Which funding option typically involves the investor taking a stake in the company in exchange for funding?

Which funding option typically involves the investor taking a stake in the company in exchange for funding?

• A. Investor
• B. Bootstrapping
• C. Crowdfunding
• D. SBA loans

Answer: (A)

Equity financing is the idea here: an external investor provides capital in exchange for an ownership stake in the company. That stake means the investor becomes a part-owner and may gain rights like a share of profits or a say in governance. This is different from debt funding, where money is borrowed and must be repaid without giving up ownership, or from bootstrapping, which uses the founder’s own funds, and from typical crowdfunding, which often involves rewards or donations rather than taking equity. So the option described—funding in exchange for an ownership stake—matches the concept of an investor providing capital for equity in the business.

Equity financing is the idea here: an external investor provides capital in exchange for an ownership stake in the company. That stake means the investor becomes a part-owner and may gain rights like a share of profits or a say in governance. This is different from debt funding, where money is borrowed and must be repaid without giving up ownership, or from bootstrapping, which uses the founder’s own funds, and from typical crowdfunding, which often involves rewards or donations rather than taking equity. So the option described—funding in exchange for an ownership stake—matches the concept of an investor providing capital for equity in the business.