Study On Staged Financing In Venture Capital

Venture capital is propitious to the industrialization of new technology, the innovation of enterprise and the amelioration of capital market. With the coming of knowledge economy, our country begins realizing the importance of VC, especially the special functions of VC in the restructure of economy and the improvement of science and technology. So the study of venture capital embodies the important value in theory and the significance in practice at present.The problem of moral hazard in venture capital is a focus research field for many scholars in the world. These years, staged financing as a way to prevent moral hazard has become a common investment philosophy. However, there are not enough literatures focusing on the theory of investment for the staged financing path and the corresponding mechanism, which has hampered China's investment in the development of the VC industry to some extend. In view of this, based on principal-agent theory and contract theory, we do the research from an internal and an external perspective of staged financing. We study how the mechanism of motivating and monitoring works in staged financing of venture capital from an internal perspective, the optimal investment path from an external perspective.Through the study we have made the following main results. We Summed up the representative international venture capital model of development and give some suggestion for the development of China's venture capital. Through the principal-agent model which focuses the differences between the traditional up-front investment and the staged investment path, we study how the staged financing mechanism works in motivating and monitoring entrepreneurs. We found that staged investment under the basic contract to equity financing for the two sides bring the greatest efficiency gains and minimize losses. Under the assumption of variable liquidation value, we identify an algorithm of staged optimal investment path. At last, we study the Current Contractual Relationship between venture capitalists and entrepreneurs, and give some suggestions to our country's venture capital.