This form of raising money for a business essentially means that an investor is buying part of the business.
Equity – When an investment is made, the investor acquires equity which is sometimes in the form of a shareholding. Both are known as having ‘equity’ in the business. Equity appears on the company’s balance sheet. When assessing how much equity the investor receives for the investment, an assessment is made of the company’s worth, including the assets together with intangible items such as branding, and reputation/ goodwill.
As the value of the business increases or depreciates, the value of the equity does too.
Seed Capital – This term is used when an investment is made at the startup of a company and is often made by the founders of the company to support the business until it can generate its own cashflow.
When an external investor contributes Seed Capital, there is much less information available to base the decision on, compared to an established business. Therefore there is more risk associated with making this type of investment. To balance this risk, and entice the investor, often more equity is offered to seed investors.
Iconic has a wide and varied list of investors. To see if you business qualifies for an equity investment contact us today on 1300 118 556