I watch Shark Tank and very often find that people, when faced with either exchanging equity for capital, or keeping their equity and paying a royalty on product sales, very often (almost always) choose the non-royalty offer.
I'm trying to understand why that is. For example, just to play with some specific numbers, let's say a company is selling a product with a $50 profit margin per unit (on a $10 production cost), and I'm willing to give them $100,000 for 10% equity in the company or else give them the $100K for no equity and $2 per unit until my money is paid back, after which my royalty drops to $1 per unit in perpetuity. Far more often than not it appears to me that the capital for equity trade is the preferred offer.
When and why is it smarter to lose equity over taking on a royalty?