Slow growth - high discount
Slow growth (~40% early, easing to ~5% (the weak-growth baseline)) at a high (40%) discount rate.
Royalty PV
74.44
Terminal value PV
3.49
Equity equivalent
604.2%
vs. company value without royalty
Success probability
100.000%
Value lost to constrained growth (PV)
8.83
Total economic cost (PV)
83.27
Royalty PV + lost value
Assumptions & rationale
| Assumption | Value | Why this value |
|---|---|---|
| Starting revenue | 100.00 | |
| Royalty rate | 15.000% | |
| Royalty duration | 20 years | |
| Discount rate | 40.000% | 40% is the high end of the 20-40% startup range. |
| Valuation multiple | 5.000× | |
| Exit multiple | 5.000× | 5x final-year revenue, typical for a SaaS trade sale. |
| Commercialization probability | 100.000% | |
| Reinvestment rate | 50.000% | Half the royalty cash would otherwise have funded growth. |
| Investment efficiency | 100.000% | |
| Funding replacement rate | 0.000% | Cash-funded company, no external financing for growth. |
Revenue and royalty
Lost growth: revenue without vs. with royalty
The royalty removes cash the company would otherwise reinvest, so constrained growth drives the with-royalty revenue below the baseline. The gap is value lost beyond the royalty payments themselves.
Economic impact over time: royalty paid vs. revenue lost
Cumulative cash paid as royalty compared with cumulative revenue forgone to constrained growth. The forgone-growth cost compounds and typically overtakes the royalty payments themselves.
Discount-rate sensitivity: equity equivalent