CAC

There’s a new funding model quietly gaining traction among later-stage startups and it doesn’t involve giving up equity.

Imagine a startup spending $1m to 10m per month on customer acquisition. Instead of raising another dilution-heavy equity round just to feed the CAC machine, they tap into something new: user-cohort-based financing.

Here is how it works:

• A capital provider underwrites a specific monthly customer cohort

• They can finance up to 70–80% of that cohort’s CAC

• They recoup that same share of revenue from that cohort over time, with a capped return, say 1.03–1.4x

• Some companies have consistent spending and ROI, so the interest can be lower

• If the cohort underperforms, they eat the loss

• No covenants. No recourse. No dilution

It only works for companies with high LTV/CAC and predictable funnels, but for those, it’s a great tool: you get to pull future revenue forward without sacrificing ownership.

For the right kind of startup, this could save tens of millions in dilution per round. Grammarly’s recent $1b raise from General Catalyst may have followed this structure.

It’s a type of financing that we’re considering at a bunch of companies I’ve invested in or have advised so am happy to chat more about it if anyone is interested.