The question I receive so frequently….
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"Are royalties like credit or like equity?"
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It's a fair question, but it's also the wrong one.
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It made sense when economies were built on factories, inventory, and hard assets. Tangible
things you could touch, value, and sell. Traditional debt was designed for that world, fixed
repayments, amortisation schedules, and hard collateral.

Private equity was too. Buy a business with leverage, expand the multiple, and find an exit at
a higher valuation. This worked in a stable economy built on tangible assets that followed a
clear valuation logic.

But the economy has shifted and the market is confused over valuations.

The most durable businesses today are built on intellectual property, data, and workflow-
embedded software with high switching cost. They are combining recurring revenues, long-
duration contracts, and intangible assets that exhibit high economic durability, low marginal
cost, and non-linear scalability. These features make them inherently difficult to value.

Financing these businesses like we used to finance a steel plant is suboptimal, to say the least.

In an IP-based economy, revenue becomes the most reliable and economically meaningful
anchor. Royalty investing reflects that. It provides contractual participation in recurring
revenue, downside protection without fixed repayment pressure, and growth-linked upside
without depending on an exit that may or may not come.

It is not debt, it is not equity, it is revenue-participating capital built for an intangible
economy. Royalties is a new and distinct asset class.
The question shouldn’t be which bucket royalties fit into, but whether the existing buckets
still capture how value is actually created.

And I believe they don't.

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