Most small or growth-stage
businesses use equity financing in a limited way. As with debt
financing, most of the time additional equity comes from non-professional
investors such as friends, relatives, employees, customers or industry
colleagues.
However, the most common source of professional equity funding
is that group of investors known as venture capitalists. Venture
capitalists are institutional risk takers and may be groups of wealthy
individuals, government-assisted sources or major financial institutions.
Most specialize in one or a few closely related industries. The
high tech industry of California's Silicon
Valley offers many shining examples of capitalist investing.
While public perception of venture capitalists may be of deep-pocketed
financial gurus looking for "that hot new business" in
which to invest their money, in reality they most often prefer three-to-five-year
old companies that offer the potential to become major regional
or national concerns and return higher-than-average profits to their
shareholders.
Venture capitalists may scrutinize thousands of potential investments
annually, while investing ultimately in only a handful.
Learn more about SBA.s equity capital programs.
Small Business Investment
Companies
http://www.sba.gov/INV/
New Markets Venture Capital
Program
http://www.sba.gov/INV/NMVC/index.html |