Arctaris invests in healthy, growth-stage companies in broad range of industries:
- Companies should have at least $5M in annual revenues.
- Companies should be cash flow positive.
- Companies may be public or privately held.
- Companies with locations in underserved or rural markets are desirable but not mandatory.
- A deal sponsor (e.g. PE Fund, pledge fund, or individual equity investors) is desirable but not mandatory.
- No Dilution of Ownership- Royalties are used as an alternative to warrants or stock as with traditional subordinated debt.
- No Pressure to Sell- There is no need to force an exit, as royalty securities are self-extinguishing.
- Competitive Cost of Capital- Lower targeted return multiples in exchange for predictable income back to the fund.
Standard Loan Base:
- Current coupon, paid monthly, with 5-year principal amortization
- Senior secured or subordinate with UCC perfected lien
- Low total leverage ratios of 1.0-2.5x
- Royalties pay a percentage of incremental sales
- Royalties are secured by same lien as base loan
- Inflation protection through sales peg
- Less or non-dilutive to founders, VCs, shareholders
- Flexible/affordable obligation that matches company’s payments with revenue growth
- Payments are tax deductible after repayment of principal
- Transparent model –no hidden valuation formulas
- No forced exit needed to satisfy Investors’ need for liquidity
- Interests are aligned to grow the top-line revenue