Marshmallow Games Transforms EdTech Growth with Revenue-Based Financing

For Marshmallow Games, the Italian company behind the award-winning Smart Tales educational app, the solution to scale sustainably came through a flexible funding model that aligned perfectly with their business needs.

Cristina Angelillo, CEO and co-founder of Marshmallow Games, has built her company into a digital education powerhouse. Smart Tales, their flagship product, combines interactive storytelling with educational games for children aged 2-11, focusing on STEM subjects and soft skills development. With over 3 million downloads globally and recognition as “App of the Day” in more than 150 countries, Marshmallow Games represents the kind of innovative digital business that revenue-based financing (RBF) was designed to support.

Challenge

Marshmallow Games faced the classic scaling dilemma that many successful D2C subscription businesses encounter. As an edtech company operating in the competitive children’s app market, they needed substantial capital to acquire users at scale while maintaining profitability.

The company’s business model—subscription-based with heavy reliance on digital marketing—required continuous investment in customer acquisition campaigns. This became particularly critical during seasonal periods like “Back to School,” when demand for educational apps peaks dramatically.

Traditional financing options presented significant obstacles. Bank loans required lengthy approval processes and rigid repayment terms that didn’t align with their revenue patterns. Equity financing would have diluted ownership at a crucial growth stage, potentially limiting future strategic flexibility.

Solution

Revenue-based financing emerged as the ideal funding mechanism for Marshmallow Games’ growth strategy. Unlike traditional debt or equity financing, RBF provides capital in exchange for a percentage of future revenues, creating a repayment structure that naturally aligns with business performance.

Marshmallow Games chose Viceversa’s RBF solution because it offered several key advantages:

• Speed and Flexibility: Access to capital was significantly faster than equity rounds, allowing the company to capitalize on time-sensitive opportunities during peak seasons.
• Performance-Aligned Repayments: Repayments scale directly with revenue, providing natural cushioning during slower periods while accelerating returns during high-performance months.
• No Dilution: The equity-free structure preserved ownership for founders while providing necessary growth capital.
• Digital Business Focus: The funding model was specifically designed for D2C subscription businesses with strong acquisition metrics and measurable growth patterns.

Strategy

Marshmallow Games leveraged the RBF capital to execute targeted growth strategies:

Growth Strategy

The immediate focus centered on vertical scaling of high-performing marketing campaigns. Marshmallow Games invested heavily in Meta advertising platforms, expanding testing capabilities to identify optimal growth levers. This approach allowed them to quickly identify and scale campaigns with strong return on ad spend (ROAS) while exploring new creative formats including user-generated content (UGC).

Market Expansion

Beyond immediate performance marketing, the capital enabled broader strategic initiatives. Marshmallow Games expanded their testing of new communication angles and creative formats, building a foundation for sustained growth. The funding supported their expansion into key international markets, where educational content demand continues growing.

Results

The impact of revenue-based financing on Marshmallow Games’ growth trajectory was substantial and measurable:

• H1 2025 revenue grew 100% versus the same period in 2024, showing sustained year-over-year acceleration 
• Conversion rates improved by 80%, especially in trial and direct subscriptions
• User LTV increased 91% from January to June 2025, demonstrating improved customer value optimization

These metrics highlight how RBF enabled Marshmallow Games to not just increase spending, but optimize their entire customer acquisition and retention funnel.

Why Viceversa?

The partnership proved particularly valuable during critical business periods. For seasonal businesses like Marshmallow Games, the ability to rapidly scale investment during high-demand periods like Back to School season can determine annual performance. RBF provided the capital flexibility to maximize these opportunities without straining cash flow during slower periods.

The Future of Digital Education Funding

Marshmallow Games represents a broader trend in how innovative digital businesses approach growth financing. As the edtech sector continues expanding globally, companies need funding models that match their unique operational rhythms and growth patterns.

Revenue-based financing offers a compelling alternative to traditional funding approaches, particularly for businesses with predictable recurring revenue streams and strong data-driven growth strategies. For companies like Marshmallow Games, operating in competitive markets with seasonal demand patterns, this flexibility can be the difference between sustainable growth and missed opportunities.

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