Creating Risk Capital: A Royalty Fund Solution to the Ownership and Financing of Enterprise
By Ian Whalley
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About this ebook
Ian Whalley begins by describing the rich inheritance of private enterprises and the financial systems which support them in major market economies. He looks at some serious problems which afflict many enterprises when they seek funding through conventional methods: from small and medium-size firms to major companies, providers of public services and diverse enterprises such as mutual and non-profit organisations. A common theme emerges - enterprises of all types struggle to obtain risk capital without taking on debt or compromising effective management control. The capital is necessary but the drawbacks are potentially fatal.
The book shows how the dual functions of equity - risk capital and ownership capital - can be separated and thus how risk finance can be raised without affecting the ownership or control of a company, and without traditional borrowing. The model for achieving this is royalty funding, a system grounded in the proven and familiar practice of licensing. Under this system enterprises pay for the invested risk capital by means of royalties on the sales revenues they achieve, rather than become debtors or partners to those who provide the funds. Royalty funding will benefit both those who own and manage enterprises and also the investors who receive a contractually committed return whilst maintaining the security of asset ownership in the event of a failure of the enterprise.
Whalley explains how royalty funding could be put into practice for a range of different enterprises, and draws some broad conclusions about the impact that royalty funding could have if used to finance business in the future.
Offering a compelling alternative that complements current financial models this is an essential read for anyone involved in establishing, running or investing in successful enterprises, as well as policymakers and academics.
Ian Whalley
Ian Whalley qualified as a chartered accountant. After working in Africa and Europe, he specialised in export credit and overseas project finance at a merchant bank in London and New York. He then worked in risk capital and the licensing of intellectual property, and latterly in the financing and provision of public services. Subsequently he completed a Master of Research degree in order to prepare the ground for this book.
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