REVENUE-BASED FINANCING: IT’S ALL ABOUT ALIGNMENT
This piece is part of a collaboration with MLG Blockchain Consulting, a leading global blockchain development and consulting firm headquartered in Toronto, Canada, with a distributed team across North America, Europe and Asia that is focused on building next generation applications using blockchain and smart contract technology. Emie-Claude Lamoureux PR Director at MLG Blockchain Consulting explains why revenue-based financing can be a unique investment opportunity which is significantly more secure and profitable for those on both sides of the fence
Right now the investment industry is the most democratic it has ever been thanks to the boom of the sharing economy. Online platforms and crowdfunding startups such as Prosper, FrontFundr and Canada’s Lending Loop are demonstrating to the world the perpetual power of online collaboration. Rewind ten years and crowdfunding was just a seedling with $880 million in funding to begin its growth. In 2014 that figure doubled to $16.3 billion and by 2016, equity raised from crowdfunding managed to exceed venture capital financing for the very first time. In less than ten years the growth of crowdfunding has been phenomenal and by only 2025, the World Bank Report estimates that crowdfunding will soar to $93 billion.
Making Room for Change
So what are the two key options when it comes to startup funding? If you said equity and debt then you’re right, and if you didn’t, then either you don’t know or you’re already one-step ahead of the game. Traditionally, equity and debt-based financing have been the dominant funding options. Equity-based financing is when an investor gives funds to a business in exchange for a percentage of ownership or shares. If there is an acquisition or the business goes public then the investor receives a return. Raising equity can be demanding and as ownership is joint this can create complications for business management and decision making.
Right now the investment industry is the most democratic it has ever been thanks to the boom of the sharing economy.
Alternatively, in a debt-based financing, the investor holds no rights to the ownership of the business. Instead, the investor receives repayment of the loan in addition to an interest rate. Although debt financing often suits companies with steady revenue streams, there is often a great deal of insecurity as it is effectively borrowing against future earnings. Sufficient funding is the key for an entrepreneur to reach and maximize their potential, and it is often lack of funds and the disadvantages of traditional financing which burst the bubble. The development of blockchain technology has naturally opened up a space for a new kind of funding – introducing revenue-based financing (RBF).
The Future of Financing
Revenue-based financing is a unique investment opportunity which is significantly more secure and profitable for those on both sides of the fence. Essentially, revenue-based financing is a loan in exchange for a proportion of profit, meaning there is no need for shares and soaring interest rates. Investors receive quarterly or monthly payments which are based on the business’ revenue, and depending on the fixed percentage agreed, the business continues to pay regular sums until multiple returns of the investment has been received – typically 2 to 10%.
Despite economic uncertainty, fluctuating markets and other difficulties surrounding business, the most important thing early growth businesses promise is a steady stream of revenue.
Corl is a new blockchain company for accredited investors particularly interested in early-stage technology and SaaS startups. The Corl ethos is very simple: when the interest of both investor and entrepreneur are mutually aligned, success will flourish. Corl offers solutions to the multitude of problems in traditional investing by combining revenue-sharing, crowdfunding, and blockchain.
A Unique Blockchain Platform
Corl aims to serve and maximize investment opportunities for both parties and this is represented in the highly functional blockchain platform. It will enable investors to purchase, manage and analyze their investments with portfolio analytics, legal disclosures, and audited financial statements through the blockchain technology.
As the world moves towards a decentralized and collaborative future the investment industry must also follow suit. Instead of issuing debt or equity investments, Corl will allow for a company to acquire capital in exchange for regular payments until the mutually agreed return has been met. Revenue-sharing is a logical and intuitive investment strategy which is mutually beneficial for investors and entrepreneurs.