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The Core Thesis

Late-stage tech companies underinvest in growth

• Pressured to show short-term EBITDA
• Constrained by cash reserves
• Ignore high ROI opportunities in CAC

Solution: Use EBITCAC, not EBITDA

“Think of CAC as CapEx for tech.”

Outcome: Drives better long-term equity value

Why EBITDA Fails Tech

EBITDA misses the point in tech:

• No interest → low/no debt
• No tax → operating losses
• No assets → minimal D&A

EBITDA ≠ actual cash generation in tech

✔️ EBITCAC reflects:

• Recurring revenue
• Cash generation after CAC ROI

CAC as CapEx

Industrial Companies:

• Invest in machines (CapEx)
• Assets = financing = long-term payoff

Tech Companies:

• Invest in CAC (ads, sales, marketing)
• But expense it on P&L

Pranav Singhvi: “We treat CAC like an expense, but it acts like an asset.

Introducing EBITCAC

EBITCAC = Profit + CAC

Reflects true growth profitability

Example SaaS Company:

• Revenue: $100
• Gross Margin: 70%
• S&M (incl. CAC): 40%
• EBITDA: –20%

But ➕ add CAC back → EBITCAC = +10–20%

EBITCAC gives:

• Real ROI visibility
• Better capital efficiency
• Justifies ongoing spend

Two-Company Framework

Think of a tech business as two entities:

1. CAC Machine – Invests in marketing, brings new customers with predictable ROI

2. Operating Company – Develops product & platform, funded by LTV residuals

“Remove CAC, and most tech companies are cash-generative.”

Capital Misallocation

Current problem:

• Equity used to fund CAC
• Debt doesn’t isolate CAC risk
• P&L optimization stifles growth

Result:

• Underspending on high-ROI CAC
• Lower RoE
• Missed scale potential

The Fix: Capital Stack Innovation

EBITCAC enables structured CAC financing

CAC = an underwritable, recurring asset

Should be financed like CapEx: with purpose-built, risk-isolated capital

Equity = Platform + R&D

CAC = Financed by structured CAC capital (revenue-based financing, etc.)

Market Potential

Cloud 100 companies:

• $12B/year on CAC
• If financed smartly:
• Free up capital
• Fund M&A, buybacks, innovation

$12B excess reinvestment potential

“Imagine the DPI if CAC capital came back to shareholders.”

DPI in this context refers to Distributions to Paid-In capital, a key metric in private equity and venture capital used to measure how much money has been returned to investors relative to how much they originally invested.

if companies free up capital tied in CAC and return it earlier to investors (e.g., via buybacks or secondary sales), it would:

• Improve DPI
• Give liquidity without needing an IPO or acquisition
• Reduce dependency on market timing

Conclusion

Switch to EBITCAC:

• Reveals true profit engine
• Frees cash for growth
• Enables better capital structuring

Ask not: “What’s our EBITDA?”

Ask: “What’s our ROI on CAC?”