With the rise of the sharing economy and crowdfunding platforms like LendingClub, Prosper, Canada's Lending Loop and Front Fundr, online marketplaces keep on democratizing the investment industry. Between the FinTech revolution and the new regulations (Startup & Integrated Crowdfunding Exemptions; allowing non-accredited investors to invest in businesses), we are witnessing the disruptive power of online collaboration at its best.
Back in 2010, crowdfunding started off with $880 million in funding. This number increased to $16.2 billion crowdfunded in 2014. In 2016, equity raised from crowdfunding passed VC funding for the first time, and, by 2025, the World Bank Report estimates that global investment through crowdfunding will reach $93 billion.
When it comes to startup funding, there are two dominant options: equity and debt. In equity-based financing, investors fund a business in exchange for a certain percentage of shares in the company. Investors get a return in the case of an acquisition or going public. Unfortunately, fewer companies are being acquired or going public. In addition, there is no guarantee that the share's value will not drop below the original purchased price.
On the other hand, debt financing is more suitable for stable companies with consistent revenue streams. However, it's not the best funding option out there, at least not in its traditional form. Enter, revenue sharing, or as we call it, revenue-based financing. Revenue-based financing is a unique form of investment where instead of owning a share of a company's stock, investors receive monthly or quarterly payments that are based on the company's revenue. Meaning, investors issue a loan for a percentage of the business' revenue. The nice thing about revenue sharing is that there is no need to undergo a valuation of the business and investors enjoy the benefits of short term returns compared to waiting for an exit.
With economic uncertainty, fluctuating markets, lower valuations, and lack of exit strategies, early growth businesses enjoy one great thing; a growing and consistent revenue stream.
At Corl, we use revenue-based financing investments, which allows accredited investors to invest in promising technology companies in return for a fixed percentage of a company's monthly revenue. The company keeps paying investors a portion of the revenue until they receive a multiple return on their investment (1-2X). With revenue-based financing, companies can grow on their own terms without giving up equity, board seats, or personal guarantees.