Here's the difference:
‍
Revenue-based lending is providing credit that gets repaid through a share of revenues. It's a
loan structure. You lend €5M, and the company repays it by giving you, say, 5% of monthly
revenues until the loan is paid back, plus interest.

The model works and it is an important first step towards solving the problem of rigid and
sometimes damaging amortisation schedules of standard credit. The problem is capped
upside, limited scalability, and small ticket sizes. The risk-return trade-off is not always right
and many revenue-based loan providers have disappeared, especially those who did not focus
on a rigid and professional underwriting process.

Royalty investing is fundamentally different.

We're not providing a loan. We're acquiring a share of future revenues for a predetermined
period.

It's a royalty purchase, not debt on the balance sheet.

This is the model that has worked for decades in pharmaceuticals, music, entertainment and
metals and mining. Companies like Royalty Pharma have built billion-dollar businesses on
this structure because it's fully scalable, institutional-grade and can handle large tickets.

Althera42 brings this to IP-based tech businesses and software companies with recurring
revenues and long-term customer contracts. Companies that provide infrastructure and are
built to last.

The key to making royalty investing work is two things:
First, focus on the upside. Deep understanding of the company's growth potential, retention
metrics, and revenue quality. We only win big if the business grows its revenues.

Second, build strong downside protection by focusing on IP. We focus on companies that
have valuable intellectual property, patents, trademarks, and proprietary technology. We
structure our investments to ensure we're protected even in adverse scenarios.
Revenue-based lending treats software like a credit product with a revenue twist.
Royalty investing treats it like the asset it actually is, a stream of recurring revenues backed
by intellectual property.

‍