Royalty math for senior leaders
How to think about a capped, time-bound royalty when you're used to thinking in equity and salary. With a worked example.
Senior leaders evaluating a Maitro engagement have one consistent first question: how do I evaluate a royalty against the equity I'm used to thinking about?
It is the right question. The honest answer requires walking through three numbers and three scenarios. I'll do that in the open.
The three numbers
Maitro's royalty has three locked parameters. The exact values are released only to verified senior-leader emails through the application form (we don't put them on the public site for the same reason private equity firms don't quote terms on a billboard). For this essay I'll use placeholder labels — the shape of the math is what you need to evaluate the model. The actual numbers are gentler than what most readers will assume.
- Royalty rate. A small single-digit percentage of net revenue. - Lifetime cap. A hard maximum, denominated in INR. Once reached, the obligation closes. - Term. A defined number of years from product launch. Whichever closes first — cap or term — terminates the royalty.
Three locks, designed to make the math finite. You can compute your maximum payout precisely. You can compute the studio's maximum take precisely. There is no perpetuity, no clawback, no escalator.
How to compare against equity
When someone offers you equity in a startup, the math you're really doing is:
- Probability the company reaches a meaningful exit (call it p), - Multiplied by your equity share at exit (after dilution), - Multiplied by the exit value, - Discounted by the years it takes to reach.
Most senior leaders I have talked to underestimate dilution and overestimate p. The honest probability that a seed-stage startup founded today reaches a $100M+ exit is single-digit percent. After 3–5 rounds of dilution, your 5% co-founder share is closer to 1.2%. So if the exit is $100M and p is 5%, your expected value is $60K. Not zero — but not the number you had in your head.
Compare that to the Maitro royalty. The royalty pays out from year 1 of product revenue. There is no exit dependency — you earn quarterly the moment the product ships and starts generating revenue. The math is:
- Revenue trajectory (year-1, year-2, year-3), - Multiplied by the royalty rate, - Until you hit the cap or the term.
The royalty's expected value is closer to its nominal value because it does not depend on a low-probability exit event. The downside is the cap — if the venture becomes a unicorn, the senior leader does not capture unicorn-scale upside. That's the trade.
A worked example (with realistic but illustrative numbers)
For this essay I'll use these placeholder numbers:
- Royalty rate: r% of net revenue - Cap: ₹X cr lifetime - Term: 5 years from launch
Year 1 of product life. The venture ships in October. By year-end it is at ₹2 cr ARR. Your quarterly royalty is (2 / 4) × r%. For most reasonable values of r, this is the price of a nice family vacation, not a life event. That's fine — year 1 is bootstrap.
Year 3. The venture has grown to ₹15 cr ARR. Your quarterly royalty is (15 / 4) × r%. Now the math compounds — over four quarters you're earning into a number that begins to matter relative to your CXO compensation.
Year 5. The venture is at ₹40 cr ARR. The total royalty you have collected over five years has approached or hit the cap. The obligation closes. You have earned the cap, all paid in clean INR, all reportable as personal income, all without ever owning a share of the operating company.
Compare against the equity counterfactual. If you had taken 5% co-founder equity instead, after three rounds of dilution you would be at ~1.2%. If the venture is acquired in year 7 for ₹500 cr, your share is ₹6 cr — earned at the moment of acquisition, taxed at LTCG. The equity path is bigger in the unicorn case. The royalty path is bigger in the realistic case.
The realistic case is the case that happens.
The case for the cap
Founders sometimes ask why the cap exists at all — why not let the royalty run forever? The honest answer is: the cap exists to protect you, not us. Above a certain revenue level, the studio has clearly earned out — the CTO + crew + AI stack that built the product is no longer load-bearing on the company's growth. Continuing to take a royalty above that level is not aligned with the deal we are actually offering. So the cap closes the obligation cleanly.
The term-bound clause is the same logic against time. Five years from launch is a long enough window for the deal to have proved itself one way or another. After that the studio's contribution has been priced.
The "but my employer" check
Before any of this math matters, the IP-conflict review with your current employer needs to come back clean. Maitro's counsel underwrites that check. We will tell you honestly if your contract makes the named-ideator role infeasible — and we will not ask you to assign anything that belongs to your employer. The IP-conflict gate is the most common reason we say "not this cohort" to a senior leader, and we say it before the contract conversation gets serious so that nobody wastes their time.
The application is at maitro.in/apply. The full economics — actual rate, actual cap, actual term, contract template, and a realistic worked example with your industry's typical revenue trajectories — arrive in your inbox within the hour after you submit.
Three minutes. Then a conversation.
— Bhaskar Anand LinkedIn