Equity finance is the process of raising capital through sales of shares. Both public and private companies raise money for short term needs. Equity financing can come from friends, family, professional investors or an initial public offerings(IPO).
It basically involves the selling of equity instruments such as different types of preferred stock and equity units and warrants. The startup that grows into successful company will have several rounds of equity financing. Equity finance are often used by startups but companies which have risky business, some business looking to manage debt, established SMEs looking to expand.
Sources of Equity finance are:-
• Venture capitalist/private equity
It is the first large investment that a startup or nay company can expect to receive. The investor and the company or the startup will normally enter into a non-binding offer based on the preliminary valuation of the company usually followed with a financial, legal and technical due diligence on the company as required by the investors.