“What we’ve seen with these is that people want to diversify within these investment types,” Daley (pictured left) says. “So they’ll come and buy the minimum of each multi-unit auction and create their own fund of royalties.”
Royalty Exchange makes an 8 to 12 percent transaction fee on each auction, paid by the seller. From the buyers, the startup earns a half a percent of each monthly royalty distribution.
Multi-unit sales are a key way to bring more activity to the platform, and they position the company for a time when unaccredited investors will be permitted to invest (pending the approval of federal crowdfunding rules) on the platform.
Royalty Exchange’s next frontier.
But a bigger opportunity will come even sooner, when Royalty Exchange begins to auction oil and gas royalties.
After an intensive six-month process, the company expects to earn a broker/dealer license within days. The startup went through the trouble due to high demand from existing investors and potential sellers.
The oil and gas industry represents hundreds of billions of dollars of opportunity – the federal government earns about $100 billion a year in royalties, but the majority is generated by private companies and there’s no good way of tracking that number.
The only similar online marketplace exists for people inside the industry who operate or own refineries and use royalties as another way of generating revenue for their businesses. Royalty Exchange will open up those once private opportunities to all.
“Not only is there demand from our existing investor base but it’s a mature market that everyone understands,” Daley says.
Just as important: “The oil and gas opportunity represents the foundational element of Royalty Exchange in that we’re not just about music royalties. We are about royalty investments across many industries, and this is the first expansion. This proves our model.”