Funding with equity can sometimes be better suited than financing with other means, eg. bank loans, but it may require different things from you and your business.
The Key Benefits Of Equity Financing Are:
The funding is for your company and your specific projects. Investors only earn on their investment if your business is a good business. For example, they can do through stock sales or resale to other investors.
Resources for your business. The suitable venture capitalists can provide valuable skills, knowledge, contacts, and experience that they can pass on to your business, and help with strategic knowledge and key decisions.
Like yourself, investors have a great interest in making your business a success, for example. through growth, expansion, surplus and value added.
Investors are often ready to provide additional funding as your business grows.
The Key Disadvantages Of Financing With Equity Are:
It is demanding to raise equity. It costs money and takes a long time. You run the risk that your business will suffer. Possible investors will gather background knowledge about you and your business – they will thoroughly examine past performance and will try to uncover the future prospects of your business. At the same time, they will examine your key employees
Depending on the investor you get, you will experience a greater or lesser desire to influence the management of your business and on larger decisions.
You need to prepare yourself to spend time getting up-to-date information for your investor – information that he can monitor and relate to.
The part of your business that you own will be reduced. But in return, it may be that your share increases in value as the financing makes your business worth more.