Equity investment – some further considerations
- Raising equity investment can be costly, and equity finance decisions require significant management time. This may have to be diverted from the day-to-day running of the business.
- Potential investors scrutinise past results and forecasts of future performance and will investigate background information. This includes looking at the history and background of the management team.
- Equity investment will dilute the owner’s share in the business, and once new equity investment advantagesshareholders invest, management will have varying degrees of influence when making strategic decisions. This will depend on the nature of the shareholding, the perspective of the shareholders themselves, and the stake acquired.
- The management team should expect to invest their own time, so they can produce regular information for their investor or investors to monitor.
- Many legal and regulatory requirements apply when raising equity finance.
- There are more disclosure and governance requirements if a company raises capital from public markets.
- Crowdfunding investment is normally ‘fill or kill’. If a proposition is not properly researched and presented and does not hit its target, it receives no investment at all.
- Dividend payments are not deductible for tax purposes.
If you are interested in raising equity finance, our interactive tool can help you understand which equity investment options are most suited to your needs. Alternatively, if you already know which type of equity finance you are interested in, visit one of our partner sites for information and support.