Because this will be a new product for them, they expect it will take several months before they start to make any revenue with it.
> Why such an extreme discount? I'd start digging there.
Yeah, it seems like a big jump. I asked if it could be monthly pro-rata and they agreed to that.
> Is their business viable for 3 years?
I think so, or they'll get acquired.
> Why don't you to ask them to borrow $5M, pay you that amount now, then let them pay off the loan over 3 years? At 12.5% interest, total payments come to about $6M for a 3 year loan term.
Because they don't know that they'll be able to sell the product that they'll be building around my product. This way if they can't they can cut their losses without being on the hook for the entire amount.
I don't see that I'm taking much of a risk, if they terminate the agreement we get to keep whatever we've been paid to-date.
Why don't you to ask them to borrow $5M, pay you that amount now, then let them pay off the loan over 3 years? At 12.5% interest, total payments come to about $6M for a 3 year loan term.
It's a way of shifting risk from you to them. Somehow, I doubt they'll agree; but their response may be very informative and helpful for further negotiation.