The Wall Street Journal, Small Business
WSJ.com, December 2, 2010
Entrepreneurs Going the Royalty Route Use a Share of Revenue to Pay Back Loans
By: Scott Austin
When first-time entrepreneur Philip Vaugn recently began searching for start-up capital, he traveled down two conventional paths.
Mr. Vaugn, co-founder of travel-review aggregator Raveable.com in Kirkland, Wash., says he wasn't interested in forking over a large chunk of equity to venture capitalists or committing to ambitious investment-return expectations. He also considered a loan, but knew that banks had made it onerous for young companies like his to obtain debt financing.
"We're in a weird spot" but we have "a decent amount of revenue coming in," says Mr. Vaughn who expects Raveable's sales to grow two to three times annually.
So he's considering an alternative called royalty financing, in which a company pays back a loan using percentage of revenue. Traditionally found in industries such as mining, film production and drug development, royalty financing is being seen more among technology companies and other early-stage firms with growth potential.
To read the full article.. click here.
No comments:
Post a Comment