Fundrising & Investment

Fundraising is the process of seeking and gathering voluntary financial contributions by engaging individuals, businesses, charitable foundations, or governmental agencies. Traditionally, fundraising has consisted mostly of asking for donations through face-to-face fundraising, such as door-knocking. In recent years, though, new forms such as online fundraising or reformed version of grassroots fundraising have emerged.

Equity financing is the process of raising capital through the sale of shares. Companies raise money because they might have a short-term need to pay bills, or they might have a long-term goal and require funds to invest in their growth. By selling shares, a company is effectively selling ownership in their company in return for cash.

Equity financing comes from many sources: for example, an entrepreneur's friends and family, investors, or an initial public offering (IPO). An IPO is a process that private companies undergo in order to offer shares of their business to the public in a new stock issuance. Public share issuance allows a company to raise capital from public investors. Industry giants, such as Google and Facebook, raised billions in capital through IPOs.

Debt financing occurs when a firm raises money for working capital or capital expenditures by selling debt instruments to individuals and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise that the principal and interest on the debt will be repaid.

When a company needs money, there are three ways to obtain financing: sell equity, take on debt, or use some hybrid of the two. Equity represents an ownership stake in the company. It gives the shareholder a claim on future earnings, but it does not need to be paid back. If the company goes bankrupt, equity holders are the last in line to receive money.

A company can choose debt financing, which entails selling fixed income products, such as bonds, bills, or notes, to investors to obtain the capital needed to grow and expand its operations. When a company issues a bond, the investors that purchase the bond are lenders who are either retail or institutional investors that provide the company with debt financing. The amount of the investment loan—also known as the principal—must be paid back at some agreed date in the future. If the company goes bankrupt, lenders have a higher claim on any liquidated assets than shareholders.

• Debt financing occurs when a company raises money by selling debt instruments to investors.
• Debt financing is the opposite of equity financing, which entails issuing stock to raise money.
• Debt financing occurs when a firm sells fixed income products, such as bonds, bills, or notes.
• Unlike equity financing where the lenders receive stock, debt financing must be paid back.
• Small and new companies, especially, rely on debt financing to buy resources that will facilitate growth.

Investment vehicles refer to any method by which individuals or businesses can invest and, ideally, grow their money. There is a wide variety of investment vehicles, and many investors choose to hold at least several types in their portfolios. Holding different types of investment in a portfolio minimizes risk through diversification because a portfolio constructed of different types of assets will, on average, yield higher long-term returns.

The different types of investment are subject to regulation in the jurisdiction in which they are provided. Each type has its own risks and rewards. Deciding which vehicles fit particular portfolios depends on the investor's knowledge of the market, skills in financial investing, risk tolerance, financial goals, and current financial standing.

Multiple investors often pool their money to gain certain advantages they would not have as individual investors; this is known as a pooled investment vehicle and can take the form of mutual funds, pension funds, private funds, unit investment trusts (UITs), and hedge funds.

• Investment vehicles are used by investors to gain positive returns on their money.
• Investment vehicles can be low risk, such as CDs or bonds, or high risk such as options and futures.
• Other investment vehicles include lending investments, such as bonds, CDs, and TIPS; cash equivalents; and pooled investments, such as pension plans and hedge funds.