Equity funding involves raising capital by selling shares of ownership in a company. In exchange for their investment, shareholders receive a stake in the company and can benefit from its success through dividends or a potential sale or buyout.

Key Aspects of Equity Funding:

• Mechanism: Typically involves issuing new shares in return for a cash investment.
• Investors: Equity investors range from friends and family to angel investors, venture capitalists, government funds, private equity funds, and even corporations.
• Benefits for the company: Startups that may not qualify for large bank loans can acquire funding from angel investors, venture capitalists, or crowdfunding platforms to cover their costs. Equity financing is viewed as less risky than debt financing because the company does not have to pay back its shareholders.
• Benefits for investors: Investors make gains by receiving dividends or when their shares increase in price. But Investors typically also seek an exit strategy to realize returns, which can create pressure to sell the company or pursue an IPO sooner than optimal. This pressure can lead to decisions that prioritize investor exits over long-term health and growth of startup.

• Advantages of Equity Funding:
   No need to make regular repayments, helping manage cash flow.
   Investors often bring expertise, connections, and experience to help grow the business.
   Offers an alternative funding source to debt, which is crucial in a company’s startup period.
  Equity Funding Rounds: Venture capital is raised in stages, with VCs often specializing in a specific stage. These stages
  include start-up/pre-seed, seed/early stage, Series A, Series B, and Series C. Equity financing is especially important
  during a company’s startup stage to finance plant assets and initial operating expenses.
  Different kinds of Equity funding are explained in the following segments.