Types of Equity Financing and Private Equity

1. Early Stage Financing

Seed Financing – A relatively small amount of capital provided to an inventor or entrepreneur to prove a concept, qualify for start-up capital, product development, market research, build a management team or develop a business plan.
Research and Development Financing – An opportunity to finance product development for either start-up or existing companies. If successful, investors take a share of the profits.
Start-Up Financing – Usually for businesses that have already done market research, assembled key management, developed a business plan but haven’t sold their product commercially. They need finance to complete product development and initial marketing.
First-Stage Financing – Companies that have already developed and market tested a prototype, but need more funds to initiate full-scale manufacturing and sales.

2. Expansion Financing

Second-Stage Financing – Providing funds for the initial expansion of a company who are producing and shipping a product and have growing accounts receivable and inventories, but may not yet be showing a profit.
Third-Stage (or Mezzanine) Financing – Providing funds for the major expansion of a company who are making a profit or just breaking even and have increasing sales. This will go towards further plant expansion, marketing, working capital or development of an improved product.
Bridge Financing – This could be needed when a company plans to go public within a year. Often funds are structured so they can be repaid from the proceeds of a public offering (IPO). This can also involve the restructuring of major stockholder positions through secondary transactions. This is done if there are early investors who want to reduce or liquidate their positions, or if management has changed and the stockholdings of the former management and their relatives and associates are being bought out to relieve a potential oversupply of stock when public.
Take Off (Venture Strategy) – A venture strategy where a variety of venture stages of development are invested in or there is no stated venture focus.

3. Later Stage investment (Equity Capital)

Acquisition Financing – Providing funds to finance an acquisition of another company.
Management/Leverage Buyout – Providing funds for an operating management group to purchase a product line or business from either a public or private company. They could be at any stage of development and will usually involve revitalizing the operation with entrepreneurial management.
Industry Rollups – Providing funds to finance the acquisition of a company within the same industry category.
Control-Block Purchases – An investment where you acquire more than 50% of the company’s shares.

Other Financings

Generalist Equity Financing – Either a stated focus of investing in all stages of Equity Financinginvestment (not just venture) or a fund considered to be generalist by its investment record when it has no investment focus.
Fund of Funds – A direct investment consisting of investments in other Equity Financingfunds.
Recapitalisation – Providing finance for turnaround situations, particularly for distressed companies.
Private Placement Financing – Privately acquiring shares of publicly traded companies, rather than acquiring them on the open stock market.
Distressed Debt Financing – Investing in the debt of a company that is financially stressed.
Turnaround Financing – Investing in a company experiencing financial or operational trouble to try and improve its performance.