Funding a New Business For Dummies

Chapter 7

Sharing the Pie: Equity Funding Explained

IN THIS CHAPTER

Defining equity funding

Knowing what equity funding means for ownership

Prospecting for equity funding sources

Understanding dilution and the valuation of your new business

When you’re on a road trip and you have people riding with you, you may want to have them chip in to help with expenses like fuel for the car. In your business, the idea of equity is simple: In return for the money your company requires, you give investors a piece of the ownership pie.

There are plenty of benefits to this arrangement:

• Money, which we think we can agree is good.
• Priceless knowledge from your equity partners, which is also good.
• The contacts your equity partners have that can help your business.
• The possibility of mentorship from your equity partners as you grow your business.

But if you’ve read any other chapter in this book, you know that it’s not all roads with smooth asphalt and clear weather. So, this chapter takes you on the full tour of equity funding including what it is, what it means for your ownership, and examines ...