With the market still in flux, raising capital for companies
— whether equity or debt — remains a challenge.
One innovative vehicle for raising capital that is generating
attention in the market lately is royalty-based financing.
At its simplest, royalty-based financing is lending against the
company's future revenue stream but, in the venture context, it
can have a few wrinkles. Instead of purchasing an equity interest
in a company, the investor lends the company a set amount of funds,
just like a regular loan. Repayment, however, can be structured
with more flexibility than a loan. For example, the company could
make repayments that are calculated solely as a percentage of the
company's revenue stream over a period of time. Or the loan
could carry a set interest rate and payment schedule in addition to
the revenue component. In this structure, the company may pay
interest only for a period of time (e.g., a year or two) and then
repay the principal and interest on
