Raising start-up capital may require giving up a portion of your business to private investors, called "angels." Such money is called equity capital. Equity financing means dividing your business ownership among investors who contribute capital but may or may not participate in the operation of the business. There aren't any loans associated with equity capital, and there isn't any legal obligation placed on you to pay back the amount invested. All the investor gets is a percentage of the business, and the losses or profits associated with it.
Excerpted from Starting a Home-Based Business