Definition of Equity Financing
Equity financing is a method of raising capital for the company by selling the shares of it to the general public, financial institutions, or investment companies. People become shareholders after buying the shares and they own a certain percentage of the company for the profit purpose. Shareholders provide the much-needed money for the company's liquidity, survival, or expansion in exchange for ownership in the company. To raise equity financing, companies have to show their financial details in a prospect and also specify where they will spend the raised money.
Venture Capitalist (VC) are more likely to invest in start-ups & when any company goes public, they sell their shares at a premium price for profits.