Equity finance
Equity finance: raising money by selling shares in your business
Equity finance means selling part of your company to investors in return for their money. You don’t make loan repayments, but you give up a share of ownership and future value, and investors usually expect a say and a way to get their money back one day. This guide explains how it works, who invests at each stage, what investors look for and how to get ready.
Wize Finance can help businesses explore equity finance and, where appropriate, connect them with an equity or investor-matching route. Wize Finance isn’t an investor and doesn’t give investment advice.
Share how much you want to raise and where the business is now. The team reviews your enquiry and discusses whether an equity route may be appropriate.
How equity finance works
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You sell new shares. Investors put money into the company and receive shares. Existing shareholders’ percentage stakes get smaller. This is called dilution.
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The price depends on the valuation. How much of the company an investment buys depends on the value agreed with investors, and that’s a negotiation.
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Investors usually raise in rounds. Companies often raise in stages as they grow, from early “pre-seed” and “seed” rounds to later “Series A”, “Series B” and growth rounds.
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Terms matter as much as the money. Investment comes with a shareholders’ agreement and updated articles, which can give investors rights over reporting, board seats and major decisions.
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Investors expect a return. Most equity investors make money when they sell their shares, for example when the company is sold or listed. That’s often called the exit.
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Control depends on the terms. Selling shares doesn’t have to mean giving up control. Many investors take a minority stake, but they may still ask for rights over key decisions.
Who tends to invest at each stage
Investors specialise. Who you approach usually depends on how far the business has got.
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Stage 1: Pre-seed
- What the business often looks like
- An idea or early product; often before a minimum viable product
- Who tends to invest
- Founders, friends and family, sometimes angel investors
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Stage 3: Series A
- What the business often looks like
- A working product with market traction and a credible plan to scale
- Who tends to invest
- Venture capital firms, larger angels or “super angels”, sometimes institutional investors
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Stage 4: Series B and growth
- What the business often looks like
- A proven model with strong growth, expanding into new markets or products
- Who tends to invest
- Venture capital or private equity; sometimes corporate investors in later rounds
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Stage 5: Mature business
- What the business often looks like
- Established, often looking at the next stage of growth, a change of ownership or an acquisition
- Who tends to invest
- Private equity
Seed and early-stage investment
Early-stage investment helps a business move from an idea to a going concern: building and testing the product, finding first customers and hiring the core team.
If you’re also weighing up borrowing at the start, see Startup Business Loans.
- Pre-seed money often comes from founders, friends and family, and sometimes angels, before there’s a finished product.
- Seed rounds are typically led by angel investors, early-stage funds or incubators. Some companies use equity crowdfunding.
- At this stage, investors are mostly backing the team and the idea. If you don’t yet have revenue, expect to show proof of concept, such as a working product, evidence of demand or protected intellectual property.
- Some early-stage investors may be able to claim tax relief through SEIS, if the company qualifies. See UK programmes and investor tax schemes.
Angel investment
Angel investors are individuals, often experienced entrepreneurs, who invest their own money in early-stage businesses, usually in return for a minority stake.
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What they tend to look for: a strong founder and team, a business that can grow quickly, and a clear route to a return.
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What they can bring: besides money, many angels offer experience, contacts and mentoring.
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How they invest: on their own, or together through angel networks and syndicates, which pool deals and sometimes share the due diligence.
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How founders find them: through introductions, angel networks, accelerators and pitching events. The UK Business Angels Association is the trade body for angel and early-stage investment, and publishes funding guides for entrepreneurs ↗.
Venture capital
Venture capital (VC) firms invest money raised from institutions, such as pension funds, into young companies with the potential to grow very fast.
- What they tend to look for: rapid growth, a large market, a clear competitive edge and, increasingly, real traction such as revenue and customers.
- What they usually expect: a meaningful stake, a board seat or board influence, regular reporting, and an exit that returns their fund’s money.
- How deals usually start: often through a warm introduction from someone the fund trusts. Arrive fully prepared.
- Corporate venture capital (CVC) is investment from large companies, usually in smaller firms in a related industry. Alongside a return, they’re often looking for a strategic benefit, such as technology or market insight.
Raising VC can take time, and legal costs may arise whether or not the round completes.
It helps to know that before you start. We can talk through where your business is now and whether equity, borrowing or both may be worth exploring.
Growth investment
Growth investment (sometimes called growth equity, growth capital or expansion capital) is for established businesses with a proven model that need capital to expand, for example to enter new markets, launch new products, or make an acquisition.
Growing fast but with steady cash flow? Borrowing may also be worth comparing: see When borrowing may suit better.
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Who provides it: later-stage venture funds, growth investors, private equity firms and some corporate investors.
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What they tend to look for: a track record of revenue growth, solid financial reporting, a credible growth plan and a capable management team.
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What they usually expect: often a minority stake with a board seat, close review of your financials and plans, and an exit in the medium term.
Private equity
Private equity (PE) firms invest in mature, usually profitable businesses. Unlike most angels and VCs, they often buy a majority stake, frequently using borrowed money as part of the deal, and aim to grow the business and sell it or list it after several years.
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PE is usually about ownership change, for example a founder selling up, a management buyout or a buy-and-build strategy, rather than funding a start-up.
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Approaches often come from the investor or through corporate finance advisers. If you approach a firm yourself, take independent advice first.
Buying a business or planning a management buyout? See Acquisition Finance.
Equity crowdfunding and strategic investors
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Equity crowdfunding means raising money from many members of the public through an online platform, in exchange for shares. Investment-based crowdfunding is regulated by the Financial Conduct Authority, so check that any platform is authorised. It can suit consumer-facing businesses with a loyal customer base.
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Strategic investors are companies, rather than funds, that invest because your business fits their own plans, such as a supplier, customer or larger company in your sector. They can bring distribution and expertise, but their goals may not always match yours.
What you give up with equity
Equity has no repayment schedule, but it isn’t free. Before you raise, weigh up:
Investor readiness: what investors commonly look at
Different investors weight these differently, and none of them guarantees investment, but most will want to understand:
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Team: experience, skills, commitment, and whether you’ll take advice
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Market: how big it is, how fast it’s growing and who else is competing
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Product: what problem it solves, and proof that customers want it
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Traction: sales, customers, growth and other evidence that it’s working
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Business model: how you make money, and how that scales
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Financials: your forecasts and the assumptions behind them
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Use of funds: exactly what the investment will pay for and what it will achieve
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Ownership: who owns what today (your cap table) and any existing investor rights
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Fit and exit: whether your stage, sector and ambitions match theirs, and how they might eventually get a return
Preparing and pitching for investment
Not every investor wants a full business plan, but they will want to understand the assumptions behind your numbers.UK Private Capital (formerly the BVCA) publishes model documents for Series A rounds ↗, including a term sheet, as guidance for entrepreneurs.
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Get your numbers straight. Prepare a sales forecast, a profit and loss forecast and a cash flow forecast, and be ready to explain the assumptions behind them.
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Research your investors. Look for investors who back your sector, stage and location, and find out how they like to be approached. A warm introduction often helps.
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Build your pitch. A pitch deck usually covers the problem you solve, your product and customers, your market, business model, traction, competitors, team, financials and how you’ll use the money. Keep the version you present short and visual. Make the version you send ahead clear enough to read without you.
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Tell the story. Investors back people and a vision as well as numbers. Explain why you, why now and where the business could go.
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Prepare for due diligence and terms. Keep company documents, contracts, accounts and your cap table organised. If an investor makes an offer, it’s usually set out in a term sheet before the legal documents. Take legal and financial advice before you sign.
UK programmes and investor tax schemes
Government-backed equity programmes. The British Business Bank runs equity programmes that mostly invest alongside private investors or through fund managers. Examples include the Angel CoFund and the Regional Angels Programme, which co-invest with angel investors, and the Nations and Regions Investment Funds. See the British Business Bank’s equity finance page ↗ for what’s currently available.
Looking for government-backed borrowing instead? See Government Business Loans. Funding you don’t repay or give shares for: Business Grants.
SEIS and EIS. The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) give tax relief to individual investors who buy new shares in qualifying companies. The relief goes to the investor, not to the company. Whether your company and share issue qualify depends on detailed rules, which the company must keep to for at least three years. You can ask HMRC for advance assurance before you raise. Read the HMRC guidance and take professional advice. Wize Finance doesn’t give tax advice.
When borrowing may suit better
Equity isn’t the only way to fund growth. If your business is trading, has predictable cash flow and wants to keep full ownership, borrowing may be worth comparing first. You keep your shares, and the cost is set out in the agreement.
Prefer to keep full ownership? Wize Finance can help your business see which types of business finance may suit it.
Related: Business Loans · Large Business Loans
Equity finance FAQs
What is equity finance?
It’s raising money by selling shares in your company to investors. Instead of repaying a loan, you give investors part-ownership and a share of the company’s future value.
What’s the difference between equity and debt finance?
With debt, you borrow money and repay it with interest, and you keep ownership. With equity, you don’t make repayments, but you give up a share of the business and usually some say over how it’s run.
Do I lose control of my business if I take equity investment?
Not necessarily. Many investors take a minority stake. But they may ask for a board seat or a say in major decisions, so control depends on the terms you agree.
What do angel investors look for?
Usually a strong founder and team, a business that can grow fast, and a clear route to a return. Without revenue yet, expect to show proof of concept, such as a working product or evidence of demand.
What’s the difference between seed funding and Series A?
Seed funding helps turn an idea into a working business, and often comes from angels or early-stage funds. Series A usually comes later, once there’s a product with traction and a plan to scale, and is often led by venture capital.
Is equity finance only for start-ups?
No. Growth investors and private equity firms invest in established businesses, for example to fund expansion or a change of ownership.
How much of my business will I have to give away?
It depends on the valuation and terms you negotiate, so there’s no standard answer. Take independent advice before agreeing to a deal.
What are SEIS and EIS?
They’re government schemes that give tax relief to individuals who invest in qualifying companies. The rules are detailed, so check HMRC’s guidance and take professional advice.
Can Wize Finance introduce me to investors?
Wize Finance can help businesses explore equity finance and, where appropriate, connect them with an equity or investor-matching route. After you submit your details, the Wize Finance team reviews your enquiry and contacts you to discuss your funding needs and next steps, including whether that route is appropriate. Wize Finance isn’t an investor, doesn’t give investment advice and can’t guarantee investment or an investor match. If borrowing could also suit your business, you can start a business finance enquiry with us.
Ready to raise, or rather borrow?
If equity is right for you, start with your numbers, your pitch and investors who fit your stage and sector.
You don’t need to know which type of funding is right before you enquire. Tell us what you’re trying to achieve, and Wize Finance will review your circumstances, discuss the options with you and, where appropriate, connect you with a suitable funding provider.
Last checked 26 October 2026.