The above link will play an interesting YouTube video of pregnant salmon swimming across a road in Skokomish Rover, Washington, seeking the reward of reaching more quickly a desired location.
The salmon’s seemingly brave, instinctive and probably thoughtless activity is similar to that of many investors in Initial Public Stock Offerings — seeking enrichment, regardless of the capital risk or holding period required for free market capitalization, based on the hope of achievement of company results, sufficient to justify the market valuation assumed at the level of the initial offering.
Royalties are different, and may be better bets for investors, as they generate distributions based on an agreed percentage of a company’s revenues, for an agreed period — irrespective of the company’s reported profitability. The royalty payments, when revenues are generated, are quarterly and are not influenced by stock market sentiment reflected in price/earnings ratios and resulting market valuation.
Therefore, royalties produce earlier and less risky returns, while still benefitting from the revenue growth of the royalty issuing company. Due to the terms of royalties we structure and recommend the projected returns, assuming the company achieves its projected revenues, exceed an Internal Rate of Return of 15%. Such a return is much better than most investment managers achieve on a regular basis.
Royalties are the better way for both investing in and financing of early-stage companies.