Equity refers to money invested by a third party in exchange for ownership in your business. The investor will be repaid and earn a return through any of the following methods:
Investors willing to make equity investments in early-stage technology businesses typically seek higher investment returns than those earned by lending money to businesses and investing in mutual funds or specific publicly-traded shares in technology businesses. Keep in mind that the presence of these third-party investors will dilute (make smaller) your ownership position in a business and that many outside investors willing to fund early-stage businesses want to take a more active and involved role in your business.
Regardless of the stage of funding, when issuing shares to investors, you must comply with applicable securities laws in your province, so ensure you get advice from legal counsel.
The Government of Canada’s Sources of Financing Database supplies a comprehensive list by specific geographic region of all organizations that provide financing of all types. It offers a valuable resource for entrepreneurs considering financing alternatives and trying to identify potential investors for their business.
Canadian Bankers’ Association. Retrieved April 9, 2009, from http://www.cba.ca/lang.php.
Canada Business Services for Entrepreneurs. Retrieved April 7, 2009, from www.canadabusiness.ca.