Where a business agrees to pay you a percent of their monthly revenue until you receive the total payment. Monthly payment, if any, may be different every month.
Example: you invested $1,000 in a revenue sharing offering on NextSeed
Investment Multiple: 2X
How much the business agrees to pay you in total by the maturity date by adding up monthly payments.
Revenue Sharing Percentage: 5%
How much the business agrees to pay investors each month from its gross revenues. (This is not in addition to the investment multiple—this is how a business reaches the investment multiple payment)
Maturity: 48 monthsSecurities are not guaranteed or insured and investors may lose some or all of the principal invested if an issuer cannot make its payments.
How Payments Work
How are payments calculated?
Your payment depends on how much of the total investment pie you took with your principal investment.
Suppose that the total amount a business raised was $100,000 and you invested $1,000
Your $1,000 investment slice out of the total $100,000 raised is:
Your investment was 1% of the total funds a business raised.You get 1% of the total payment a business makes to all investors each month so long as the business is able to make payments.
How Much Does A Business Pay To Its Investors Each Month?
The payment a business owes to its investors each month depends on its gross revenues. This means that payments to investors are calculated first before costs are deducted.
Let’s say the business has the following hypothetical revenues:
What Is My Monthly Payment?
Your monthly payment is your share of the total payment made to investors.
*Your monthly payment is your share of the total payment, if any, made to investors.
When Do Payments Start?
After closing a successful campaign, payments generally start after a business begins generating revenues for one full calendar month. Usually businesses begin receiving revenues after they’ve opened to the public. If a business does not have revenues, then no payments are due.
When Do Payments End?
Payments end when the business pays you back your total payment, or when the maturity date is up, whichever is earlier.
The investment multiple determines what the total amount a business will pay you. In this case:
So if the investment’s maturity date is in 48 months, but the business pays you $2,000 by month 40, then payments stop at month 40. If it’s been 48 months and the business has only paid you $1,500, then the business contractually owes you $500 at the maturity date or risks default.
When Is A Revenue Sharing Note in Default?
The monthly payment for a business with revenue sharing notes varies depending on its gross revenue for the applicable month. Here are a few possible scenarios:
Assume a business with revenue sharing percentage of 10%
- If the business’s revenue for month X is $0, the required payment for month X is $0 * 0.10 = $0. The business is not in default for paying $0 to investors for month X.
- If the business’s revenue for month Y is $10,000, the business’s required payment for month Y is $10,000 * 0.10 = $1,000. The business is in default if it does not pay $1,000 to investors for month Y.
- At the end of the term, the business is in default if it has not fully paid its “Total Payment Amount”. The “Total Payment Amount is calculated by multiplying the principal amount of the revenue sharing not by the applicable “investment multiple.”
Disclaimer: This example is for illustrative purposes only and does not reflect an actual deal or performance. The terms of each deal differ. The total payments above do not take into account NextSeed fees of 2% on each payment made to investors. The exact length of time that it will take a business to pay each investor in full cannot be known in advance. Payments are not guaranteed or insured and investors may lose some or all of the principal invested if the business cannot make its payments. There are currently no opportunities to exit or resale NextSeed investments. After an offering has closed, your investment is committed to the business.