC equals LTV, the thing that you have to remember is that you have to finance that customer acquisition cost until it's

break until it's broken even and lender repaid whatever. So you have to factor that into your overall economics. And that's something that I've seen done fairly badly as well. people just they just lose the cost of financing and they they end up potentially bidding too much because they don't take into account the cost to actually of financing it through to break even.
Yeah. And and that's like a subtly an additional cost. So let's kind of jump in on that for a second. What you're kind of saying is when we're running UA, we think about it as like LTV divided by CPI. It's kind of your return. But a more old school term might be, you know, LTV divided by your CAC, your actual full customer acquisition cost. And in this case, we're talking about adding the cost of the debt. The kind of ceiling that we're talking about here is if you were paying a $10 CPI, but another 10% for your money, you're actually paying $11 for that install.

And if UA financing increases my effective CPI from 10 to 11 and it doesn't change my LTV, well then the point where I reach my maximum profitable scale is now lower than it was before. Am I reading that mechanic right?
Yeah. You just have to factor in the cost of financing it through into your bidding decisions. And I I can say with my uh MSE community hat on like one of the biggest things we discuss is the relationship between the finance function CFO head of finance whatever you want to call them and the UA teams because the UA teams are super focused on just a rorowass metric or effect P&L metric whereas the finance guys got to figure out how it gets financed through and how this all forecast as well. So, it's one of the major friction points that I've seen over 12 years of doing this stuff in a gaming studio is frankly finance not really understanding UA and UA definitely not understanding finance. However, trying to put a glimmer of hope

here, when both teams or people or whatever understand each other's respective business, that's when you can engineer the magic if you've got good underlying economics
and data, right? I think that's one thing we really learned and we're focusing on is how can we now help companies really get this data layer right that they truly understand how the game's performing what's their rows pulling all the ground source data in and by ground source I mean like all the ad networks on the on one hand on the side of the spend but also revenue app store data corrected data on that how much are you getting net to really make sure that everyone is speaking the same language and has the same data cuz that was the biggest issue we've seen especially with sort of the latest wave of trying to get things funded that should never be funded right yeah so you just need to get this right and I think

that will be the biggest challenge I know there are others trying to fix this as well and but I think that's the key is how can we all help that all these different functions and that's not just UA and finance It's also the game teams. How do they all have the same data? They work with the same definitions. I mean, it's been a problem that's been around forever, right? Where these teams don't work as closely as they probably should, especially if you start lending and suddenly it's not your own money, but you you actually suddenly have have to pay it back.
Yeah. [clears throat] The source of truth question comes up all the time.
What do you mean by source of truth? A bit over a year ago, we had like a community town hall where CFO of of quite a big studio says like, I've got all these different people telling me all these different things. Who do I trust as a source of truth? So, I've got my App Spire here, I've got Facebook here, I've got Apple here, I've got my own BI teams, and they're all saying this is, you know, there there's

conflicting data. Right? Now, it's interesting because when you actually unpacked it, there was no clear set of definitions within the company to say what these things were. So you might have had the finance guys were looking at day one retention on a calendar day basis whereas the UA team were looking at it on a rolling UTC window basis and if the UA was heavily skewed towards one particular geo versus another that could put 10 points of D1 retention right no might iron itself out over time but these are the sorts of things. So it was just very interesting teasing some of this stuff, a lack of internal definitions about how these things are programmed. Now to go back to the lending conversation. So if if I'm just purely reliance on NP data or maybe I'm very trusting I just purely rely on the customer's own BI you know whatever a reliance on one you know set of data when there are conflicting around it could cause friction but in most scenarios it's a bit more nuanced than

that and therefore it really doesn't
yeah I think that the tough truth is that it's easy if you're a game that's recouping in 30 days and you're making $200 % on day 365 the
go for it right
in that case the cost of money it becomes almost immaterial the the challenge is that I mean Phil how many of the clients you funded had economics that ridiculous
a single one right and I haven't seen anyone really do that of the lenders that are around at the moment is also tell people to stop right because we we're true believers in real time data if we do raw forecasts on a daily basis and we see the cohorts are not trending in the right direction, right? Cuz wrong campaigns or maybe even the campaigns have been exhausted. I mean, you you've seen that, Josh, right? That you have a campaign you think is amazing and you put more money in and it just the ad networks will spend it, but the

catchment area of of the players gets bigger and the rollers dips. And we've seen this that this just gets detected way too late. If you do this and you you've got much more real-time data, it's the risk is actually pretty low, right? The risk becomes big, if you don't detect these things early enough going in the wrong direction. And
I think the challenge here is that, you know, you're not I I don't think you're seeing companies like Scopley or Mood Active take on these debts. It's usually more SMB style.
I'm sure they
Oh, yeah. But not cover financing. It's very true. Correct.
Yeah. And so the the companies that the businesses, the studios that need this product are usually teams that don't have a 20 person data science team and they have the hardest time sorting all of this out. Their teams that are trying to bootstrap or compound or get to a solid level of scale either because they want to go on and do their next thing or they want to sell or whatever it is. And so one thing

I don't hear asked a lot is, you know, when should you take on cohort finance and what should you do first? And I just want to throw this out there for anyone listening. If you're scaling, your ad networks can usually see your rorowass or whatever your your approxy is. If you tell them you're limited by cash and they can see that your performance is good and you're on net 30, if you ask for net 60, you might get free debt. They might give you net 60 for free, which means essentially if you're spending 100k or 200k a month with that ad network, suddenly your bank account basically pops up by that much and that compounds essentially forever. you now have an additional month of UA free and it scales with you. I've also heard of instances with ad networks where if you look on your IO, if you

miss a payment, there's an interest rate that you're being asked to pay. It's usually 1% a month, which is a very kind of easy consistent term. Do not do that without talking to your ad networks, but having a conversation with that ad network and saying, "Hey, we're thinking about this. We have options. Would you be okay if we did this and paid a month late or two months late and did this and allowed kind of things to pay back more and we just paid you 2% more or 1% more?" These are conversations that you can have as well. Is there is there anything else Phil or Martin that you you've seen studios do to avoid taking on please? on on this one. This is a conversation I have a lot of people like, oh, why would I want to do that? I just get a bigger credit line from ad network and you know, fair enough, but you just got to think about the actual maths here, right? So, you it's the 1st of January and whoever meta or applo and whatever have got given you a credit line and you've got to have that bill paid on the

28th of February, right? So, let's say your AP revenue all through Apple, that January revenue is going to be paid depending on the Apple cycle, it could be February, it could be into March, right? So maybe you can't pay that. Maybe on AppLoving you can and they recycle it or whatever. But the bigger one is like if you've got a 3 month break even period and you want to spend 100k, you won't have broken even to actually pay the bill until the end of March that needs to be paid at the end of February and then you've got that you've got the February payment cycle and all. So you got to manage the cash really carefully. The bigger credit line conundra, you know, it's a factor and you should always use it first. I mean, I write this all the time. It is a risk transfer of view onto them. It's the top of the stack, whatever. But what you then need to do is you need leverage underneath either with a receivables facility or co-op financing to enable you to keep doing that. A bigger credit line from an ad network per se does not solve this problem. It is the very top of the stack.

It delays.
Yeah, it delays a little bit. But if you start thinking, hey, I got a bigger credit line here. I'm going to go crazy. you can't pay the bill, they're going to cut you off, right? And your grand plan just just go and you then scrabble hard. So, you got to think of it as part of a wider financial strategy. But sure, the other thing that you should always do is if you have one of these products, you should do intrammonth paid ads. You've got a million dollar credit line, you've reached a million by the middle of the month, but you still want to keep spending, make an interim payment financed by one of these other products to keep it topped up. You use the cash really efficiently. But yeah, bigger credit line from an network doesn't solve the problem. It's it's just a part of the solution. It's not the solution.
What it does though is it shows you have a certain level of maturity. Right? So the lending isn't just on the cohort. I mean maybe some lenders do that, but they should also run credit checks. You should understand who are the people behind the studio. Are they in good standing? and people who've been around

the blocking gaming for a while. You can also ask obviously the reps at all the ad networks and so on and the games have to open their finance. If I would see this right for me that's just a plus because it shows that someone else is looking at this and someone else is having tabs on it because with the app networks as you said you have to have a proper conversation. You need to put a plan forward. I think it's just a great level of maturity. So I I would in any case recommend everyone is doing that having really good relationships with the app networks and the reps of them.
I'm going [clears throat] to pitch it at at pubs just a different way one last time. I think it's so important to have as many of these conversations as you can because they're conversations that you don't want to have because the cohort financers, they want to give you money and they want you to pay for it. the networks don't want to give you the free money, the free payment terms, and so the temptation is to just not bother

them, but it's the cheapest way to get it. And so be pushy and ask. And so my the two benefits that I see of this is I think one, it can delay a little bit because you don't scale I sincerely hope no one's scaling by like 5 to 10xing their UA spend month over month. It allows you to smoothly scale up and prove internally how elastic or inelastic is our performance as we scale. Like how much does does CPI creep up or or our poo drop down or whatever it might be for your game as we scale. But second, if your game is like let's say your UA is being paid on net 30, your IAA and your AP revenue is coming back on exactly net is being paid on net 32. So it's the exact same. That means a six-month break even means it's a true six-month break even because you're getting paid as fast as you're you're paying out. If you're able to turn some

networks to net 60 and they're collaborating with you there, if you take on cohort financing, that is a discount from a six-month loan to a 5mon loan forever.
Can we just be clear on one thing that if you spend 100k month one, that 100k is payable at the end of month two. So, you need to carefully map out how much you're getting in and then when that is paid out because, you know, on a six-month break even period, if I've spent 100 grand month one, I owe it to the end of month two. If I've got a six-month break even, I can't pay the bill.
I can pay a little bit of the bill, but I can't pay the bill. And this is where you need to put something else in underneath.
Yeah. I mean, if a company's financial situation is such that they can't afford UA at all, then it's really tough, right? because they have no cash reserve to prove out a cohort. They have to figure out how to get financing on just to just to start to measure these cohorts.
But that's also not where cohort financing comes in. Then you do need VC money.

Yeah. Which which is very hard to get.
Find out. We'll always see this. If you look at the stack, right, there will always be a form of VC financing or you need to bootstrap or do something else to prove this out because the lenders are ultimately not taking the risk especially not for that kind of interest rate. I mean a VC takes a big bet. They want to return, I don't know, a couple of X of their fund. So they calculate that there will be quite a lot of defaults. And if you go into that with that mindset because all you've done is raised VC capital in the past, that's definitely the wrong mindset because lenders are looking at two or less percent defaults ever, whereas the VC is or one in 10 makes it right. I'm sort of exaggerating a bit, but it's about 90% or 80% default. Yeah, it's a very different mindset and model.
That's one conversation I had [clears throat] really made my eyes pop out recently. Well, recently it's about a year and a year ago where this guy had a a game. It's performing okay, not

great. And Station Strategy was like, I'm going to take around all of the cohort lenders. If I can persuade someone to finance it, we're going to try and scale it that way. And if we can't, I'm just going to sell it to one of the roll-ups and move on to the next one. That really just made my eyes pop. That was someone thinking, hey, this is a bit of a free trip to the casino, which obviously it's absolutely not. But I think he just saw all these people are reaching out the whole time. So, yeah, sure. You know, take take a look at the data, see where we get to. Not a healthy attitude for for for either side, right? you said, "Oh, maybe not everyone has has this sort of deep knowledge of UA and everything in their team, but I would argue if you want to self-publish and you want to scale, one of you, you know, might be employee number one, but it should probably be one of the founders, right? Should have knowledge." And it's like in every business, especially around the founding teams, you want the diverse team where

maybe someone is really good at at making the game. Someone is really good at at at data, math, understanding, UA, hopefully the finance part. And I really think you do need that in your team. It can't be an afterthought. Otherwise, you know, start publishing with someone else for a while. And there are still enough publishers around that are really looking for games they can scale with their means. And that's I guess why why that came about. So I can only urge people to genu savvy, understand it, read up on it. Um join Martin's community, I suppose. Um but it's if you don't, you can't scale. I mean look at a lot of the the companies especially around Hyper Casual that's really scaled. They started not by making amazing games. For them, it was like, okay, we're really good at UA and adtech to monetize and we need eyeballs, right? That was their attitude and they managed to really scale it up. But it's because they inherently

understand that. So, I can only urge everyone to to do that. Let's say you you've done your research. You've tried and failed or you tried and you you've gotten some good payment terms for a little bit. And Martin's right. You It's very very hard to become a hund00 million plus mobile game studio without taking on some kind of financing. But you've now heard that the the effective annualized rate could be 14 or 14%. As a publisher, when you're talking to these financing companies that offer cohort financing, what are the first questions that you should ask every single financer?
You do need to understand the terms. Then I would also look and and see who else is is borrowing money of them. I would definitely talk to them just to understand what their experience is and

ideally find someone where things didn't go according to plan. Right? If a cord hasn't performed accordingly, are they really genuinely on your side? Are they getting really draconian immediately? I would also start understanding a bit if you've raised some VC money, have the VCs dealt with them, do they have some information? I would do that and then I would compare what Martin has said is is the IRRa put that into the calculator to get a good overview. What does your LTV curve look like? What's your payback periods? How are you going to monitor if you scale up how things are performing? Cuz I think that's how you save yourself in in in the best possible way. For me, I think okay, cost is important, but it's really not, you know, I mean, you could quite happily be financing a an IR in the low to mid20s if you've got crazy good performance if and this is almost the most important thing is the

flexibility of the instrument to do what you want it to do, right? So like duration matching, you know, I've got a six-month break even, you're prepared to do this, you're prepared to commit this much capital over time so that you can continue to scale up. You know, again, just work it out as part of the overall thing. Too many people just get hung up and they were like, "Oh, why is this like 21%, I can get a bank loan for seven. Go get a bank loan. See how see how useful that is for you." I saw one company said, "Yeah, I'm going to raise a $2 million venture debt facility that amortizes over five years." I'm like, that doesn't help you because you're just going to be repaying this facility back over 5 years. So the flexibility of the instrument to do what you want it to do I think is the most important thing. So that that and obviously price but not I I don't think actually even price is at the top because if you've got half decent unit economics it falls to second. Flexibility trumps it. However, there's also a bunch of other stuff that people don't normally check. It's like

you know where is the source of capital for the lender? Is it some massive institutional warehouse facility or is it a bunch of guys who have you know made a bit of cash who are looking for some short-term investments who might happen to just pull that at any point in time. So the the certainty and the commitment to the funding behind it obviously the security and then you know what what are you really giving up how easy is it going to be to police covenants and things and as Phil said what happens when it goes wrong. This is not this is not like you're interviewing a bunch of VCs who have said, "Oh yeah, tell me about all the amazing exits you've had, right? This is the polar opposite of that. It's like, okay, what happened when the hit the fan and how did you how did you conduct yourself and did you you know, obviously you're a lender. You need to get repaid. You don't have the, you know, 100x return possibilities that a a VC has, which is why you're lending money, whatever, but what you do need to make hella sure of is that that money gets repaid. So otherwise you're wearing

it and that affects your ability. So it's a very different thing. So it's a bit more nuancing the things of what you have to to ask. But I think ultimately you're looking for a partner. If you both understand the alignment, you both understand, you know, why each other is doing it, what the risks, what the rewards are to do, you know, then it's a way better relationship than just like comparing a bunch of term sheets and picking the cheapest one because probably nine times out of 10, it's not going to be necessarily the right outcome um for the studio. Guessing where your users come from, that's so 2010. Absly [music] is like having a cheat code for mobile marketing. Pinpoint attribution, real-time insights, [music] and analytics that actually make sense. Stop flying blind and start flying smart. Apps flyer because your data is your best [music] co-op partner. Unless you've been living under a rock, you know this is web store rumbringer. 70% of top apps are using a web store. And

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us a part. vibes vybs.co [music] for first-time founders or first- time I guess scalers taking on debt. What are the most common terms you see that maybe they shouldn't have agreed to?
I mean, people doing fixed rate deals that they didn't understand how to calculate an interest rate that's going to stand out at the top. Again, I'm trying to caveat it. There's no point. There's no problem with that as long as you understand what
as long as it backs out.
Well, but but also keep in mind there are certain jurisdictions where you're only allowed to do fixed term
like a fixed interest that's pre-calculated, right? So that don't exclude these because sometimes it's the only thing you can get based depending where where you're based.
Yeah. you get into the when is alone not alone because at Poland we're regulated in the US and all rest of it and you know we had to report these things like really diligently most people can't well

I say can't be bothered it's a real pain if you have to go through a regulatory process to become a certified lender it gives you a lot of operational overhead so generally what they do is like hey we're a revenue share agreement or revenue based loans or whatever therefore it's not lending it might look like a loan and smell like a loan But legally it's structured as a marketing co-investment agreement or something like that. So yeah, so sometimes for rare reasons that has to be done on a fixedterm basis and again no problem as long as you can unpack and you can figure out what you are actually paying. I think then duration mismatch as well. When I see a cohort financing company trying to do 30-day break even deals, it's just like dude, it's the wrong instrument. So, I know you might have a sales guy and the sales guys from one of these guys and they're reaching out. They're hitting out hard, right? You see them every day
and they're good.
Yeah,
they're they're good. Yeah. Yeah, they're good. So, but ultimately they're sales guys with one of these in their

pockets and it's like, hey, I've got this. How many do you want to buy? Right. So, they're not necessarily thinking, okay, what is the what do you actually need? And if I've got if I'm a sales guy with a target and I need to deploy X amount because I've got my investors all over me to deploy it. you know, if you've got a two-month break even period, hey, cohort financing might be a the answer to all your all your prayers, right? So, I think it's really important to say to take a step back and figure out what you want and what you need, what the most appropriate instrument is, duration, match it, and look, if you've got six months of data, you're growing at 20% a month, and you just need to put more more on the gas, you've only got a certain amount of cash in the bank, it's a brilliant instrument. You can get four, three, four, five times leverage in your existing investment and it works like a dream. And there are multiple companies that have used this to deploy a huge amount of capital and scale into really big businesses. All good. What you're saying, Martin, this is exactly the reason why I actually think that

flexibility and a partner that's easy to work with is probably the most important long-term thing, even if it costs you a couple points a year. And the reason is simple. I have no way of knowing if this is my first or second ever finance deal what I'm going to need. You know, most founders and most people running the business scaling up, this won't have been their 15th or 20th time where they have tons of reps in this. The likelihood that the deal you sign is the deal you need in 12 months is probably fairly low, I imagine. Is that is that right, Martin? So, so I'm working on some right now and it's basically like look for the next three to six months. You need a factoring deal because you've got lowish volumes, short paybacks, factoring is perfect. At a certain point in time, you'll be dialing up the spend, pushing back the payment terms, in which case you sort of, let's say you go from

a a twomonth to a six month period, which is fine, but the product you need then changes from factory into co-hold financing, right? And so that might take you from, you know, when you go six months even to nine months, even a one year breaking period if you can still do it and and you know, you look at your cost of capital versus your return and you can keep doing that and hit the gas and all of a sudden you are, you know, you're doing 7 8 9 10 million bucks a month. You're like a $100 million run rate revenue company. All good. What you then may find is you need more flexibility and it becomes back to more like a corporate facility. So you've reached a certain level of scale, you've achieved a lot of residual value in your cohorts, and then you can effectively put in place a more flexible and lower cost facility, right? So you you don't need to be paying in the 20s anymore. You're not using future cohorts as the collateral. You're using the residual value in your existing cohorts. And it means that you don't have to self

amortize every cohort. You don't have to pay it back every month. You might have a 20 or 30 or $50 million facility. you just deploy that capital where it's needed in the business. It may be to make an acquisition. It's not prescribed to have to go into user acquisition. So you can, you know, put it into product development scale, you know, build up a new game or I've seen this a number of times. It's like a studio wants to pump UA in a new game that it really believes in, but you can only use UA financing or co- financing on one that's already got the data. So this way approach allows you to crosscolateralize and say look I'm taking this company facility and it's more like a traditional credit facility but I got a hell of a lot more ability to deploy their capital where it's needed in my business as opposed to just like a oneandone into new cohorts. So I really see it as a evolution of the sorts of capital you need at different times and different stages. There is not a one-sizefits-all in this in this world. Well, that's the challenge though because there aren't really lenders out

there. I mean, some specific ones, but the the standard candidates for the UA core financing, it's not what they're doing. I mean, what Martin said makes a lot of sense. That's kind of where where we sort of ended up. So, we're helping some of our bigger customers to do exactly that right now cuz we have all the data. We've got the finance contacts now for the debt funds. So, we can help them with that. But I think one other thing you guys haven't mentioned that I think is really important is given how these things change in your requirements, how do you get out of a contract, right? Because I think Martin touched on it very briefly at the beginning. It's like if you have this deal, often you can't take any other money, right? Because they have first dips. So they don't want you to go to another lender, layer another level of debt on top. So that's very important and often really tricky to get out. Can you buy them out?

Can the next lender just, you know, pay off the outstanding cause? Can you have a deal where you do pay them back as they pay over time and then you you you bring on additional debt. So that's a clause and terms you really need to check. There should always be a prepayment clause so you can effectively prepay out of that cohort. Again, if you've got relatively short duration, 3, four, 5 months, you might have a handful of cohorts to pay out, but maybe you've just refinanced that cohort lender with a corporate facility and it's, you know, it's whatever. If you've got, you know, a dozen cohorts that have still like, you know, low monetization, whatever, that's going to cost you materially more to get out of.
But these are not the standard terms. At least not what I've seen.
Well, well, prepayment clauses and lending are totally, you know, totally standard, right? So if you've got a big facility prepare being waved around in in the gaming space,
right? So here here's like and for you're probably closer to than me, but

someone who's trying to effectively do if there's any kind of vendor lock in and there's any kind of like trying to force to spend money, these should be massive red flags because if the UA is not working and you're seeing the signals, you need to have the ability to dial back. You don't want to be like chucking cash off the cliff because you know you're going to lose it. So you need to make sure that facility is scalable with what you need that doesn't try and sort of force you into something you don't want to do in terms of longer payment periods in terms of I haven't seen anything too nefarious in terms of uh the lock in side but I've seen a few and often they scale up but very rarely they scale downwards right at least what what I've seen and and maybe they're adapting now and that's a good thing but I think that's definitely where the market needs to head right that you as the game can start changing if a better deal comes along or the partner isn't quite the right fit or the game doesn't scale the way you predicted the UA is

not working. You don't want anyone trying to force you to spend or oh you in your forecast you said this was going to happen right so a lender is going to want to have capital deployed that's how they get paid so if all these cohorts are amotizing that means that their capital deployed is going down so understandably they want to keep it they want to keep it deployed so it's a two-way argument and I'm very much I see things very much from a lender point of view as well because I spent you know 10 years as a lender but I also have a lot of empathy on the side which is why you need to build in this this resilience or these ratchets that if it's not working you have the ability to repay if it's working you have the ability to dial up more so that's where you get back to the partnership angle as well [clears throat] which is super important there was one point I wanted to make about modeling and what happens when it goes wrong because this can be the real sting again I'm not trying to be negative here I just want to I want to get it out there because I've seen it and seen

someone almost got roasted on it This is an incredibly complicated um area and the hardest part is the skills that founders have and studios have to get to the point where they need UA financing have relatively little crossover with the skills required to use a UA financing deal appropriately. And that means it can be easy to to make a mistake. So, first of all, Martin, we're going to put your IRR calculator link in in the podcast description. So, if you're thinking about that, go down and and use that because I think that's that's the the key. And another thing that we we said here is I just want to stress this again, delaying. And if you can, don't think about UA financing as a as single tool. Use it as a range of options, especially as a new game comes live. Funding it yourself as long as you can to learn what the cohort, what the maturation looks like is great.

That might mean on tight break evens. As you gain confidence, expanding your break even window out a little bit, maybe a receivables alone to allow you to kind of go through that, build up more confidence. And as you see 6 9 12 months and you kind of like where this is going, getting into a co-ore financing situation can start to be extremely scalable. The question is understanding what those things cost. And so is that a good framework and then for publishers to think about how do you think about making those transitions from an IR perspective and what kind of problems can you get into it?
It it depends [clears throat] very much in break evens and what the right instrument is for what you're trying to do and that may that will change over time right and factory is not actually too different in cost and it's more driven by kind of scarcity of people who really understand it. It's more about, you know, again, I keep coming down to thing the flexibility of instrument. One thing I did want to call out because

naturally people are sort of fairly optimistic, right? So, if you're looking at saying, "Hey, I've got this core financing and it's going to be able to deploy 100 or 200 or 500 or million dollars a month, whatever." So, when you're doing your planning, you're going to assume you've got the reference curve. It's all met. It's all good. And therefore, instead of doing 200 grand this month, you can now do a million. And that's what your projections are based on and you know what free cash flow is like send off to pay the team and all the rest of it. Most people run their gaming businesses where they've got known fixed costs and everything else goes into UA provided they are pretty certain that UA is possible right so it's normally run you know fairly close to wire the thing I want to call out is if your cohorts start to not perform and all of a sudden they go into aggressive amortization you know not unreasonably by the lender and they take 100% of the coal revenue if you are then left high and dry and you don't have enough money to pay people, pay servers,

you know, all asset, then the whole thing can implode. And this is where getting back to like proper underwriting by the cohort lenders is really important. So if you fail to meet these projections, you can't meet your obligations. The servers get switched off. People don't get paid. And by the way, the cohort lenders don't recover either. So I think there's been a propensity for people to look too much at just the cohort and not think these are very often fairly fragile businesses in terms of people with bills to pay and if everything's been modeled on the slightly more um rosy performance curve and things start to pull back right because the coral lender is going to say right I go aggressive amotization and these cohorts are underperforming and guess what I'm not going to put any money into new ones then you as a founder or a CFO or as a team or whatever you got some bigger decisions to make and some of this stuff can compound very quickly. So just be super conservative in the modeling and don't always assume everything's going to be all rosy. Try and sort of figure out these situations like if I have to amal

size, if I get no more financing for new cohorts and just be like fairly conservative in your modeling.
But that's also where the maturity of the lender comes in, right? because you should not underwrite someone that doesn't have enough money in the bank to keep the lights on for at least you know couple of months but we've seen this where we looked at some teams they had one or two months and they got a deal and it's just a bit too close to the wire as you said. So um but that's again where the VCs might want to work a bit more closely with some of the co lenders right you raise a bit of equity to get your opex in the bank and then the scaling comes from the UA lending so I would love to see that a little bit more that people are just doing their due diligence a bit more and making sure that the financial foundation is actually solid. It's such an interesting point because it used to be, you know, when you when you raise a round, you might go to SVB and and get a little bit

of of debt on at the same time as part of that rounds. I haven't really seen the inversion if someone's taking on, you know, co financing or a piece of debt getting a little equity at the same time. Does that happen? [clears throat] Not yet. But I think it actually would make a lot of sense to be honest because it reduces the risk of the lending, right? because they can keep the lights on longer, but also the equity part could actually grow and scale much more quickly as well. So, I do think they would actually work really well because they're different instruments. One is to scale and the other one is to actually build and make sure the foundations are there.
Debt is is cheap when you win, but it's very expensive when you lose. Equity is the opposite. It's incredibly expensive when you win,
but it's it's very cheap when you lose.
Empirically, I what I'm seeing is a lot of founders just think this is non-dilutive financing. I'm not going to, you know, it's purely it's purely debt, purely at risk on the cohorts. I

give I don't even give warrants like I would have had to give to SVB. So, and and people like really
Yeah. the concept of warrants and covenant light and all the rest of it which is I mean a lot of the deal flow is coming from VCs. They're thinking oh great a I don't want to keep pouring cash into this. I want to juice my IR and the investment by encouraging them to use more more capital efficient ways of financing themselves which is where they get the rewards. Now is there a case for a VC to backs stop it? Maybe. But then, you know, if they take the risk on the cohorts, maybe the VC is just happy to let it go. I I think there is a I'm not sure it's really being teased out yet, but there is probably some optimal debt and equity. I mean, you know, if you get, for example, all the debt you need to scale then for that lender to take a small equity position in the business. I mean, by small, I mean minority equity. I think that's that's a

fairly interesting trade because it helps set a price without having giving up board seats and all the rest of it, but there's not that many people that can uh that can play across the stack,
but it also makes the product even more complex. So, I'm not sure who want to go there.
Does it does we're solving problems by adding more [clears throat] complexity.
I suppose that's a that's a good thing to end on is that these are challenging products to decide on. It does sometimes come across in some of the marketing materials like it's this easy decision, but using debt to scale is leverage. That means your rewards are bigger, but so is your risk. You know, taking on debt to buy stock, taking on debt to buy users. This is a great way to increase your rate of return, but you're getting an adjustment to your risk as well. And so as you're analyzing these decisions, go to the link in the description, use the IRR calculator. The cost of the debt is not the only thing that matters, but

it's an incredibly important one. It's a great way to far it out who you do and don't want to work with.
I mean, I was just going to say like the devil is in the detail, right? in terms of like if they are genuinely nonreourse and the lender takes all the risk, it doesn't the risk for the borrower doesn't amplify. It's like some prepared to walk away just having lost 25% of the cohort, no claim on your business. That's okay. I think the question is really what that recourse looks like and that's not going to show up in the one-page PDF. That's going to show up in page 25 of the contract, you know. So, and that's really the thing to to to work about. But look, like when I was doing this back in the early days, there was zero and we were cast out as some kind of, you know, predatory payday lender until companies started to massively grow and sell and then it got reframed a bit. So there's lots of financial innovation, but for me the wrap-up is just be like really informed, talk to everyone, try and think all of these things through and then select the best product for your needs as opposed

to what someone's trying to sell you.
And as more lenders come in, it can only be good for the gaming industry, right? And the more it becomes standardized, known, the fairer the terms will become. So yeah, competition is great. Just keep your eyes open and don't sign anything you don't understand. [clears throat]
Yeah, don't sign anything you don't understand. And I would also say, and some of the lenders might not like me saying this, but if one lender is willing to lend to you, there's probably 10 that are willing to lend to you. And that means that you do have options and negotiating power. Just because this is a hard time for your business and your scaling does not mean you are powerless and so aggressively advocate for yourselves.
100%.
Thank you both so much for joining me. This has been a really really eye opening episode for me.
Great. Thanks for having me on. Thanks George.
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