Equity

Equity is the most common financing approach, where a startup offers shares (percentages of ownership in the company) in exchange for cash, allowing them to raise capital for growth purposes. And a way of acquiring the money needed to scale the business is by selling shares, effectively selling ownership in the company, for cash. Equity financing can come from day-to-day investors, the three Fs (family, friends and fools), angel investors, VCs or an IPO (initial public offering).

Consider an investor acquiring 10,000 shares (1% equity) of a publicly traded company with 1,000,000 total shares. This investment grants them a proportional claim on the company's assets and earnings. The value of their equity may rise with company growth, and they may receive dividends. As shareholders, they can exercise voting rights during key events, reflecting an active interest in the company's success.