Revenue Royalties

Flow Capital’s revenue-linked growth capital provides competitive and flexible options for small and medium sized enterprises (“SMEs”) which are looking for an alternative or complement to traditional debt and equity financing.

Our goal is to align with your plans for quickly increasing the value of your business by trading our capital for a small percentage of your company’s future revenues, matching our returns to your success.

A typical royalty agreement will have the following structure:

  • Amount: Initial investment of $500K-$1 million; up to $3 million over time
  • Monthly Payment: Minimum payment or up to 4% of revenue
  • Buyout Options: You control
  • Control Features: None
  • Financial Covenants: None
  • Security: None
  • Warrant Coverage: Light

Flow Capital seeks to invest in companies with the following characteristics:

  • North America-based
  • Capital-efficient and growing
  • Operating in high growth market, such as technology, cannabis, renewables, healthcare IT
  • Operating history greater than 2 years
  • Annual revenues or ARR of greater than $1 million
  • Close to or at operating profitability
  • Revenue visibility

Team

Robb McLarty
Chief Investment Officer, Acting Chief Executive Officer

An investor and engineer, Robb McLarty has been working with and investing in emerging growth companies…

An investor and engineer, Robb McLarty has been working with and investing in emerging growth companies for over twenty years. From 2007-2013, Robb was Investment Committee Member of NGEN Partners, where he focused on the application of digital technologies in the energy sector, and on solar project development and finance. His investments included Pure Energies (acquired by NRG), Soraa, Choose Energy (acquired by Red Ventures), REGEN Energy and Adura Technologies (acquired by Acuity). Prior to NGEN, Robb was a Technology Analyst at Ziff Brothers Investments, a multi-billion dollar private investment firm.  Earlier in his career, Robb worked at IBM’s venture capital group, was an initial employee at Bill-Me-Later (acquired by eBay), and coded and supported software at Nortel. Robb holds an M.B.A. from the Yale School of Management and a B.Sc.E. in Electrical Engineering from Queen’s University, Canada.

Stephanie Tadros
Director, Investments

Stephanie Tadros is a motivated finance professional with experience in providing alternate financing solutions to…

Stephanie Tadros is a motivated finance professional with experience in providing alternate financing solutions to growing companies. Prior to joining Flow Capital, Stephanie spent 4 years at Export Development Canada in various roles providing insurance, financing, and working capital relief solutions to Canadian SMEs, and most recently individually managing a portfolio of 30+ companies. Stephanie graduated with distinction from the John Molson School of Business at Concordia University in 2011, and is currently a CFA level III candidate.

Donnacha Rahill
Chief Financial Officer

Donnacha is a financial services specialist with over 20 years of experience in a number…

Donnacha is a financial services specialist with over 20 years of experience in a number of senior finance positions in Ireland, Canada and Singapore. He has diversified experience in financial services covering leasing, life insurance and banking. Donnacha has over 10 years experience acting as CFO for companies in financial services and prior to being a CFO, managing the treasury activities of 2 multi-national companies out of Ireland. Donnacha was CFO for the subsidiary in Canada and Asia Pacific of De Lage Landen International (a subsidiary of the Dutch bank Rabobank) which during his time the growth in the portfolio was significant. Donnacha is a Fellow of the Institute of Chartered Accountants in Ireland and was admitted to membership in November 1987. Donnacha spent six years in public practice in Ireland with BDO and Price Waterhouse.

FAQs


Our revenue-linked growth capital is designed for emerging growth companies, generally, including in high growth markets such as technology, SAAS, tech-enabled services, systems, blockchain, AI, big data, cannabis and healthcare IT.

Flow does not invest in companies that operate in the industrial, bricks and mortar retail, traditional mining extraction, oil and gas extraction, film and pharmaceutical drug development sectors.

Our investments are structured on a contractual relationship whereby Flow Capital and its portfolio company commit to paying a small portion of future revenues in exchange for cash today. In each case, Flow seeks to purchase up to 4% of the future revenues of a company. The royalty is paid monthly with no additional charges, fees or interest.

Our financing is structured to align our investment with your revenue goals, aligning our growth with yours. The structure of the royalty over the long term is flexible and is established according to your unique business situation. 

We also work hand-in-hand with our portfolio companies to collaborate in developing future buydown and buyout strategies to reduce or eliminate the royalty rate over time via mutually beneficial transactions.

Companies within our portfolio have more than $1 million in revenues, strong growth, capital efficient business models and are run by seasoned and invested executives.

Flow is currently focused on investing in companies based in the United States and Canada.

We currently target initial investments of $500K to $1 million, with the intent of growing our investment over time. Frequently we invest alongside syndicate partners at the time of initial investment so that our portfolio companies maintain financial stability by having more than one capital partner at the table.

Flow Capital's royalty model is adaptable and able to accommodate a high degree of seasonality. We tailor our terms to work with the business that you are operating. An example would be our ability to establish a rolling average monthly payment, ensuring our royalty structure works seamlessly with your cash flow generation.

Cost, control, simplicity and transparency are all words used to describe our value proposition. Flow's model aligns with management’s plans for quickly growing the value of their business while minimizing dilution. We want business owners to retain control of the business they have created – our terms speak to that. We do not require any type of exit or sale of your company to realize our returns and benefit only when the owners do.

There are no onerous financial covenants, no board seats, and there is no dilution of ownership.  We offer flexible buydown and buyout alternatives with no mandated principal repayment date, which limits your risk as an owner.

Traditional debt requires collateral to secure the capital. If your company has limited or exhausted traditional collateralized capital alternatives, or is not in favour of personal guarantees, your ability to secure debt financing is materially impaired. Furthermore, debt financing requires payment of principal, whereas our form of capital never requires retirement of the facility. With our form of financing, the cash can remain in the business for growth.

Selling equity can be complex and expensive for high growth businesses. Equity pricing is costly when your business is growing rapidly, and liquidation preferences, control rights and board seats actually can cause you to lose control of your business, and the bulk of cash proceeds upon sale.

Furthermore, traditional forms of debt or equity may not be available to all companies on commercially attractive terms. Our experience has been that Flow Capital works as a catalyst for further investment, acting as a “first-step” investor to get the conversation moving towards more favourable terms in negotiating traditional debt or equity alternatives.

None, there is no interest paid. Repayment is in the form of royalties on top-line revenue only.

There are no hidden or ongoing fees, there is only your royalty payment.

There are legal and initial closing fees at the front-end, which are clearly outlined and agreed upon in advance of any transaction. Flow Capital takes pride in knowing the fees which are levied are substantially lower than the fees associated with traditional alternatives.

There is no repayment of principal required in our royalty agreements, however, there are buydown and buyout options available for you to exercise at your election.

Flow's royalty offering is a hybrid structure with features of between mezzanine debt and equity. Like mezzanine debt, it has recurring monthly payments. Like equity, our investment is subordinated to all other existing debts at the time of investment and generates higher returns when the owners generate outsized returns through growth or a sale of the business. With these hybrid features in mind, our structure is priced in between mezzanine debt and equity.

We waste no time getting you the funding you desire. Within a week of our initial conversation we deliver a term sheet for your approval. Once executed, closing can follow within as little as four weeks. 

It is not until we agree to move forward that legal fees are incurred. These associated fees are outlined in the executed term sheet and are set at a capped amount.

All legal fees are paid upon closing from proceeds of the funding.

We have endeavored to mitigate high legal costs by instituting a standardized legal and closing procedure. It is our aim to make every client’s experience as cost-effective as possible.

Case Studies

Above Security, now Hitachi Systems Security, is a Montreal-based provider of customized services for monitoring…

Above Security, now Hitachi Systems Security, is a Montreal-based provider of customized services for monitoring and protecting IT assets, catering to small and medium businesses in highly-regulated industries such as financial services and government. With accounts in over 40 countries worldwide the company was founded in 1999 and has representative offices in North America, Europe, and the Middle East as well as security operations in Montreal and Sierre, Switzerland.

In 2014, Above Security had been looking for flexible capital that would allow them to expand their presence across North America and the EU. Flow Capital’s original investment of CAD $1,000,000 and various subsequent rounds allowed them to successfully execute on their growth plan and complete an acquisition.

Flow Capital’s investment allowed the executive team to maintain control of their cap table and was ultimately pivotal in the successful exit of the business to Hitachi in 2015.

Bluedrop Performance Learning (TSXV: BPLI) is the holding company for its two wholly owned operating divisions,…

Bluedrop Performance Learning (TSXV: BPLI) is the holding company for its two wholly owned operating divisions, Bluedrop Training and Simulation Inc. and Bluedrop Learning Networks Inc. BPLI’s mandate is to lead and dominate niche markets where technology and learning can deliver new levels of operational success to military, government and corporate customers.

Prior to the Flow Capital investment, Bluedrop had raised CAD $3,000,000 with Difference Capital in order to complete the acquisition of Atlantis Systems Corp. Following the acquisition, Bluedrop was in need of working capital for the integration and growth of the newly joined businesses. Flow Capital’s funding was easily combined with BPLI’s existing sources of capital and offered the company a solution that helped propel the company on a successful growth path as a merged entity, while avoiding shareholder dilution at the wrong time.

Since 2007, ConnectAndSell’s patented cloud sales acceleration platform has helped over 1000 B2B companies ranging…

Since 2007, ConnectAndSell’s patented cloud sales acceleration platform has helped over 1000 B2B companies ranging from small startups to Fortune 500 enterprises like IBM, Infoblox, Varonis to make 65 million dials and deliver 3.5 million sales conversations. ConnectAndSell integrates with popular CRMs like Salesforce, Microsoft Dynamics, SugarCRM, Netsuite and many others.

In May 2017, Flow Capital invested USD $1,500,000 in ConnectAndSell.  Our value proposition rang true: flexible and expandable growth capital that would help catalyze the next level of company expansion, without diluting the existing cap table. Like Boardwalktech and many of Flow Capital’s portfolio companies — and in spite of being situated in the heart of Silicon Valley —ConnectAndSell had no interest in taking venture capital, preferring to maintain operational control, without the high-pressure growth expectations of VCs.

Fixt Wireless Repair is an emerging Toronto-based B2B and B2C cell-phone and electronics repair chain,…

Fixt Wireless Repair is an emerging Toronto-based B2B and B2C cell-phone and electronics repair chain, set-up by a team of wireless industry veterans to capture a multi-billion-dollar market that is relevant to 90% of the North American population, is highly fragmented, and primed for an industry leader to emerge.

Founded in May 2015, Fixt had been establishing and growing their retail presence across the Toronto area.  In 2017, Flow Capital provided CAD $250,000 in revenue-based capital alongside other investors, allowing the company to continue its retail and corporate expansion plan. In 2018, Fixt had more than doubled its retail presence and bought out Flow’s investment.

Based in Toronto, Hybrid Financial provides investor relations and retail-focused origination and distribution services to…

Based in Toronto, Hybrid Financial provides investor relations and retail-focused origination and distribution services to the investment management industry throughout North America. Leveraging technology and one of the most comprehensive databases of the Canadian and US retail investment advisor landscape, Hybrid has become one of the leading financial sales and investor relations firms in Toronto.

Led by founder and CEO, Steve Marshall, Hybrid has been on a significant growth trajectory, offering a compelling value proposition to publicly listed corporations, investment managers and issuers seeking to find a more efficient and cost-effective means of generating sales through the retail broker/dealer networks.

In 2017, Flow Capital and its partners invested CAD $750,000 as a flexible form of capital that would support Hybrid’s growth and expansion into the US.

Dedicated to creating cultural hubs in every community in which it operates, Inner Spirit is…

Dedicated to creating cultural hubs in every community in which it operates, Inner Spirit is establishing a chain of recreational cannabis dispensaries under its Spiritleaf brand. Supporting local entrepreneurs by applying its award-winning franchise and retail models, Inner Spirit has more than 100 partnerships in place for Spiritleaf locations across BC, Alberta and Saskatchewan. Inner Spirit will also operate multiple corporate dispensaries. With a diverse portfolio of quality and curated lifestyle cannabis products – including Spiritleaf’s own locally and sustainably sourced lines – Inner Spirit’s Spiritleaf is positioned to be an iconic Canadian brand and the most trusted source for recreational cannabis.

Flow Capital initially invested in ISH’s subsidiary company, WatchIT!, and subsequently converted its revenue royalty into a significant equity interest in Inner Spirit.

Based in Los Angeles, California, Stability Healthcare uses an online platform to match the supply…

Based in Los Angeles, California, Stability Healthcare uses an online platform to match the supply of travel nurses with healthcare facilities that are in need of temporary nurses, significantly reducing placement times. Stability has changed the way that the industry has historically operated by creating transparency in selecting travel assignments by releasing information upfront to nurses including compensation, travel expenses and placement facility details. In 2015, 2016 and 2017, Stability was ranked on the Inc. 500 fastest growing private companies list.

Stability Healthcare was attracted to Flow Capital’s revenue-linked investment structure as it allowed the founders to continue growing their operations without compromising their ownership positions.  Flow Capital and syndicate partners invested USD $1,250,000 into Stability Healthcare in 2018.

Aquam is an integrated pipe infrastructure solutions company that provides proven technology solutions to owners…

Aquam is an integrated pipe infrastructure solutions company that provides proven technology solutions to owners and operators of both water and natural gas pipe infrastructures.

Flow Capital’s 2014 investment of CAD $2,000,000 enabled Aquam to significantly grow its business prior to raising its next round of equity.  In 2017, Aquam raised $26,000,000 from NewWorld Capital, realizing significant accretion for Aquam’s shareholders and a buyout of Flow’s royalty.

 

Boardwalktech (TSXV: BWLK) provides a patented digital ledger blockchain service for the extended enterprise, which its…

Boardwalktech (TSXV: BWLK) provides a patented digital ledger blockchain service for the extended enterprise, which its customers — including 23 of the Fortune 500 — use to run mission critical applications managing the digital exchange of information internally and with customers, channels, and suppliers. One of the most highly anticipated consumer products of 2017 was launched using the Boardwalktech digital ledger to manage its global supply chain.

After investing in Boardwalktech in December, 2017, Flow Capital played a pivotal role in the company’s CAD $10,000,000 go-public transaction on the TSX Venture exchange.

Flow Capital’s investment and advice catalyzed this transaction, enabling Boardwalktech to realize significant value for its existing shareholders, and to fuel the next level of its growth, backed by world-class investor Fidelity.

Factor75 is an online, subscription-based, personalized chef service that is positioned at the intersection of food…

Factor75 is an online, subscription-based, personalized chef service that is positioned at the intersection of food and fitness. The company’s name, Factor75, stands for the philosophy that 75% of fitness results and everyday performance derives from diet.

All meals are made gluten, soy, GMO, hormone, antibiotic and preservative free, with keto and paleo options.

Factor75’s founders are experienced operators and private equity investors, to whom the value proposition of Flow Capital’s revenue royalty — fairly priced, zero dilution, highly flexible — was immediately clear.

In December, 2016, Flow led a USD $750,000 syndicated royalty investment in Factor75. Since then, the company has significantly grown the size and value of its business, expanding geographically and into adjacent markets such as vitamin supplements.

Dionymed Holdings, dba Herban Industries, is a California based group operating as a licensed cannabis…

Dionymed Holdings, dba Herban Industries, is a California based group operating as a licensed cannabis manufacturer and distributor across the newly regulated State. An early mover in the industry, DionyMed, through its operating entities, sources cannabis distillate, flower, edibles and other related products from licensed suppliers for delivery through its truck fleet, to the 300+ licensed dispensaries throughout California.

Led by serial entrepreneur Edward Fields, and cannabis industry veteran Peter Kampian, the DionyMed team saw the significant value in leveraging revenue-linked capital to grow their business without affecting their cap table.

In 2018, Flow Capital’s CAD $1,000,000 investment helped kick-start their ramp in revenues without giving up any dilution, an important aspect to the founders who largely hold the business.

InteriorMark, formed in 2007, is an online retailer of home theater  furniture and seating, selling…

InteriorMark, formed in 2007, is an online retailer of home theater  furniture and seating, selling both through it’s own online presence as well as through various large retail channels such as Best Buy. Since it’s inception, InteriorMark’s home theater business has been flourishing, becoming a leading supplier in the US.

The business, tightly held by the founders, took on a Flow Capital investment of USD $1,750,000 in 2015 as an addition to their capital stack, as the funds provided them the working capital flexibility to continue to expand without dilution. Since the time of the original investment, operations have grown significantly with an additional USD $150,000 was advanced in 2016 and subsequently bought out in 2017.

 

Solar Brokers is one of the largest solar providers in Canada and the first residential…

Solar Brokers is one of the largest solar providers in Canada and the first residential solar brokerage in the country. Since its founding in 2012, the company has experienced revenue growth of over 8900%. To date the company has brokered over 30 megawatts of residential solar in Ontario. Based in Toronto, Solar Brokers and its affiliate companies oversee a staff of over 100 industry-leading professionals. Through its proprietary tools, including state-of-the art project and customer relationship management software, and lead-generating interactive kiosks, Solar Brokers is redefining how consumers adopt residential solar.

Flow Capital and JV partners invested CAD $1,075,000 in 2018, and subsequently helped the company to raise funds from US investors into the existing royalty structure.  Our capital will help Solar Brokers invest in expansion, and will help to attract larger debt and equity investors.

TruGolf began as a subsidiary of Access Software. In 1999, Access Software was purchased by…

TruGolf began as a subsidiary of Access Software. In 1999, Access Software was purchased by Microsoft for its expertise in golf software development. Following the acquisition, TruGolf maintained the core programming and graphics team of Links™, the best selling PC golf franchise ever.

The TruGolf team is passionate about driving the golf industry with the most realistic simulation engine possible. It has built award-winning video games (Links™), innovative hardware solutions (TruFlight), and now an all-new eSports platform to connect golfers around the world with E6 CONNECT.

Flow Capital’s USD $1,000,000 royalty investment enabled TruGolf to expand both its product portfolio, with E6 CONNECT, and the geographies in which it sells — all without diluting its existing shareholders.