Research On Strategy Selection And Equity Auction Mechanism In Venture Capital Exit

The explosion and virtuous cycle of venture capital gave an enormous impetus in promoting the development of high-tech and its commercial applications, therefore, venture capital is an important economic development booster and has attracted full attention of governments and companies around the world. Venture capital exit is the last stage of venture capital, on the one hand, venture capital exist difficulties make it difficult for the risk investment institutions to translate the risk corporate equity into capital forms, the accumulation of risk capital will seriously pull investment entities’ enthusiasms down, continuously for a long time hence, it will be detrimental to the overall development of venture capital market; on the other hand, venture capital exist difficulties could be the obstacle to the transformation of high-tech production to commodities, resulting in a great waste of social capital and is also not conductive to the optimal allocation of the whole social resources. So the opportune exist of venture capital has a significant influence on the success of venture capital and is the most important stage of venture capital. However, since the objective existence of high exit costs and information asymmetry, China’s venture capital is faced the outstanding problem of exit difficulties. If the problem can’t be settled properly, it will seriously hamper the development of China’s venture capital industry, and even affect the overall economic development. In the aforementioned market environment, the key to solving this problem is finding a reasonable and effective risk capital exit that meet the conditions of lowering the exit costs and avoiding the losses caused by asymmetric information.Auction is essentially a method of resource allocation and price revelation mechanism, it has the significant advantages of revealing the real value of goods, achieving efficient allocation of resources, reducing transaction costs and improve transaction efficiency and so on, thus has a definite instruct significance to the theoretical research and practice operation in the field of venture capital exit. In view of this, taking the actual situation and the real difficulties of China’s venture capital exit market into account, this paper treats risk corporate equity as a special auction items, and uses the method of equity auction to realize the success of venture capital exit. The purpose of this paper is analyzing the strategy selection rules of venture capitalists and accordingly designing reasonable equity auction trading mechanism to achieve efficient allocation of risk corporate equity and the maximum of venture capitalists’ returns.This paper is divide into eight chapters, each chapter can be formed into single system and connected as a whole, each chapter reads as follows below:Chapter Ⅰ introduces the research background and significance of this article, briefly reviews the history and important of venture capital and the status of venture capital exist difficulties, clarifies this paper’s research framework.Chapter Ⅱ elaborates the related theories of venture capital exit, auction and game theory, these theories constitute the main theoretical basis of this paper.Chapter Ⅲ considers the situation of multiple venture capitalists and multiple external investors in the venture capital exit market, and regards the equity trading activities as the process of bilateral matching of these buyers and sellers. First, we use bilateral matching theory designing an equity auction bilateral matching mechanism, graph theory proves that the mechanism has the advantages of realizing incentive compatibility、pareto optimality and protecting venture capitalists. Considering equity’s multi-attribute characteristics, we attempt to expand the above-mentioned mechanism into an equity multi-attribute auction bilateral matching mechanism, and Netlogo simulation proves the rationality and effectiveness of the designed mechanism.Chapter Ⅳ further considers the situation of one venture capitalist and multiple external investors in a specific venture capital exit, thus the number of participants is different from Chapter Ⅲ. In addition, the risk entrepreneurs, though not directly involved in the equity transaction, but has certain constraints on the venture capitalist, in this condition, venture capitalists’ strategy will also present some differences. So we analyzes the choice of venture capitalist and venture entrepreneur towards different types of outside investors, proves the strategic choices of them could become the Prisoner’s Dilemma, and analyzes the dilemma using the related ideas of quantum game.Chapter Ⅴ introduces the difference of venture capital equity and general merchandise, because of the high-risk, high-yield characteristics of equity, we regard it as a special kind of auction item. venture capitalist and entrepreneur’s mutual cooperation resource sharing can help fostering the risk enterprise, which provides a strong guarantee for the corporate equity value-added in the future. Thus, we use synergies between venture capital agent and entrepreneur to quantitative the value of quality attributes of the venture corporate equity, and explore the venture capital exit equity auction model under realistic conditions of intertemporal preferences、 associated value and so on.Chapter Ⅵ mainly uses the ideas of stochastic differential game, and considers the influences of environmental uncertainty and the continuous dynamic changing bidding strategies on the equity clearing price and the expected maximum avenue od venture capitalists. To maximize their own interests, the venture capitalists need to have some knowledge of the bidders, and reveal the right amount of information of the risk enterprise to the bidder.Chapter Ⅶ uses social network theory to study the relationship between outside investors, and explores the law of information transmission and interactive learning of outside investors. The simulation results show that the importance factors of outside investors are in a dynamic changing process, and with the continuous evolution and expansion of social networks, it demonstrates a certain degree of self-similarity. At the same time, with the influence of external investors’interaction, venture capitalists can induce the outside investors reveal their true valuation with very low incentive costs, and ultimately realize the maximum avenue.Chapter Ⅷ summarizes the whole article, and forecasts the future research work.