The royalty is the product
A reader wrote in last week — a senior CHRO at a large Indian SaaS company — to ask why we did not just write the senior leader a cheque. Pay them a one-time consulting fee, get them to sign over the idea, ship the venture under Maitro's name, give them a small bonus when it works. It would have been simpler. It would have been faster. It would have been cleaner from a contract perspective. Why a royalty?
The honest answer is that the royalty is the only consideration that matches what the senior leader is actually contributing.
A consulting fee compensates an hour of someone's time. The senior leader is not contributing an hour. They are contributing twenty years of compounded pattern recognition that finally crystallised into one shippable insight. There is no hourly rate that prices that correctly. A consulting fee would either insult the contribution (₹50,000 a day for sixty hours = nothing relative to what they bring) or break the budget (₹5,00,000 a day for sixty hours = a number nobody can budget for).
A royalty does not try to price the contribution. It shares the outcome the contribution made possible. If the venture earns nothing, neither does the senior leader. If the venture earns well, the senior leader earns alongside, capped and time-bound. The math is fair in proportion to what actually happens.
This matters because of what equity-style compensation cannot do.
A common counterargument to royalty: why not phantom equity? Why not stock appreciation rights? Why not a profit-share that pays out at exit?
Each of those alternatives has the same flaw — the consideration depends on a future event the senior leader cannot influence and the studio controls. Phantom equity vests at exit. Profit-share pays at sale. SARs trigger on a defined liquidity moment.
If the studio decides not to sell the venture for ten years, the senior leader's compensation never materialises. Their contribution is real and immediate; their reward is contingent and remote. The asymmetry is bad for the relationship and corrosive over time. It is the kind of structure that, four years in, makes the senior leader wonder whether the studio is delaying an exit on purpose to delay their payout. That kind of question destroys trust, and we did not want the model to live in a place where it could be asked.
A royalty pays from quarter one of revenue. The senior leader does not have to wait. They do not have to bet on a future event. They do not have to second-guess the studio's exit strategy. The cheque arrives every ninety days for as long as the venture earns and the cap and term remain open. It is the most boring possible compensation structure, and that is exactly why it works.
There is a deeper reason, harder to write down, that I want to put on record.
The senior leader contributes the idea — but more importantly, they contribute their name. When the venture launches, the public face is the senior leader, not the studio. The keynote at NASSCOM is delivered by the senior leader. The Mint quote is from the senior leader. The LinkedIn announcement post is on the senior leader's profile. The senior leader is the brand, twelve months running.
A name, in the world of senior business leaders in India, is not free. A CHRO who lends her name to a product is staking twenty years of accumulated trust. If the product is bad, her trust takes the hit. If the product is generic, she becomes associated with generic. If the product is excellent, she compounds.
The royalty is not just compensation for the idea. It is partial compensation for the brand-equity stake. The senior leader is not just contributing intellectual property; she is contributing reputational capital, which is the most valuable asset she owns. The royalty pays back into both at once.
A consulting fee would only have paid for the idea. A royalty pays for the idea and the willingness to lend the name. Those are two different things. They have to be priced together.
The cap matters here too. The cap exists, in part, because the senior leader's reputational stake is finite. The first twelve months of brand association carry the bulk of the reputational risk. By year five, the venture has either become a credible thing under the senior leader's name (and the brand is reinforcing them, not requiring further risk) or has not (in which case continuing royalty would feel like consolation, which is the wrong note to end on).
The cap closes the chapter. The senior leader walks away with what they earned, with their name on a venture they helped bring into existence, with a Council seat for life if they want one. The relationship transitions from founding to alumni, which is the right shape for what comes next.
That is what I mean when I say the royalty is the product. It is not the side-payment. It is the whole architecture of how the deal closes cleanly.
— Bhaskar Anand LinkedIn