| As an innovative financing and investing system, venture capital plays an active role in the development of high-tech small & medium business. Venture capital consists of three processes that are financing, investing and withdrawing, involves in three participants that are investors, venture capitalists and entrepreneurs. The first layer of principal-agent comes into being between investors and venture capitalists and the second between venture capitalists and entrepreneurs. Under the two-ply mechanism of principal-agent, high risk and technical propriety result in the serious asymmetry of information between principal and agent, which makes the agent problem severely. Therefore, how to reduce the risk of agent becomes the main clue of this article and the key content is how to settle the agent problem, reduce agent cost and solve the agent conflict, etc.The research method is first separation, and then integration. Firstly, we research how to settle the problem of agent in the first layer principal-agent and the second principal-agent separately which is mainly about the adverse selection and moral hazard. Then we integrate the two layers of principal-agent, and probe into the effect of venture capitalist, which is the "soul" of venture capital, answering the basic and essential question of why two layers of principal-agent exist in venture capital. The main content of this article includes:1. High risk of venture capital makes investors institutionalization. Unlike general individual investors, institutional investors have more initiative and power of gaining information to select the qualified venture capitalists as their agents. In order to avoid the adverse selection in choosing venture capitalist, besides the exterior signal such as education and former achievement, investors can supply the venture capitalists with a group of contracts containing the reward coefficient and fund on return, screening the type of venture capitalists by their choice.2. As the soul of the whole venture capital, it is essential to safeguard against venture capitalists' opportunism. In the first layer of principal-agent, we should settle the moral hazard of venture capitalist from three aspects, which are reward incentive, reputation restriction and system administration. In the aspect of reward incentive, we should allow investors to invest by staging of capital infusion and require venture capitalist to contribute his own capital. In the aspect of reputation restriction, we should foster the venture capital market leading by reputation. In the aspect of system, through the analysis of the evolvement of American venture capital organization form, we find that, limited partnership is a more preferable venture capital system arrangement. Therefore, we should perfect the inherent mechanism and exterior environment of our country's venture capital, and develop the advantage of limited partnership.3. In the game theory of venture capitalist choosing entrepreneur, entrepreneur actions first, transferring the signal of his own individual ability and project quality. Then venture capitalist takes action, supplying entrepreneur with a group of contracts containing residual claim right and investment value, screening the type of venture capitalists by his choice.4. In the second layer of principal-agent, we should settle the moral hazard of entrepreneur from three sides, which is administration, incentive and the cooperation of two participants. For the high cost of exterior administration, interior administration, such as staging and syndication of investment should be utilized. The case of Alibaba validates the effect of interior administration. In order to make the entrepreneur, who acts as the agent, assume the risk, they need to be given proper incentives. Besides the interior incentive of material, exterior incentive mechanism, such as valuable management and consultation advice and government policy auspice, could also reduce the moral hazard of entrepreneur, and increase the probability of success to the enterprise. For venture capitalist and entrepreneur, cooperation strategy is the "Nash Equilibrium" of collective rationality. For the long-time cooperation between venture capitalist and entrepreneur, it is necessary to strengthen information communication, constitute the favorable private association, so that every participant could gain "complete information". In order to exert the time pressure, we should stipulate the goal of enterprise in each stage. For transferring the signal of cooperation intent, we need to set up double-side restriction mechanism in the early stage and punish the defection behavior.5. By researching the failure reason of China New Technology Venture Investment Co. Ltd., the first venture capital firm. We find that it could not effectively reduce the agent risk of double layers of principal-agent, which is the fundamental reason of failure. The reason that it could not reduce the risk of agent lies on the fact that government is the investor, and corporate governance structure can not effectively settle the adverse selection and moral hazard. Therefore, government could not be the principal part of venture capital. We should encourage civilian capital and overseas capital to enter venture capital, and government could play the role of "night watchman". It can supply education training, information and technology service, investment subsidy, etc., also it could help eliminate the barrier of bylaw and administration. The exterior incentive of government can also reduce the moral hazard of entrepreneur, and increase the probability of success to the enterprise.6. Venture capitalist is the most important and active core in venture capital, playing various roles in two layers of principal-agent. As the agent of investor, he should ensure venture fund to maintain and increase value. As the principal of entrepreneur, on one hand, he has the right of administration and incentive, safeguarding against the opportunism of entrepreneur, on the other hand, he has the obligation to supply management and afford consultation advice.7. As the "activator" of the high-tech industry and the "engine" of the economy development, the venture capital has great significance on a nation's economy. Our government increases the auspice extent to venture capital financing and investing in recent years. Such as the "Partnership Law of the People's Republic of China (revision)", which passed in August 2006, establishes the law status of "limited partnership" in venture capital. On March 2007, the State Administration for Taxation issued the file No. 37 (2007) of fiscal and taxation to give venture capital preferable policy on revenue. But, with regard to withdrawal mechanism, our country lacks the perfect pyramid capital market. As the important form of IPO, Red Chip IPO is an expedient and high efficient withdrawal channel, but it is affected by many policy factors. Therefore, it is necessary to develop the real Growth Enterprise Market (GMS), which will be suitable for small & medium business. |
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