Equity financing definition
What is the definition of "equity financing"?
Equity financing is the conversion of ownership interest (i.e. stock -- common, preferred or an instrument convertible into stock) in a company for capital from investors. As opposed to debt financing which is collateralized by pledging assets of a company, equity financing is collateralized by the company itself. Early equity investors take higher risks for the possibility of a significant return if the company grows significantly and increases the value of the equity.
The earliest equity financing may come from those close to the founder (friends, family, suppliers, angel investors, etc.). Venture capitalists are the interim stage of equity investors prior to the ultimate, which is to make shares available by public offering.
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