Investor participation in corporate profits, which is the essential objective of owning the shares of a company is increasingly complicated by corporate ESG policies. Meeting the objectives of an expanded body of stakeholders, versus the narrower quest for maximum per share profitability for stockholders, creates differences in investor objectives that can be resolved by employing revenue royalties for a larger role in the financing of companies.
If ESG-focused companies offered investors the opportunity to invest in a percentage of corporate revenues, which is what a revenue royalty is, there could be two distinct and complimentary investor groups interested in the growth and success of those companies. The royalty investors would be solely interested in the revenue growth of the company, which is dependent on the company’s ability to satisfactorily serve the interests of the company’s customers. Therefore, the royalty issuing company’s growth is dependent on continuing to serve a growing number of customers, who ideally are themselves growing.
Companies that sell revenue royalties to finance their businesses must be, or ultimately become, sufficiently profitable to maintain and grow their business. Therefore, those companies must have profit margins which justify the cost of the royalty. Revenue royalty finance also benefits the company owners by not diluting their ownership of the business, compared with conventional start-up fundraising.
Assuming the cost of the revenue royalty payments is more than offset by the profit margin of the company, the owners of the company will benefit from owning more of their company than they would by selling equity to finance their business development.
The owners of the business will also have greater flexibility as to executive compensation, research development projects and other areas of management strategic decision-making since the company’s investors in revenue royalties are interested in the revenues of the company and not in the quarterly profits or sale of the company.
We have developed and patented some of our approaches for using royalties in the financing of early-stage companies, many of which are technology oriented. However, established companies can also effectively use non-equity diluting royalties in both the financing of their primary business, as well as for new projects and affiliated companies.
We have prepared a deep library of research about revenue royalty finance and would welcome the opportunity to explore with entrepreneurs and company owners and managers the ways in which revenue royalties can be of benefit to them.
Arthur Lipper, Chairman
British Far East Holdings Ltd.
14911 Caminito Ladera,
Del Mar, CA
+1 858 793 7100
Mobile: +1 858 353 7100
Skype: artlipper
Chairman@REXRoyalties.com
arthurlipper@gmail.com
http://REXRevenueRoyalties.com
http://REX-Basic.com
http://www.royalties.website/home
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