Business and Finance solutions

When you need more funds than you can get with a simple loanwhen you want to raise really large amounts of money, typically in the tens or hundreds of thousands of dollarsyou need to consider equity funding. It’s called equity funding because you sell equity in your business in return for the funding dollars. The people or companies that buy shares of equity are called investors; they’re investing their money with the hope that their equity position will be worth more at a later date than it was when they purchased it.

When you take on investorsof any typeyou’re gaining partners. An investor buys a share of your business and thus has a lasting equity stake. Even though that equity stake can be small, it’s still therewhich means for every investor you add, the business adds a new co-owner.

The stake of the business that an investor purchases is called a share. Each share of your company’s stock that you sell is assigned a specific price; this price can vary for different types of investors and will vary over time. As long as your company is private, you set the value of your shares. Once your company goes public (and it doesn’t ever have to, of course), the value of the shares is set on the open market of a stock exchange.