Equity financing is a way for a startup to raise funds. It means that the company is willing to sell part of its ownership, or stocks, to interested individuals or groups in exchange for money. It provides a way for investors to gain ownership interests in the venture. At the same time, the startup gets an infusion of funds without getting into debt.

For example, let’s say your best friend wants to start a coffee shop business but only has half of the money to get started. He offers you partial ownership of the company in exchange for shouldering the other half of the expenses.

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