Sample terms: Revenue Participation

One tool that investors take part in on STOKR is a revenue participation financial instrument. In this article, we will show a sample revenue participation and what rights investors can expect.

Let's say the venture wants to raise EUR 1M for the business on STOKR and wants to issue revenue participation securities to the investors. Simply put, this allows investors to participate in the gross revenue (costs not deducted) of the business. 

Sample Terms

• Loan Amount: EUR 1M.
• Instrument: Revenue Share (Debt).
• Tipping Point: EUR 50,000 gross revenue per year (the gross revenue threshold beyond which the venture is comfortable to share the percentage of the annual gross revenue with the investors).
• Revenue Sharing Percentage: 20% of gross revenue.
• Maturity Date: 5 years (the date by which the Loan Amount and the Investment multiple must be paid).
• Investment Multiple: Varies until the Maturity date is reached:
  • 3X if paid after 5 years;
  • 1.8X if paid after 2 years but before 3 years;
  • 1.2X if paid before 2 years.

('X' means multiples)

If and when the venture reaches EUR 50,000 in gross revenue in a fiscal year, the venture starts paying 20% of that revenue every year to their investors, pro-rata, until the payout equals the Investment Multiple.

This amount gets paid out over 60 months; depending on the terms of the agreement. In case the Investment multiple isn’t paid out by that time, the difference is made up in a last payment either in cash or in kinds (like shares). The Venture can also pay back earlier (perform a buy-back of the securities), before the Maturity Date which will allow the Venture to pay less on the Investment Multiple.