The odds are that if you live in the UK and rest of Europe you have never heard of royalty finance. However, more than a decade after the 2008 financial crisis and on the back of a recent sell-off in global equity markets, the word around royalty financing is inevitably spreading rapidly.
Thanks to a relatively light-touch regulatory environment, the UK’s ‘alternative finance’ sector has flourished in the eight years or so since the first equity crowdfunding and peer-to-peer lending platforms came on stream.
A form of alternative finance is facing a reputational revival in the UK. Royalty financing, where capital is provided to a business in return for a cut of that company’s revenue, is typically associated with mining, particularly with development projects.
Thomas Hoegh tells a story about the aftermath of 9/11. Back then, the Norwegian internet investor was the largest shareholder in the travel website lastminute.com. The start-up had made progress in convincing airlines to offer discounted seats, yet had struggled to persuade hoteliers to list empty rooms on the platform.