Understanding Revenue Share Agreements: The Most Creator-Friendly Raise Structure

When creators and small business owners run their first Reg CF raise, most choose a revenue share agreement. Here is why — and how to structure yours correctly.

What Is a Revenue Share Agreement

A revenue share agreement (also called a revenue-based financing agreement or RBA) is a contract where investors provide capital in exchange for a percentage of future revenue, paid monthly, until investors receive a predetermined multiple of their original investment.

Example: An investor puts in $10,000. The agreement pays 3% of monthly gross revenue until the investor has received $20,000 (a 2x return). Once the cap is hit, the obligation ends and the creator keeps 100% of revenue.

Why Creators Prefer Revenue Share

No permanent equity dilution. When the cap is paid, you own 100% of your business again. Investors share the upside of growth without becoming permanent shareholders.

No fixed monthly payment. Unlike a loan, revenue share payments scale with your business. If you have a slow month, you pay less. If you have a strong month, you pay more. The obligation matches your cash flow.

Fans understand it immediately. Revenue share is intuitive in a way that SAFE notes and equity rounds are not. You can explain it in a single sentence and your audience gets it.

The Four Key Variables

Revenue percentage: Typically 1% to 5% of gross revenue. Higher percentages pay back faster. Lower percentages are easier on cash flow. Choose based on your revenue margin and growth trajectory.

Return cap: Typically 1.5x to 2.5x the investment. A 2x cap means an investor who puts in $1,000 receives $2,000 total. Caps above 3x are unusual for Reg CF.

Revenue definition: Be specific. Monthly gross revenue? Net revenue after refunds? Revenue from specific product lines only? The clearer the definition, the fewer disputes.

Payment frequency: Monthly is standard. Some agreements have a quarterly option. Monthly aligns with creator revenue cycles.

What Investors Think About

Investors evaluate revenue share deals on implied IRR — how quickly they expect to receive their return cap, and what that implies as an annual return.

A 2x return in 3 years is roughly a 26% annualized return. In 2 years, roughly 41%. In 5 years, roughly 15%. The faster your business is growing, the more attractive the terms.

Setting Your Terms on RawFunds

RawFunds provides a term builder that walks you through each variable and shows you how different structures affect investor returns and your monthly payment obligations. You can model multiple scenarios before committing to your final terms.

Start your raise at RawFunds.com.