This isn’t exactly a new concept, but I like the name.
The idea is that a new business that needs start-up capital issues bonds. Like other bonds, they have an expiry date an an interest rate, or the like.
But you have no other rights. Even if your bonds fund 60% of the business, you get no say in how it is run. You don’t get discounts, priorities or rewards.
If the business fails, you become a debtor ranked according to the terms, and typically you only get something after those who supplied goods and services are paid.
The bonds can be traded.
It rolls together early-bird funding, angel investing, crowd-funding and an IPO into one, for the ease and convenience to get a small venture running.
Without the upside angel investors can usually hope for – exponential returns – the bond must return a rate of interest unobtainable from safe investments. Say 30% after 2 years.
The business might have some reverse re-investment clause. Like, at the 2-year mark, bond holders can extended the end date, for a higher total return, but lower relative return.