The Founder’s Dilemma: Equity vs. User Acquisition Financing

By Michail Katkoff , who enjoys telling finance folks that EBITDA wasn’t made for games.   UA financing breaks that stalemate.   But UA financing is not the solution for every game or company.

This write-up explores when and how to use this powerful lever.   EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization.    CapEx means Capital Expenditures.

It refers to the investments a company makes to acquire, improve, or maintain long-term assets such as buildings, land, machinery, or equipment. LTV stands for Life-Time Value.   The LTV curve represents the growth of user value over time.

For example, an LTV curve for Netflix is linear as users spend roughly the same amount every month for years.   A cohort is a group of users coming. In this context, by cohort, I refer to a user group that joined in a specific month and tracks their performance.

  The Problem With EBITDA Thinking Every late-stage gaming or app founder has felt it: the numbers look good, the LTV curve is smooth, UA is performing… and yet your CFO says the growth budget is frozen because EBITDA is trending the wrong way. That’s not a business problem; that’s an accounting problem. EBITDA wasn’t designed for companies like ours .

It was born in the 1980s when cable operators were digging trenches and laying miles of wire. The cable companies needed a way to show investors the real earnings power of these companies, which were all spending heavily on CapEx and taking huge depreciation hits. Their fix was to add back depreciation and amortization, creating EBITDA, a metric meant to strip away accounting noise from capital-intensive growth.

Fast forward to 2025: gaming, SaaS, and consumer apps are not CapEx-heavy . Our “factory” is user acquisition spend. But unlike cable companies, we expense our “CapEx” immediately.

The $1M you spend on UA this month might return $3M in gross profit over the next 24 months, but on paper, your P&L (profit and loss statement) just took a $1M hit. So companies fixate on a short-term EBITDA target and cut UA, even if the ROI is fantastic. As Pranav Singhvi , Managing Director of General Catalyst, puts it on the Deconstructor of Fun podcast below, “EBITDA is anti-growth.

Quite literally, if you spend more on UA, your EBITDA will go down. ” The right mental model here is EBITCAC , EBITDA plus Customer Acquisition Cost.   If EBITCAC is positive, you’re fundamentally profitable.