2x Entrepreneur | Presidential Scholar at Babson | Helping Startups in Building Sustainable Tech Solutions | MBA in Entrepreneurship
Would you pay ₹10,000 to earn ₹2,160? Many Indian startups do. Here’s why: Founders confuse raising money with making money. 👉 CAC (Customer Acquisition Cost): how much you spend to get 1 customer. 👉 LTV (Lifetime Value): how much that customer gives you over time. If CAC > LTV → you’re scaling losses. No matter how much funding you raise, you’re just burning fuel on a broken engine. Example 1: Skillshare 1. CAC: ~₹500 per customer 2. LTV: ~₹2,160 per year Solid math. Profitable flywheel. Example 2: Byju’s 1. CAC: ₹20k+ per student 2. LTV: ₹20k–40k (if they renew) The math only works if retention is high. If CAC shoots up to ₹50–60k, the engine collapses. This is the math most founders avoid because it’s boring compared to building decks and features. But this is also the math that decides who survives the crash. 💡 Insight: You can raise $100M. But if your CAC:LTV is broken, you’re not building a startup, you’re building a countdown timer. What’s your CAC:LTV ratio telling you right now?
Retention, not acquisition, decides survival, without it, LTV shrinks and CAC kills growth.
This math applies to most businesses. However, there are some exceptions like the ones mentioned below: 1. Network-effect businesses Examples: Matrimonial apps, dating apps, peer-to-peer marketplaces (OLX), social media platforms. Here, value grows exponentially with user base density. Monetization typically comes after critical mass is achieved, so early-stage CAC > LTV can still be rational. 2. Winner-takes-all markets Examples: Ride-hailing, food delivery, search engines. In these markets, being first (and fastest) to scale often ensures long-term dominance. Once habits are built and competitors exit, the winner gains pricing power, improving LTV dramatically. Shivam Lohiya
Funding is fuel, but CAC:LTV is the engine.
CAC=0 (lifetime) with potential of 2.5B + MAU. Whats your thoughts on zero cac..
For booststraped startups like us, our only struggle and joy is to make this thing positive from day one.
Your post nails a fundamental truth about startups—funding can hide bad unit economics, but it can’t fix them. CAC:LTV ratio is like pressing harder on a car’s accelerator while the engine leaks fuel—you move faster toward collapse, not sustainability. But i think LTV is also a moving target, especially for early stage Startups. Early LTVs are guesses that systematically underestimate future value when you’ll cross-sell new products, bundle (e.g., memberships), pivot business models or find a entirely unexpected customer segments. The real challenge isn’t just keeping CAC < LTV—it’s having the discipline to survive long enough for your true LTV to reveal itself.
I’ve seen founders treat fundraising as validation, but it really isn’t. Unless the revenue engine makes sense, every dollar raised only shortens the runway instead of extending it.
Brilliant breakdown, Shivam. What I’ve seen often is founders also miscalculate LTV by assuming ideal retention instead of real retention. They project 3–5 years of value when in reality, churn kicks in much earlier. The CAC:LTV ratio isn’t just about acquisition math, it’s also about product stickiness, community, and habit-formation. Sometimes lowering churn can be more powerful than lowering CAC. ✨
Such clear articulation for founders to understand Shivam Lohiya
2x Entrepreneur | Presidential Scholar at Babson | Helping Startups in Building Sustainable Tech Solutions | MBA in Entrepreneurship
2moStart-ups don’t die from lack of money, they die from bad unit economics.