Equity investment: Why not all capital is created equal
At Azets, our corporate finance team is active across a wide range of transactions, with capital raising currently one of the most in-demand services we provide. Yet, amid increasing interest from business owners, a consistent theme arises in our conversations with clients, prospects, and fellow professionals: there remains a significant lack of understanding around what a successful equity raise truly involves, and the differences between various forms of investment.
One of the most misunderstood areas is equity investment. If we had to distil the message into a single sentence, it would be: not all equity investment is the same.
The source of capital alone can dramatically influence what the funds can be used for, the level of control retained, and the type of relationship a founder or management team will have with their investors. Angel investors, venture capitalists, and private equity firms may all provide equity funding, but the differences between them - and even within these categories - are substantial.
For example:
- Some investors will only consider minority stakes, while others insist on majority control.
- Certain investors allow for an element of cash out for founders, while others strictly require all funds to go into the business.
- Many have sector, geographic, or ticket-size restrictions.
- Some are focused on long-term value creation, others on shorter-term returns.
- The investment instruments used can vary - from ordinary shares to preference shares, convertible loan notes, or more complex hybrids.
These nuances will significantly affect who might be interested in your business, the terms they’ll offer, and how they’ll engage with you post-investment. A mismatch in expectations, objectives, or deal structure can quickly derail an otherwise promising raise.
Plan, prepare, and partner wisely
Equity raising is rarely quick, and never something to rush. If someone promises to close in just a few weeks, be cautious - ask whether they really can, whether they truly will, and if they are, whether the deal is overly skewed in their favour.
Our advice is simple: speak to people who understand this landscape. The right adviser doesn’t just connect you with capital - they ensure you’re aligned with the right type of investor, on the right terms, and with the right long-term fit. A good adviser can turn a "no" into a "yes" and help you avoid critical missteps along the way.
We’re here to help
At Azets, we have over 100 deal professionals across the UK and Europe who live and breathe these transactions. If you're considering an equity raise - or simply want to explore your options - we’d be delighted to help. Reach out to our specialist Corporate Finance advisers via the form below.
