Sharing is Caring, The Role of the Equity Partner

by Admin | August 11, 2021
Sharing is Caring, The Role of the Equity Partner

Why a company may need an Equity Partner?

In times of economic crisis, many companies and freelancers have had to close their doors and cease their work activity, however, positive things have also happened as the recession and lack of resources have been a springboard for entrepreneurship.

Due to the revolution of new technologies, most of the sectors we know are reinventing themselves and with this trend, innovative projects emerge that need to be financed without banks in order to develop.

This is where the figure of the "equity partner" comes into play.


What is the role of the Equity Partner?

Due to the economic crisis scenario, most banking institutions closed to granting credit. It was then when many companies were plunged into the chaos of the lack of liquidity, however new figures and financing opportunities arose, one of them is the equity partner.

An equity partner is an individual or legal entity that deposits its own funds in the capital of one or more companies, in order to obtain benefits and a certain control and information on the business model.

Nowadays, this figure can be confused with that of a Business Angel, since both contribute capital to an entrepreneurial initiative in exchange for, on the one hand, assuming a risk and, on the other, receiving future profits. However, business angels usually show a high degree of involvement in the projects on which they bet, and the capitalist partner may or may not do so.

Let us then analyze how an equity partner acts when it comes to investing its capital:

The person is the key

When investing in a business, beyond analyzing the sector in which it will operate, the most important thing is to look at the person or team of people who will carry it out. We must not forget that brands are a reflection of the individuals who make them possible, so it is essential to find out about the professional background of these people, their experience and knowledge of the business area to be undertaken.
Once we are clear about all these issues, we will be able to evaluate our decision of whether it will be a good idea to become their capitalist partner.


Investing with knowledge

Surely we all know cases of people who have invested all their savings in sectors of which they had little information, but at the time they bet on them, simply because someone told them that they were great investments because they were booming industries.

This is usually a serious mistake. It is essential before investing, to have some kind of experience and knowledge about the area in which we are going to invest our capital, and if we do not have it and we are still interested in the operation, we must be properly trained before making the final decision.


Active Equity Partner

Until not so long ago, the term of capitalist partner was related to the concept of passive rentier, that is to say, that person who deposited his capital in a certain business, without interacting with it and with the only objective of seeing his investment rewarded through benefits.

With the new times and the arrival of new technologies this has also changed. Most of today's capitalist partners are active, concerned and interested in the activity and development of the projects they are betting on, showing in some cases, high levels of involvement and sharing contacts, market expertise, specific knowledge, etc.

The Equity Partner is a great alternative for all those projects in need of liquidity that have been rejected by the traditional sources of financing.

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