How to Raise Equity

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Raising equity to finance the growing needs of a business can be accomplished by soliciting investors through public and private equity offerings. Equity capital is a method of raising funds for a businesses' long-term growth, in exchange for an equity stake in the company in the form of share capital. Private equity offerings are usually made to high net worth individuals, referred to as angle investors, family members and friends who want to become partial owners in the business. Public equity offerings are usually issued to investors in the form of an initial public offering, referred to as an IPO.

Things You'll Need

  • Business plan
  • Write a business plan. Describe the type of business you have and why you need an equity investment to grow. Support your request for funding with your business's financial information obtained from the prior three to five years of business operations. Provide your businesses' projected future sales and earnings estimates for the next five years.

  • Solicit equity offerings from prospective investors. Start-up businesses with little or no prior history should solicit equity investments from family, friends, and angle investors. An established business with a solid and proven business track record may solicit -- after consulting with its attorney and accountant -- investments from venture capital and private equity firms. Start up-businesses and established businesses can begin their search for equity investors online by visiting Businessfinance.com.

  • Enter into an equity investor agreement with your investor. Define the terms of your sale to your equity investor. Include in the agreement all things your equity investor will be receiving as an investor in your business including but not limited to such items as business assets, customer lists, intellectual property and goodwill. Your investor agreement might also include any restrictions on your equity investor's ability to sell his share of the business. Review the investment agreement with your attorney before you commit to the terms.

References

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