Venture Capital Industry Development Mechanism

[Abstract] This paper analyzes the venture capital Industry grow and mature on the basis of factors, summed up the venture capital Industry development and evolution of the basic characteristics of the decision summarized the development of venture capital Industry, the dynamic mechanism and draw specific conclusions and practical Inspiration.

[Keywords:] mechanism for venture capital Industry

I. Introduction

After decades of venture capital development, has now become a distinctive feature of the financial Investment Industry - venture capital industry, and in the formation of the rapid development of world trends. Venture capital industry contribution to the economy of conventional industry, several times countries are vigorously promoting the development of venture capital industry, but in different countries, the way venture capital industry and the path is different. In the U.S., the market mechanism with government support to match, induced institutional change and the combination of mandatory, for the U.S. venture capital industry developed; and Japanese venture capital industry in Japan under the government's coercive power to implement and complete, and the Japanese government is the promoter of the development of venture capital industry, the perpetrators. Therefore, the study venture capital industries in Characteristics on the development of a clear mechanism for their development, promote the venture capital industry for the rapid growth of development and maturity of great significance.


Second, the venture capital industry and its development content

1, the meaning of Investment risk
Venture capital is the potential for growth through unlisted companies in emerging equity capital or quasi-equity capital Investment and by providing management services to participate in the development process, after the success of the enterprise venture capital through the equity transfer, to achieve high capital appreciation returns A special type of financial capital works. also known as risk capital or venture capital. but slightly different point of view of both statements, the operation of venture capital activities from the perspective of representation, while venture capital money from the capital, description, Both have a common essence. If you combine the two considerations, venture capital can also be seen as a financial operation of the system.

2, the venture capital industry's growth and maturity
Venture capital industry's growth is reflected in three areas: industrial scale, Investment structure and Investment structure, efficiency advancement. These three indices measure different aspects of the venture capital industry development. Venture capital industry specific expansion targets including the scale of financing, Investment scale, the number of venture capital firms and the number of venture capital funds; Investment structure continued advancement is the structure of Investment levels from low level to a high degree of evolutionary processes, in essence, with the technological development, technological progress, deepening the division of labor , the Investment structure to keep the highly value-added of high Technology, high-intensive development. venture capital structure efficiency of different organizational forms include venture capital firms the proportion of industry structure owned by the reasonableness of the key areas affected by whether the information was subject to enterprises development stage structure is reasonable and so on. The three indicators reveal the venture capital industry growth and Economic development, industrial structure and evolution of regional Economic structure inherent relationship. Meanwhile, the above three aspects are mutually influenced and restricted The. venture capital industry expansion is the basis for advancement risk Investment structure and risk structure of investment efficiency is the venture capital industry, the premise of scale, while the risk of the investment structure for the advancement and provides the conditions for efficient investment structure.

Mature venture capital industry to be more factors into account, the simple level of investment risk and a lot of money and does not constitute a professional and mature venture capital market. A mature venture capital markets, including Economic conditions must have conditions, legal and regulatory conditions, financial conditions, cultural conditions and the development of intermediary organizations. Meanwhile, the venture capital industry in the important role of national Economic development, it is not just mature mature venture capital industry alone, but must be national industrial structure associated with the overall development, especially with the upgrading of industrial structure linked. Therefore, the venture capital industry matures conditions related to a country's Economic and political, legal, socio-cultural and related supporting institutions and facilities, and many other aspects of factors.


Third, the venture capital industry, the law of evolution and development

In the real study, the initial conditions of the country and the social environment is different, and the venture capital stage of development and different levels of risk investment will show different operational characteristics and system content, and because different people understand and venture capital defined in different countries will form the development of ideas, which makes venture capital as an industry, in developing countries show different characteristics. Overall, the venture capital industry has the following law of evolution.

1, the venture capital market behavior generation and development, venture capital industry is inseparable from the emergence and development of market mechanisms
From the microscopic point of view the operation of venture capital, venture capital is mainly including financing, investment, investment management and exit of a cycle of four major aspects of the operation of the process, this process must be completed one by one to rely on market behavior; from a macro point of view, the market not only determines the generation of venture capital industry is more important is to determine the direction of its ultimate development, venture capital industry, the ultimate survival and development of market mechanisms needed to withstand the test.

2, the Government in the development of venture capital industry has played an integral role in the
Although the venture capital industry is the production of market behavior, but the survival and development is a joint coordinating role of government and market results. From historical Experience, the venture capital industry to the government support before the birth, survival and development of its slow pace of the general ; the Government's clear support, the venture capital industry has developed rapidly. In the venture capital industry, the Government is mainly from the creation of the venture capital market mechanism must have the conditions to proceed, including the economic, institutional, and cultural aspects.

3, the market behavior and government support in the venture capital industry is the emergence and development of interaction between complementary and the choice
On the one hand the operation of the venture capital market forces, the main premise is relatively weak, and its development needs the support of external forces, the Government through the support act to promote its development and growth; With the growth of venture capital industry, the increasing power of market mechanisms, the dominant position. On the other hand the Government's supportive policies, it is necessary to test and selection of the market, venture capital industry in practice also been adjusted and improved, reflecting the venture capital industry's evolution and progress. market behavior and government support for the dynamic equilibrium venture capital industry to mature a prerequisite for the final.


Fourth, the development of venture capital industry, the dynamic mechanism

As in previous analysis, in different countries, venture capital and development of industrial production is not exactly the same conditions and factors, some of which conditions and factors, but it is all the countries in the venture development process are essential. Those who venture plays a decisive role in the development of fundamental factors, we can call it momentum investing risk factors, specifically, people who can directly promote risk investment decisions of the fundamental forces. as a risk investment dynamic factors, involving Investment objective risk inherent in the process of motivation. can be said that a country's venture capital process in depth, depends largely on the risk of the investments owned by the formation of dynamic factors and the strength level.

Venture capital industry development is the basic characteristics of dynamic factors: the long-term impact of venture capital constraints or the most original elements of the development process, its venture capital to launch a decisive role and evolution and development of norms and decisions in the form of venture capital, speed and direction . According to the progress and Experience existing theoretical analysis, the driving force to promote the development of venture investment factors include the expected high yield and protection mechanisms, entrepreneurship, technological Innovation and economic growth, their relationship with the venture capital industry can be used under graph to represent.


1, the expected high-yield and Security System
Any incentive to invest comes from the pursuit of profit. However, due to investment in the uncertain process of the objective existence of risk investment both possible and profitable value-added also may be subject to a decision loss. Venture capital is a high yield with high-risk investment, venture capitalists assumed great risk, but there may be risks of over-investment income. traditional financial institutions generally focus money into the liquidity, safety and efficiency principles, combined with loans interest rates and other restrictions, commercial banks generally can not take high-risk investment in high-tech enterprise, it is difficult to obtain from the appropriate high-yield. But the risk of investment in improving the operating mechanism can achieve the unity of the risks and benefits, through the effective control of risk and benefit-sharing.

The expected high-yield and protection mechanism to fundamentally promote the development of venture capital industry, simply because of its nature is a form of institutional change, through the following means to ensure the unity of the risks and benefits. First, through the form of venture capital organizations choose to combine resources to improve the degree of information asymmetry and reduce transaction costs and moral hazard and improve the operational efficiency of venture capital. which venture capital limited partnership is the best and most viable form of organization. The second is through a rigorous project selection mechanism to select the most potential and best meet their investment expertise to carry out capital investment projects; through a variety of investment strategies of control and spread of risk. Third, the property rights through effective mechanisms to strengthen risk control constraint; through active portfolio management system to achieve maximum capital appreciation and risk minimization. Fourth, the flow of funds through the channels of exit mechanism for revenue sharing. only take high risks to obtain the corresponding high-yield, risk and benefits can be truly unified symmetry. perfect the operation of venture capital appreciation through venture capital exit, made high-tech venture capital organizations to share after the high-yield business success, so that investors with capital preservation and value-added and reliable protection, but also relieved to worry about venture capitalists.

Links to Research Papers Download http://www.hi138.com So, just have high expectations of earnings is not enough, only a mechanism for the high yields are expected to provide security guarantees to be able to attract venture capital and talent to the field of mobile, venture capital industry can be truly developed.

2, the venture capital entrepreneurship
Entrepreneurs are those who have to judge the ability, confidence and adventurous business leaders, is based on a new groups of combinations of factors of production. And the entrepreneurial spirit is the spirit of entrepreneurial Innovation. Innovation is considered a technical , and can be a good idea to break the balance. Therefore, from another point of view, entrepreneurship is a way of thinking and behavior. Babson believes that entrepreneurship is not consider the resources currently available in the case of use it to identify opportunities and is aimed at private and public areas of wealth creation.

Venture capital industry in the development process, the status and role of entrepreneurship has been fully reflected, and its undoubtedly plays a wage factor. First, the human capital for entrepreneurs, venture capital, it is more than physical capital is important. in the development of venture capital industry, the most scarce resource is the ability of entrepreneurs; the most pressing issue is reasonable and efficient allocation of existing resources. only the wealthy class of entrepreneurs entrepreneurship management and give full play superb to risk capital to produce its proper high efficiency. Second, the high-risk venture capital industry, the special needs of wealthy entrepreneurial class of entrepreneurs. entrepreneur's role is to eliminate uncertainty, coping with incomplete information and high transaction costs ; when the market is more imperfect form, the greater the need for innovative activities of entrepreneurs to invest capital and Technology the most efficient and promising production activities. Third, entrepreneurship, venture capital industry determines the evolution and organizational Innovation. Industry has the same form of organization is a series of organizations, industry evolution is the proliferation of a particular form of organization. wealthy entrepreneurial class of entrepreneurs not only be able to create new and competitive form of organization to re-combination of existing industry, You can also "copy" the existing form of organization to make industry to the balance. entrepreneurial spirit will bring new forms of organization have caused changes in the competitive environment, leading to the proliferation of new forms of organization, thus completing the industry's evolution and maturity .

3, Science and Technology Innovation
Technological innovation is the driving force behind the development of venture capital. The possibility of a large number of technological innovation has created a strong demand for risk capital, venture capital also produces development, and greatly promoted the development of technological innovation. In this context, venture capital enterprises came into being and continue to evolve.

From the historical origins of view, venture capital industries in technological innovation activities in the booming developing. Specifically for several reasons. First, the funding needs for Technology innovation investment in the production of risk. As technological innovation itself is the high risk, of the characteristics of high returns, especially in technological innovation activities on the objective requirements of funds, gave birth to the venture capital investment in this groundbreaking production. Second, innovative Technology venture capital industry has become the main way to add value. the emergence of technology innovation , especially those that can provide huge consumption potential and high-yield technology, can promote the prosperity of the venture capital industry and expansion of high-tech industry, modern scientific and technological achievements into actual products and services of the process. With the continued high-tech products development and growth and the continuous improvement of relevant policies and regulations, venture capital in the global expansion has been accelerated. Third, venture capital itself is a scientific innovation activities. Unlike traditional venture capital investment activities, investment from the finance, organization management, project evaluation decision-making to the operation of capital markets have carried out a series of innovations, the establishment of an effective operational mechanism, resulting in a unique and full of resources, fund allocation, incentive and restrictive effects. Therefore, the risk investment has come from the blood culture of innovation activities. venture capital activity is reflected by a scientific and innovative culture.

Only risk capital to invest in high-tech industries to achieve capital appreciation, and high-tech industries only in the context of venture capital investment in order to rapidly generate benefits and achieve sustainable development, mutual influence between the two complement each other, are indispensable.

4, economic growth
According to Nobel Laureate in Economics, Professor Simon Kuznets the definition of classic style and modern economic growth is a country to its increasingly diverse residents of long-term increase in the capacity of goods, this ever-increasing capacity, is built on the advanced technology and systems needed to be adjusted accordingly and the ideology based on. Rise and Fall of the development of venture capital activity is associated with a country's economic growth closely related. venture capital activities in a country's economy or the stability of long-term rapid growth of process, the volatility of frustration in the process of economic growth, the world's venture capital industry in the history reveals it all. In the long term, venture capital industry development and economic growth is a concomitant relationship.

Modern economic growth on the role of venture capital industry can be illustrated in two ways. First, modern economic growth in the development of venture capital provides the basis for the production environment and conditions. First, modern economic growth and stability not only reduces the risk of investment overall risk, but also for venture capital to provide the most basic conditions for development - the accumulation of capital and sustainable supply; Secondly, the modern sustained economic growth will lead to continuous technical innovation, the rise in national output will be in the process a sustained Research on the technology into practical productive forces of the huge demand, thereby contributing to the generation of venture capital; Finally, the system of modern economic growth, ideas and ideology of adjustment and innovation, venture creation and development of a a good cultural environment, training and institutional support. Therefore, the overall economic environment, both short and long term venture capital has the greatest impact. Second, the modern economic growth for the development of venture capital industry have provided opportunities and space. Economic Growth inevitably bring about changes in the economic structure, the emergence of many investment opportunities, not only for the development of venture capital industry have provided opportunities, and because of the persistence of this change, and in the long-term upward trend, as venture capital for the development of a sufficient room for development, making venture capital at the micro level can not only successfully completed the entire process of venture capital cycle, can also make venture capital industry in the successful completion of the macro-level organizational structure of innovation diffusion and industrial forms of change.

Through the above analysis is clear, venture capital industry is a product of modern economic growth itself, and eventually become important for modern economic growth factors, when the risk of investment and new economic growth in the real relationship between the formation of positive interaction, the venture capital industry as an industry to truly developed.


V. Conclusions and Implications

The results show that the market mechanism is the basis of the venture capital industry generated, and government support the development of venture capital and growth is the most important protection, venture capital industry, the production, development and maturity is the result of many factors. In those who venture capital industry plays a decisive role in the development of fundamental factors, the high-yield and protection mechanism is expected venture capital industry development is the fundamental driving force, entrepreneurship venture capital venture capital industry is the internal driving force, science and technology innovation is the Venture Capital Industry the demand for power, modern economic growth is the venture capital industry in the development of long-term power.

Give us more of the following Enlightenment. First, we should give full play to the market and government coordination and venture capital industry in the role of institutional change. Not only the market mechanism into full play the leading role, but also actively support the protection role of the government and support the role of necessary to meet the market players (venture capitalists) a strong demand for institutional innovation, but also to achieve the Government to obtain the maximum scale of institutional change, institutional changes to achieve maximum efficiency, path optimization. The second is to strengthen technological innovation activities venture capital industry interaction effects. the one hand, innovation activities can greatly promote technical progress, technological progress is the main driving force of economic growth; the other hand, innovation activities can actually produce the demand for venture capital. To strengthen technological innovation activities Venture Capital Industry in the pulling effect, not only the need to establish a complete set of technology Research system, and must establish a good technical market mechanisms, the former venture capital operations provides a wealth of technology products, which makes the risk of investment in the development of technological innovation as backed by strong technical support. The third is to strengthen the cultivation of entrepreneurship. the promotion of entrepreneurship is the key to the formation not only high quality entrepreneurs to develop, more importantly, is to cultivate the culture of entrepreneurs generated environment. a provide motivation to create a supportive environment or culture is the most important incentive, but also determines the cultural background of individuals with entrepreneurial potential distribution. a country's population, the higher the frequency of entrepreneurial tendencies, it reserves the more potential entrepreneurs. Therefore, the risk of investment and the higher the probability of creating enterprises, venture capital industry, the more we can grow and develop.


[References]
[1] Hui: venture capital market development model comparing the effectiveness and Enlightenment [J]. The economic aspect, 2001 (7).

[2] Li Jianhua, Xiao-Hong Liu, Luo Yuze: venture capital decision-making behavior of theoretical Research and tax policy analysis [J]. China Management Science, 2002 (1).

[3] YANG Shan-lin, Zhang Xingyu, Li Yao mine: System and venture capital industry Research [J], China Science and Technology Forum, 2008 (5).

[4] Chen, cotton, Cai Li: Venture Capital: An International Comparison and Experience [M]. Beijing: Economic Science Press, 2003.

[5] Jin Yonghong, Xiyu Qin, Zhang: Foreign Venture Capital Operating Mechanism Analysis and Its Implications [J]. Science and Technology Management Research, 2006 (10).

Links to Research Papers Download http://www.hi138.com