Reaching Higher Capital Amounts equates to taking on an Equity Partner

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Equity (dilutive) funding sources
Equity funding sources often include angel investors, venture capitalists, and equity investors. One of the most common forms of dilutive funding is equity funding, where investors contribute capital in exchange for company stock shares. This stock can be in the form of common shares or preferred shares.
 

When a company needs to raise capital to fund its operations, expansion plans, or other initiatives, it often seeks external funding from investors. These investors may be venture capitalists, angel investors, or even individuals who believe in the potential of the company. In exchange for their investment, these investors typically receive shares of the company's common stock.
 

What is equity dilution?

Equity dilution is a term that often comes up in the world of business and finance, particularly when discussing funding and investment. Simply put, equity dilution refers to the reduction of existing shareholders' ownership percentage in a company due to the issuance of additional shares. This reduction, in turn, leads to diluted earnings.
 

The problem arises when a company raises new capital by issuing additional shares. These new shares dilute the ownership of existing shareholders because they now hold a smaller percentage of the total shares outstanding. This decrease in ownership percentage reduces their control over the decision-making process and potential financial rewards.

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We measure equity dilution using various metrics, including earnings per share (EPS), outstanding shares, and price per share. The EPS represents the company's profit divided by the total number of outstanding shares. As more shares are issued, EPS may decrease, affecting the perceived value of the company.
 

Outstanding shares refer to a company's stock currently held by all its shareholders, including insiders. These owners include officers and directors as well as outsiders. It excludes treasury shares bought back by the company. Outstanding shares are sometimes called "issued and outstanding shares."
 

Price per share is the cost of a single share of a security, such as a stock, mutual fund, or bond. We express it in currency units such as a dollar amount. Price per share is used to calculate the total cost of ownership of a security. It also expresses the potential profits or losses that may result from investing in it. Learn more

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