The Opportunity Cost Of Capital For Venture Capitalists And Entrepreneurs

High-tech is the main power to push the development of society and economy in this new century. Faced with this tendency, every government has taken corresponding steps expecting to have a space in the field of economy in the future. From the foreign country's experience, venture capital has become the engine in the industrialization progress of high-tech. In the developed country such as Europe and the United States, venture capital has become one of the major channels for high-tech enterprises to finance, and the high-tech enterprises supported by venture capital have become the very important segment of the economy. In the United States, where the venture capital originated, venture capital has been very successful. It has stimulated the utilization of high-tech achievements, played an essential role in upgrading and optimizing the industrial structure and influenced the development of macro-economy. In recent years, venture capital also has been improved substantially in China. But comparing with those countries where venture capital has already been developed, our country's venture capital is still on the primary stage and there are many problems to solve. In order to improve people's consciousness of venture capital, cultivate professional venture capitalists as soon as possible, and accelerate the development of venture capital in China, we should pay more attention to analyze the developed countries' theories and practice of venture capital. This work will be proved necessary and meaningful, especially in the context that venture capitalinvesting has been becoming a trend mow.Based upon these thoughts, this paper mainly discusses the CAPM to analyze the opportunity cost of capital for venture capitalists and entrepreneurs. It can be divided into three parts: first, in the introduction, the fundamental conceptions and theories such as what is venture capital, and also their characteristics are introduced. Following this, the opportunity cost is defined. The CAPM, including its hypothesis, formulations and transformation, is specially drawn on, too. The second part focuses on the analyses of venture capital's opportunity cost. The opportunity costs of outer investors' (venture capitalist) and entrepreneurs' capital, the reciprocal effects between them, which are the contract relationship of them, are discussed respectively. And there are empirical evidence on cost of capital and the potential gains from contracting. Finally we'll give our conclusion. At the end of this paper, there are the proposals about the development of our country's venture capital. They are mainly about how to decrease the cost of the venture capital. There are three ways. First, increase the sources of the venture capital; second, strengthen the cooperation between the venture capitalist and the entrepreneur so as to lower the agency commissions; third, increase the ways through which venture capital can be withdrawn so as to make it easily for capital to circulate, and lower the total cost of the venture capital.