How Revenue Sharing is Managed & Benefits of a Revenue Sharing Network for Start-Ups

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How Revenue Sharing is Managed & Benefits of a Revenue Sharing Network for Start-Ups

The question I’ll discuss in this article is: How do current systems of revenue sharing guarantee commissions to partners, including the people involved in fundingAnd how are funds fairly divided between members of the company?

Typically, there has been no simple mathematical equation that would make sense for all, or even a majority of businesses. The short answer is that it depends.

According to Derek Manuge, the CIO of Corl, there’s no way to guarantee that the revenue distributed is fair, traditionally, unless it’s automated by pricey software.

Corl is a blockchain-based revenue sharing company that issues RSA’s for start-ups to save them a lot of headache in the realm of capital raising. As appealing as a revenue sharing model can be, it’s underused because it’s hard to determine the particulars. Current systems don’t guarantee investors will get their earned investments.

“One caveat with a Revenue Sharing Agreement is it requires trust, transparency and reliable information to be effective,” writes Manuge, hopeful his company will bring these elements to thousands of prospective companies.

How too many start-ups manage revenue sharing:

On the forum of the website ‘Sitepoint’, a person asks a common question about his new, 3-person business partnership. He wants to divide 100% of his investments and profits equally, hopeful that all three partners share the workload and cash outlay.

As one member replies, he draws a lesson from his now extinct company:

“The problem we had is that at times one of us wasn’t very busy, while the other was absolutely snowed under, working evenings and weekends. At the end of the month, we were both paid the same amount.”

This user goes on to write that the partnership split because he left on honeymoon and his partner was dissatisfied he was getting paid time off, even though he personally felt he did most of the work. This type of problem is all too common. There’s a vital need for early-stage partnerships to be managed or approved before investors start pouring cash into them.

Determining what percentage of capital goes to each member of a company, the investor and the business itself can be super tricky. In some cases, egos, infighting and a multitude of varying disagreements about salaries can cause friction and ruin the cohesive functioning of a new company. We see this all the time in financial and start-up news – power struggles, broken promises to unlucky investors and squandered potential. It’s estimated 62% of start-ups fail due to co-founder conflict alone.

The takeaway point from all this is that investors shouldn’t trust early-stage companies without a strong reason. It’s estimated 90% of start-ups fail. Corollary to this, benefits of an intelligently-functioning investment ecosystem are huge. Start-ups using an RSA issuer like Corl are not only overseen by the intelligent delegation of finances to investors, but the vetting of companies to ensure only teams whose operational ducks are all in a row receive the capital they seek. By relying on dynamic financial information rather than mere credit scores, the best possible analysis can be made of a company’s growth potential and creditworthiness and investors can be highly confident with their choices.

Logistically speaking, the Corl network for investors and start-ups uses blockchain technology’s dynamic smart contracts to distribute tokenized dividends to investors. Unlike other companies on the market, their use of revenue financing allows for quarterly cryptocurrency payments to investors.

Companies whose applications are successfully approved by the Corl team can rejoice, as they will maintain complete ownership their company and their repayments will mirror its growth swings. This ensures they won’t be bleeding money in the most important phase of maturing.

Another benefit of revenue sharing is its function as a marketing strategy.

The style of marketing strategy chosen by a business can make or break their success, regardless of the quality of the product (SBChron). Through Corl’s blockchain investment platform, start-ups may receive capital from multiple investors, potentiating the spread of information about the business through different channels and reaching multiple unique audiences. Capitalizing on revenue sharing partnerships as a marketing strategy can be a smarter option financially for businesses, as well as bringing more leads than historical marketing efforts.

I hope this article was useful for you to understand how payments are divided between investors and companies, as well as how using a revenue sharing investment platform can reduce these headaches for both parties in a normal business relationship. Bringing in money from multiple sources can be a good way of distributing shareholder risk, and going through the process with Corl’s expert team may be hugely beneficial in mitigating traditional risks for both start-ups and investors.

To read in greater detail about the logistics of Corl and their Initial Token Offering taking place in just over a month, you can read their whitepaper by clicking here.

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