Equity Financing

Business Finance

Equity financing raises capital by selling ownership stakes (stock or membership interests) in the company. Sources: angel investors, venture capital, private equity, public stock offerings (IPO), secondary offerings. No repayment obligation but dilutes existing owners' ownership and gives investors rights (board seats, voting, information). Typical valuation methods: discounted cash flow, comparable transactions, revenue/EBITDA multiples. Founders trade ownership for capital and expertise — earlier-stage investors typically take 15-25% per round. Equity is permanent capital — appropriate for risky early-stage businesses without consistent cash flow. Public companies access enormous equity capital pools but face quarterly earnings pressure and disclosure obligations.