CONTRIBUTED BY
Asher Bearman
asher.bearman@dlapiper.com

An article in the Wall Street Journal today highlights a trend that I’m seeing as well – investors creating funds to engage in royalty based financings where the company repays the invested capital by making monthly or quarterly payments equal to a percentage of the revenue generated by the company, up to a maximum multiple of the original investment amount.  Often there is also an additional warrant kicker. 

It appears that many fund managers are looking at these types of models now that the traditional venture lending banks have become more conservative and increasingly unwilling to lend to startup-type companies.  Just in Seattle I’ve seen a couple of these types of funds spring up in recent months.