2. Crowdfunding platforms
Crowdfunding platforms allow many people in the public to invest in the company in small amounts. Members of the public decide to invest in the companies because they believe in their ideas and hope to earn their money back with returns in the future. The contributions from the public are summed up to reach a target total.

1. Angel investors
Angel investors are rich people who buy stakes in businesses they believe have a potential to give higher returns in the future. The individuals usually bring their business skills, experience, and connections to the table, which helps the company in the long term.

Equity financing is especially important during a company's startup stage to finance plant assets and initial operating expenses. Investors make gains by receiving dividends or when their shares increase in price.
Major Sources of Equity Financing
When the firm is still private, equity finance can be raised from angel investors, crowdfunding platforms, venture capital firms, or corporate investors. Finally, shares are sold to the public as an IPO

After all, if equity financing can be effective for growth, then its valuation impact will only depend upon how well the company employs the capital, manages the investor relations, and brings the short-term pressures in concert with the long-term vision.

However, the drawbacks are the dilution of ownership, potential misalignment of goals with investors, and pressure to meet market expectations. The valuation set during an equity financing round also has long-term implications because either inflated or conservative valuations will affect future fundraising efforts and business strategy. Other external factors like market conditions and investor sentiment can be very crucial in determining the impact of equity financing on valuation.

Equity financing can impact business valuation significantly, providing both opportunities and challenges. On the positive side, it can strengthen a company's balance sheet, reduce financial risk, and provide capital for growth, which can lead to a higher valuation, especially in high-growth sectors. The involvement of strategic investors can also add value beyond just the capital raised, further enhancing the company's prospects.

Compared to debt, equity investments offer no tax shield. Dividends distributed to shareholders are not tax-deductible expenses, but interest payments are tax-deductible. It adds to the cost of equity financing.
In the long term, equity financing is considered a more expensive form of finance compared to debt. That is because investors demand a higher return than lenders do. Investors have a high risk when funding a company, and thus demand a higher return.

Many venture capitalists demand an equity stake of 30%-50%, particularly in cases where the company lacks a strong financial background. Most company founders and owners are reluctant to dilute that amount of corporate power, which reduces their alternatives for equity financing.

Disadvantages of Equity Financing
1. Dilution of ownership and operational control
The main disadvantage to equity financing is that company owners must give up a portion of their ownership and dilute their control. If the company becomes profitable and successful in the future, a certain percentage of company profits must also be given to shareholders in the form of dividends.

Their successful backgrounds enable them to provide priceless help in the form of business contacts, management experience, and access to other sources of capital. Many angel investors or venture capitalists will help companies in this way. It is critical in the startup stage of a company.

2. Access to business contacts, management expertise, and other sources of capital
Company management receives some benefits from equity financing too. Some investors are interested in the working of the business in which they invest and individually interested in being part of it toward its development.

Investors usually look at the long term without expecting a short-term return on their investment. It enables the company to reinvest the cash flow from its operations to grow the business rather than focusing on debt repayment and interest.