I would encourage folks who are interested to read the very good discussion: Here on HN: https://news.ycombinator.com/item?id=18338665 On Indiehackers: https://www.indiehackers.com/forum/help-us-design-funding-fo... And directly in the term sheet draft that we posted with comments open on Google Docs: https://docs.google.com/document/d/1HoZ94eWTctYQM5O5RXDeQQ_h...
A Shared Earnings Agreement is not debt and comparisons based on interest rates are academically interesting, but misleading because you cannot go to any debt lender with a side project with $2k MRR and get a loan to take a year and grow it. A SEAL has no fixed repayment schedule, no personal guarantee, no mechanism to foreclose on the business if it fails, and critically and unlike any form of debt the investor only gets paid when the business is doing well (repayment is a % of the economic benefit the founders choose to pay themselves: Founder Earnings).
We designed it to be a substitute for equity (where seed VC is really the only real alternative most founders at our stage would have) but equity that doesn't force the company to continually raise capital or sell the business. A SEAL can still have a successful risk-adjusted outcome for the investor even if you build a nice profitable business (literally the "nice Italian restaurant" example quoted from DHH in the post).
You may as well also include the effective interest rate on every VC investment that returns 50x or 100x their investment and say "Woah what a high interest rate. Should have used a credit card." Like equity, the implied "interest rate" on a SEAL looks higher in scenarios where the business & founders are more successful (thus paying back more Founder Earnings faster) and is a nice, low 0% APR if the business fails
That said, if anyone has constructive feedback to share I would love to hear it: https://earnestcapital.com/contact/