The innovative business model is called “Revenue-Based Investing” (RBI), “Revenue-Sharing Financing” (RSF) or “Revenue Discount” (RD) and was invented by Marc René Deschenaux.
In this model, an investor provides capital to a business, company or organization (“Entity”) in exchange for a percentage of the their ongoing gross or net revenues.
Unlike traditional debt financing or equity investment, the Entity is not obligated to repay a fixed amount or give up any ownership stake.
Instead, the investor’s return is tied directly to the Entity’s performance, as its earnings fluctuate with their revenues.
This model has the advantage of aligning the interests of the investor and the Entity.
Both parties benefit directly from the Entity’s success or suffer directly from its failure, if any.
The Entity doesn’t have to worry about meeting fixed debt repayments or diluting ownership.
Unlike traditional debt or equity financing investment, the Entity is not obligated to repay a fixed amount or give up any ownership stake.
This operational structure aligns the interests of the Investor and of the Entity it partners with.
This encourages Entities to embrace sustainable practices that drive their growth and contribute to the broader objectives of environmental conservation and social welfare.
Unveiling the Innovative Business Model: Revenue-Based Investing, Revenue-Sharing Financing, and Revenue Discount
A business model serves as the economic engine of an organization. It constitutes the methods and plans adopted by a company to generate revenues and profits, defining the sources of its income and the process through which it interacts with its customers, suppliers, and partners. One such groundbreaking business model making waves in the contemporary financial landscape is the Revenue-Based Investing (RBI), Revenue-Sharing Financing (RSF), or Revenue Discount (RD), a model pioneered by Marc René Deschenaux.
Revenue-Based Investing, Revenue-Sharing Financing, and Revenue Discount: A New Paradigm
In traditional financing, the relationship between a company and an investor takes one of two general forms: equity investment, where the investor takes a stake of ownership in the company in exchange for capital; or debt financing, where the investor lends money to the company to be repaid with interest over time. The RBI, RSF, or RD model introduces an innovative alternative to these conventional methods.
In this model, an investor provides capital to a business, company, or organization (collectively referred to as the ‘Entity’) in exchange for a percentage of the Entity’s ongoing gross or net revenues. This is a fundamental shift away from traditional financing models. Unlike in debt financing, the Entity is not required to repay a fixed sum of money over a fixed period. Unlike in equity investment, the Entity does not cede any ownership stake to the investor.
The implications of this model are far-reaching and profoundly beneficial for both parties involved. Since the investor’s return is directly tied to the Entity’s performance, with earnings fluctuating in tandem with revenues, both parties’ interests are inherently aligned. They both stand to benefit directly from the Entity’s success and similarly bear the impact of any business downturn.
This dynamic fosters an environment of mutual support, collaboration, and shared ambition. It alleviates the pressure on the Entity to meet fixed debt repayments, a major source of stress for many businesses, particularly startups and smaller companies without substantial capital reserves. In parallel, it eliminates concerns over diluting ownership that often accompany equity investments, allowing the Entity to retain full control over its operations and strategic direction.
Legitimizing the Model: Legal Instruments and Considerations
legally enforce the RBI, RSF, or RD model, it is crucial to codify the agreement between the investor and the Entity. The Revenue-Based Investing Agreement (RBIA), Revenue-Sharing Financing Agreement (RSFA), or Revenue Discount Agreement (RDA) serves this purpose. Under certain Roman law jurisdictions, this agreement may be published as an annotation to the register of commerce.
The agreement spells out the specifics of the financial relationship between the investor and the Entity, including the amount of investment, the percentage of revenues to be shared, and the duration of the agreement. Importantly, the agreement stipulates that the investment will last until the investor has received full repayment of the investment sum, plus an agreed profit.
As the investor has a genuine risk of loss if the Entity’s revenues fail to meet expectations, the RBIA, RSFA, or RDA is not subject to the usury limitations applicable to loan agreements. This is an essential distinction, as it safeguards the legality of the financial model and ensures its viability for the investor.
Steering Toward Sustainability
A defining aspect of the RBI, RSF, or RD model is its potential for driving sustainability. By freeing the Entity from the burdens of debt repayment and concerns over ownership dilution, the model allows the Entity to focus on its core operations and strategic growth initiatives. This becomes particularly potent when applied to Entities engaged in sustainable practices or the green economy.
Entities can direct the investment towards initiatives that enhance their environmental performance, innovate sustainable products or services, or improve their social responsibility. These initiatives not only drive the Entity’s growth but also contribute significantly to environmental conservation, social welfare, and the broader goals of sustainable development.
When aligned with green finance principles, this model could prove instrumental in accelerating the global transition to a sustainable economy. The investor, by supporting such Entities, becomes a direct contributor to this vital global objective. Therefore, the model serves to enhance the investor’s corporate social responsibility profile and societal impact, in addition to offering a viable financial return.
Flexibility and Adaptability
The adaptability of the RBI, RSF, or RD model further enhances its appeal. It can be tailored to suit a variety of industries, business models, and company sizes, making it a versatile tool in the arsenal of modern finance.
For example, a technology startup might seek an investment to fund product development and market expansion. An agriculture enterprise might require capital to innovate sustainable farming techniques and organic products. A renewable energy company might need funding to scale its operations and invest in cutting-edge clean technologies. The RBI, RSF, or RD model can be applied effectively in each of these scenarios, and countless more.
Risk Mitigation
While the model inherently involves a degree of risk for the investor, due to its revenue-dependent return structure, this risk is mitigated through several factors. First, the alignment of interests between the investor and the Entity ensures a collective effort towards business success, reducing the risk of underperformance or failure.
Second, the agreement’s duration—lasting until full repayment of the investment plus an agreed profit—is assured, offers the investor a measure of security and a clear financial prospect. Third, the legal enforceability of the RBIA, RSFA or RDA, provides a layer of protection for investors, allowing them recourse in the event of non-compliance.
