Equity financing is a method of raising capital by selling shares of a company to investors. This allows businesses to obtain funds without incurring debt, as investors become part-owners of the company in exchange for their investment. The funds raised can be used for various purposes, such as expanding operations or developing new products. Investors in equity financing expect to earn a return on their investment through dividends or an increase in the value of their shares. This type of financing is common among startups and growing companies, as it provides necessary capital while sharing the risks and rewards with investors.