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Risk capital and venture capital market

Author: Anonymous From: www.yourpaper.net Posted: 2007-11-21 17:42:56 Read:
Venture Capital is the equity financing of small and medium-sized high-tech enterprises in the start-up and growth stage or innovative enterprises or similar to the equity financing of the capital, and its characteristics are responsible for high risk the cost of chasing high returns. Domestic VentureCapital translated as "risk capital", China, Taiwan, Hong Kong, and Singapore and other Chinese regions will be translated into "venture capital", domestic academia disputed this. But whether it is a "venture capital" or "venture capital", the connotation of the expression is the same as the name of the "risk capital" for the domestic public generally adopted, this article anyway follow.
A venture capital operation mechanism
Venture capital unmediated, unorganized private direct investment capital and intermediary, organized indirect investment capital (venture capital funds). The operation of the venture capital process is divided into the financing process, the process of investment and exit process. For venture capital funds, the financing process is the process of venture capitalists to raise funds to institutional investors and wealthy families or individuals. Personal charm of the degree of difficulty of this process depends on the venture capitalists and the socio-economic environment as well as government policies and regulations for private venture capital financing depends on the investor's own financial strength and investment projects of interest and judgment . The investment process consists of three stages: (1) to investment projects and screening, the investment project assessment, the cooperation agreement signed. (2) inject innovation and enterprise, venture capital injection amount and injection is determined according to the different periods of innovation and business growth (ie the seed stage, the creation period, extended period of maturity). (3) the venture capitalists involved in the operation and management of the investment in innovative enterprises. The recovery process is the last stop of the operation of the venture capital and venture capital to sell shares of the enterprises to withdraw from the enterprise to recover the funds plus a huge profit, and brilliant performance and success of word-of-mouth, and then proceed to the next round of financing and investment. As can be seen from the operation mechanism of the venture capital financing is the starting point of the venture capital investment is the essence of venture capital, the exit end of a full investment cycle.
Venture capital exit is risk capital to risk-averse, to recover the investment and get the key to revenue. Obtain return on investment in the form of risk capital is capital appreciation, the continuous cycle of movement is the lifeblood of the risk capital. Therefore, when the venture capital stage venture has the most risk is associated with the exports allowed to exit and enter the next cycle. Otherwise, the venture capital sluggish, not add value, and rolling development and more unable to invest in new projects, venture capital loses its meaning. Venture capitalists do not invest in innovative enterprises to achieve long-term control of the enterprise for the purpose, after a number of years, regardless of the innovative enterprise success or failure in venture capital will exit from innovative companies. Out of the way under-invested enterprises operating conditions and external financial environment is different. Common for the stock market, equity transfer or share buyback, bankruptcy liquidation. The stock listing is the best out of the way, the flowing of marine crab capitalism unloading?
First of all, the stock market, especially initial public offerings (InitialPublicOf fering, IPO) to provide an option for innovation and enterprise managers. It is a call option contracts on corporate control over the investment contract signed by the venture capitalists and innovative business managers, allowing innovation and enterprise managers to achieve a certain performance targets, to repurchase shares held by venture capitalists to increase innovative business managers own equity share. Especially when venture capitalists wishing to sell its equity interest to a third party, Call options allow innovative business managers priority to buy the same conditions, the same price to the venture capitalists. Therefore, as long as the career progressed smoothly, the allocation of residual control rights to favor innovation and enterprise managers the direction of tilt. Otherwise, when the descending innovative business risks, and income from small to big, venture capitalists innovative enterprise services gradually reduced. The innovative enterprise managers bear the full cost of the effort, if you only get part of the return, he is bound to increase in-service consumer or enterprise efficiency cardiopulmonary bypass. Therefore, the control rights should be innovative enterprise managers tilt. U.S. venture capitalists generally within one year after the initial public offering, a decrease of about 28% of its ownership share of innovative enterprises, three years later, only less than 12% of the venture capitalists also holds less than 5% of the company shares in (Hehai Hong, 1998). , IPO has increased the market value of the innovative enterprises, to raise more funds for the development of enterprises, and to enhance the liquidity of the original shares, so that the innovative business managers a higher level of enthusiasm and motivation to improve business performance. Secondly, IPO is also an incentive to risk capital. Innovative companies successfully listed on the one hand, the venture capitalists get a significant number of capital gains, on the other hand also outside investors to measure the performance of the venture capitalists standard. Venture capitalists nurture more reach market, venture capitalists financing channels more widely, and lower financing costs. Thus, venture capitalists more power for innovative companies to provide quality services to help enterprises to embark on the road to success as soon as possible.
When innovative companies reach the the IPO exit conditions or not very successful, venture capitalists can choose to sell the shares to recover their investments. Here, venture capitalists put option by entering into capital must exit channels reserved. The put option has the advantage to allow venture capitalists, have the opportunity to release the equity they hold in the enterprise can not achieve a business objective. Use of put options can make the venture capitalists as soon as possible to the end of the company's relationship with the poor results of operations, so that the risk of capital withdraw, re-use in other projects. In addition, the use of put options may be a good investment in innovative enterprises operating results, because for some reason can not be listed in the short term, due to their own needs, venture capitalists must be sold in the equity they hold. Of course, when the risk of failure, venture capitalists can only take bankruptcy liquidation ways to exit. This method is generally only recover 64% of the original investment (Liu Man Red, 1998). Thus, the exit of venture capital vital to the development of the whole career.
, The features and functions of the venture capital market
Corresponds to the concept of a general capital market risk capital market, is a greater risk in the capital markets, sub-markets (Wang Yi, Xu Xiaosong, 1999). It is a nascent high-tech enterprises in the development of long-term equity financing market. The structure and role of the market can be divided into the venture capital a market --- Private equity capital markets and venture capital, the secondary market - the small cap market. A market of venture capital, including venture capital financing and investment. In most cases it is a non-open market, the shares are held by buyers and sellers in the market bootlegs private buy, the market is relatively closed circulation of information, investment smaller, but there is conducive to new enterprises, especially high-tech enterprises in the initial period of the financing. Private equity capital markets do not need these small businesses have the credit history, do not need their own assets as collateral, as long as these small businesses with growth potential. The secondary market in venture capital, including venture capital exit and innovative corporate refinancing. This market and the capital market in the stock market is a public equity capital markets, with the properties and characteristics of the public equity capital markets, but the service object is a high-tech innovation and enterprise, and thus the operational and regulatory and public equity capital market. Venture capital market, the primary market and the secondary market is an interdependence and mutual restraint, indivisible whole. A market is the basis for the existence of the secondary market. Innovative enterprises in the development of a market position to decide the future of the secondary market; secondary market is the premise of a market expansion, the secondary market for venture capital exit channels to achieve its inputs --- exit --- reinvested effective circulating capital, to provide further financing for innovative enterprises and nurture innovative enterprises is rapidly maturing into the general capital market. So, the two venture capital market is a bridge connecting venture capital a market and the capital markets in general.
There is a higher risk than the general capital market risk capital market, this risk from the main players in the market --- new and high technology enterprises. In developmental growth stage innovative enterprises own immaturity and instability and low information transparency, investors will exist in the investment decision-making and management of large blindness, increased market risk. General capital market risk from the market complexity and market derivatives operations amplification of risk. Therefore, the venture capital market has different characteristics and general capital market:
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