Performance Of China Venture Capital Investments

Venture Capital (VC) in China has expanded exponentially in recent years with VC investments growth rate reaching 214.29% per year. However, most people understanding of VC performance is restricted to media reports and VC performance academic study is relatively limited.Thus, my paper begins with a literature review of empirical studies on VC performance and then focuses on a comprehensive study of VC performance determinants, including two main areas: micro factors and macro factors. Micro factors are organized around the venture capital cycle and are classified into five categories: Portfolio Companies,VC Funds,Investment Process,Portfolio Companies Management and Exit Process. Macro factors are mainly Institutional and Environmental factors. My paper ends with an empirical study utilizing data collected from the IPO prospectuses through Shenzhen Medium-and-Small-Sized Enterprise Board.Assuming the IPO time and IPO issue price is the corresponding VC exit time and exit return, my study shows a relatively high return rate and return variance. Among the chosen five performance determinants (registered capital, working time and location of VC funds,investment duration,size,industry plus stock cycle),only investment duration is correlated with return measures at a significant level, positively with Total Return and negatively with IRR. Based on my study, suggestions about the healthy development of VC in China are given at the end of my paper.Innovation about my paper is the comprehensive research of VC performance determinants and the empirical study of IPO exit return of VC in China, which uses an original and full-scale data covering most of VC IPO exits through Shenzhen Medium-and-Small-Sized Enterprise Board.