Background

Equity Sources Venn Diagram

Our Equity Venn Diagram maps out, in general terms, where different types of equity investment might be appropriate in a business life cycle.  

 

When a business receives equity investment, the following transactions take place:  

  • The business owners sell a portion of shares in the business to a third party (the investor)

  • In return for the shares, the business receives a sum of cash

  • The cash investment is not repayable, and interest is generally noy charged on it, which is the major advantage ‘investment’ has vis a vis debt.

  • The investor retains the shares with the plan of selling them in the future when they hope they will have increased in value, and could possibly receive dividends on their shareholding, if available through profits.  

AMOUNT
RAISED
£££££

AMOUNT RAISED
£

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IDEA
(CONCEPT)

PRE-SALES
(PRE-SEED)

PRE-PROFIT
(SEED)

SMALL PROFIT
(SERIES A)

PROFITABLE & GROWING (B/C)

ESTABLISHED / MATURE
(EXIT)

PLEASE NOTE:

This document is intended to be an aide-mémoire to help you consider different forms of finance and which ones might be appropriate for your business; it is not a comprehensive guide to all forms of finance. There could be different tax and legal implications associated with different forms of finance. Professional tax and legal advice should be sought to prepare for these different forms of finance.