I think you make a good point regarding taking the risk of their business, without getting compensated like an equity holder. I may be able to use that to negotiate for some equity as part of the deal.
The risk to us is relatively limited though, as we get the technology back if they can't pay for it. The main risk is that we won't have made progress on it during that time, but that could have happened regardless (given it's experimental nature, we didn't really have much of an idea how we would market it).
Great points.
Another thing to think about: unsure about the exact repayment circumstances. But financially, the current offer has some similarities to venture debt, and that may be a useful way to think about what you're getting into.
Key consideration about venture debt: the lender (you) is basically making a bet about financing risk. If the venture (your acquirer) gets a subsequent round of VC money, they will pay you back. If they do not get another round, they will not.
Venture lenders typically don't look at their borrowers' business fundamentals too much, but they are very careful about who else is investing with them and how many rounds the venture has raised. Basically, if a new venture is (1) raising their first round and (2) backed by a big-name VC firm (Kleiner Perkins, Bessemer, etc.), the venture will almost always get another round of funding and the loan is safe. Other investors are always willing to give a KPCB-backed venture another shot. If (1) or (2) is not true, the loan is much riskier.
The risk to us is relatively limited though, as we get the technology back if they can't pay for it. The main risk is that we won't have made progress on it during that time, but that could have happened regardless (given it's experimental nature, we didn't really have much of an idea how we would market it).