If you’ve held any interest in business and entrepreneurship, then its highly likely you’ve heard the term equity financing or something similar mentioned. Equity financing is the process of raising money for company growth by offering personal or company stock, in exchange for investments. In return for the money paid, investors are entitled to a pre-determined amount of interest in the business.
Types of Investors
There are two main investor types, the Angel investor being one and the Venture Capitalist the other. Angel investors tend to be wealthy individuals, family members or even friends. Angel investors are more likely to provide financial support during the start-up phase of the business for either equity or full ownership. There may also be a number of benefits of working with an Angel investor, such as contacts and connections.
Venture Capitalists tend to invest larger sums of money than Angel investors. VC’s are more likely to invest in companies that are in the second stage of growth, this is because there is less risk during this stage of companies development. VC’s will also take a bigger chunk of equity and control. One of the main benefits of the Venture Capitalist is that they can help groom the company for merges or buyouts. There are various types of Venture Capitalist’s and they all operate in different ways.
The intended goals of the business should always be factored in when seeking the right form of investments to accept. [Read more...]