The concept of revenue sharing is comparable to a royalty agreement. It's a style of funding where investors inject capital into a company and receive a percentage of that company's revenue in return (typically 1-10%). Therefore, the rate at which the investment returns depends on the rate of the company's revenue growth.
If you are a startup founder or investor and are researching funding/investment options, take Corl's top five revenue-sharing benefits into consideration:
For entrepreneurs, a revenue sharing agreement offers the ability to fully own their company. Once the Repayment Cap is met, there is no obligation to pay future revenue back to the investor and the entrepreneur retains full ownership and control over the direction of the company.
If you can get a bank loan (and that is a big IF...) take it. They likely won't give you all the capital you need but by leveraging collateral, you can secure a better interest rate for a portion of your raise. In equity financing, investors expect a “10x” return.
That’s a $5 million return for a $500,000 investment.
Revenue sharing enables a happy median where businesses get funding that is repaid via “top-line” revenue. An investor’s expected annual return — at least at Corl — is 15–30%.
That’s $750,000-$1.5 million for a $500,000 investment.
Applying for equity and/or debt financing means you will take part in a process that takes ~2-3 months at banks and ~6-9 months at VCs. Between financial history, business history, credit history and valuations, you will spend a significant chunk of time away from daily operations. As a result, the business you start raising funds for may not be the business you have once funding is delivered. Our 10 minute application ensures that's not the case with Corl. Apply and receive funding in weeks, not months.
4. Investment Potential
With the focus of revenue growth at the forefront, the range for potential investments is wider because companies will be evaluated on ability to generate substantial profits and cashflow instead of being candidates for IPO or strategic acquisition. This gives startups a higher chance of being funded.
Revenue sharing removes the complexity of equity. Instead of being owners of the business, capital providers are simply creditors. As a result, there is a clearer direction and businesses can focus on sustainable growth and generating returns. The focus on revenue growth instead of future acquisition metrics makes quantifying success much easier.
Companies that meet our funding requirements are analyzed through qualitative and quantitative data to determine the credit and investment risk. On top of the key benefit of securing funding, startups can take advantage of three more benefits outlined in this blog post.