Royalties are the better way
of both investing in and financing
early stage companies.
Global Alternative Funding Forum
Century City, 2015
Buying equity in privately owned companies
has not generally been a successful
Business owners selling stock in the
financing of privately owned companies,
even or especially those which
subsequently became successful, has
resulted in many cases in business owner
regret and frustration.
It is better for investors to seek, perhaps even
on a leveraged basis, predictable results in the
form of buying a percentage of a promising
company’s revenues for an agreed period,
than its subject to dilution and exit event
To be attractive to investors:
• The amount paid for a royalty should be
received back in royalty payments at least
by the end of the 5th
• Provide the investor with an Internal Rate
of Return of at least 20% over the course of
the royalty payment period.
Why negotiate valuation when revenue
participation is better for both the investor
and the business owner?
The investor’s more logical decision is the
attraction of the level of projected
cumulative royalty payments versus the
possibility the revenues will disappoint.
• Royalties can be secured or unsecured.
• Can have minimums and can be assured.
• Royalties can be paid whenever the
company receives revenues.
• The royalty rate can be adjusted based on
royalty payment achieved results.
• Royalties can be redeemable at the option of
the company on pre-agreed terms.
• Royalties are negotiable and can be
transferred by the owners.
• Royalty owners do not have a vote and do
not have an ability to influence
• Royalty owners do not seek an exit and
wish to retain their royalty for as long as
possible, assuming the company’s
revenues are increasing.
• The determination and negotiation of
what’s fair and reasonable in a royalty is
facilitated by using the website calculators:
• REXRoyalties.com REXComparator.com
• Revenues are the measure of customer
• Per share profits are the harder to predict
measure of managerial skill, non-dilutive
financing and handling of unexpected
• So – why not invest in and finance
your company using royalties, the better
Thank you, and questions please.