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What is Equity Investment?

Definition and meaning of Equity Investment:

An equity investment (or equity financing) is when someone gets a company’s part in exchange for capital. For example, venture capitalists(VCs) invest in startups to get a part of the business. VCs get a percentage of the company’s assets and profits.

Equity investors usually invest in businesses they believe have strong growth potential. So they can sell their shares at a higher valuation later or get dividends as the company makes profits.

Startups usually exchange equity for the capital they need to grow. But, sometimes, they do it for other reasons, like gaining a partner. That partner can help them succeed with their expertise or connections.

Examples of equity investors:

  • Angel investors
  • Private investors
  • Venture capitalists
  • Private equity firms

Examples of equity investments:

Pre-seed funding focuses on getting a business idea started.

Seed funding focuses on building a prototype or an MVP and getting the first traction from early adopters.

Series A focuses on initial marketing and first sales.

Series B focuses on aggressive growth and scaling.

Series C focuses on expanding into new markets, doing IPO, or acquiring another company.


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