Equity Financing is a way to raise capital by issuing shares of stock in a public offering.

Equity capital is composed of funds that are raised by a business in exchange for partial ownership in your company. This can be in the form of ownership of stock or items that convert into stock. In addition to taking an ownership interest in your company, equity investors may also act as a member of the company’s board of directors and take an active role in managing the company daily. However, in comparison to debt financing, which must be repaid over time, equity financing does not have to be repaid.

Equity capital can be raised from family or from friends. However, it is most often raised from high-net worth individuals investors, "Angel Investors" or from venture capital and private equity firms. Generally, both angels and venture capital firms are looking for: early stage companies that can’t yet obtain bank financing; a return on their investment of at least 30-40%; and a clear strategy to be able exit the investment within 3-7 years and obtain this return.