Financial product comparison tool

Revenue sharing offers a good way to diversify your investment portfolio, particularly in terms of risk.

What's the risk?

Investing in a business can take different forms and follow different procedures. Generally, recurring solutions include loans and capital investments. Investing in exchange for royalties is an innovative alternative that fairly respects the interests of both the investor and the entrepreneur. As an investor, it is up to you to determine the factors that will influence your choice, even though the “risk” factor is often decisive.

	Capital (equity)	Revenue sharing	Loan (lending)
Investor perspective	Hold equity stakes for 5-7 years or indefinitely, awaiting an exit opportunity	Start seeing a return on investment within a few months of the start of the funded activity	Collect payments at a fixed interest rate; return on investment is limited by current low interest rates
Return on investment	In the event of a successful exit (IPO or sale), a multiple of 10 is targeted, but it is possible that the amount invested will not be recovered.	Target of 5-15% average annual return; investment repaid in recent years	Commercial interest rates; capital recovered with interest over the term of the loan
Risk to the investor	Risk of total loss of invested capital, pending an exit permitted by the liquidity of the shares	The risk gradually diminishes as royalty payments accumulate; the risk on the amount invested approaches 0 after 4 years.	Traditional credit risk for a company, decreasing as payments are made; recovery of losses through the sale of assets in the event of default
Control of funders	Implies shareholder roles, and potentially membership of the board of directors or key committees; potential willingness to replace existing managers	No ownership of equity shares; no status as a shareholder or member of the board of directors; no desire to play a role in the governance of the company.	No direct interference in the governance of the company, but the possibility of exercising control clauses over it in the event of default on repayment.
Guarantees provided by financiers	Guarantee taken on the company and the founders' assets, management package based on objectives The founders' shares may be transferred if the objectives are not achieved	Investment in managers' ability to develop the business.	Seats on the board of directors, shareholder agreements, and strict covenants The company's assets and often the assets of the main shareholders are used as collateral (pledge, mortgage, security interest + guarantee).
Exit	The exit is random and depends on market conditions and capital market perceptions, as well as the outcome of negotiations with buyers or M&A intermediaries.	Investors begin exiting immediately upon payment of the first royalties and accelerate as payments increase until the end of the contract.	The exit takes place upon repayment of the loaned capital or by exercising the covenants, which means enforcing the guarantees or selling the founders' shares or assets.
Community of interest	The investor's agreement is necessary for many management and strategic decisions.	The parties' interests are aligned, a win-win agreement	Investors seek liquid investment, risk of conflict

What risk does royalty crowdfunding pose to my investments?

If the project is successful, the most advantageous investment method is undoubtedly capital. The more successful the project is, the more the value of your capital investment will increase. Conversely, it will tend towards zero if the project fails.With revenue sharing, in the event of failure, the risk will be lower than with capital because regular payments allow you to limit the damage to your investment. By lending to a project, you limit the risk but you also limit your potential return on investment. Regardless of the project’s level of success, you will receive the same interest rate. The following diagram clearly illustrates the reward/risk ratio for investors, depending on the different types of investment.

Guarantees to limit risks

Financial underperformance does not necessarily mean that companies no longer exist and that your money is lost. As long as they are in business, they continue to pay royalties even beyond the initial term of the contract if they have not repaid their investors by that date, until a minimum return specified in the contract’s guarantee clause has been repaid. In the event of poor performance, this therefore becomes a zero-interest loan with no fixed term. The only possible case of loss is if the business ceases trading altogether.

Support in the event of collective proceedings

In the event of collective proceedings, we represent you before the judicial administrator by declaring your claim and monitor the proceedings until their resolution. Throughout the proceedings, royalty payments are inevitably suspended.

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