Equity funding is a method of raising capital by selling shares of a company to investors. This allows businesses to obtain necessary funds without incurring debt. Investors who purchase these shares become partial owners of the company and may benefit from its growth and profits. In exchange for their investment, equity investors often expect a return through dividends or an increase in the value of their shares. This type of funding is commonly used by startups and growing companies, as it provides access to resources while sharing the financial risk with investors.