Draper Oakwood Royalty Capital said Tuesday it has launched and will seek to invest in growth companies in exchange for a share in future revenues. London-based Draper plans to begin investing next year and won’t be raising a fund. Instead, the firm will work with a handful of institutional investors.
LONDON–(BUSINESS WIRE)–A new investment company has been formed in the UK to provide businesses with an alternative form of growth capital. Draper Oakwood Royalty Capital (“Draper Oakwood”) is to make investments in growth companies, in exchange for a share in future revenues.
Draper Oakwood calls their investment an “R Round” (Royalty Round). Royalty-based finance is used extensively in many industries, including oil & gas, healthcare, and mining. Draper Oakwood now wants to make this type of capital available to businesses across other industries.
The advantage of the R Round is that entrepreneurs don’t have to give up any equity or control in their business. Nor do they have to provide collateral or guarantees like they would do a bank.
Tim Draper, one of the world’s most successful venture capital investors, said, “Draper Oakwood is yet another transformative innovation that we in the Draper Venture Network like to encourage and endorse. We believe that many great companies will be well suited to utilize a non-debt, non-equity financial vehicle. Draper Oakwood is breaking new ground, and we believe the economy will benefit from better liquidity and this alternative access to capital.”
Aamer A. Sarfraz, founder & CEO of Draper Oakwood, said, “Our principles are straightforward – provide capital which is entrepreneur-friendly, don’t interfere in running other people’s business, and don’t dilute existing shareholders and management teams. The UK needs more innovative sources of capital, beyond just old-fashioned equity and debt.”
Draper Oakwood intends to start investing early next year. Instead of raising a fund, the company will work with a handful of institutional investors. A focus is on the UK and Europe, while the company’s investment mandate is global.