Smes Informal Financial Markets, Venture Capital Financing Research

The fact that it's hard for small-and-medium sized enterprises to raise money is getting a lot of concern of people in all fields.Present study mainly hope that financial institutions can offer more loans to SMEs,and they also reckon on the credit system of the government and the establishment of second board market.All these offer SMEs some money through the formal financial market,easing their need for capital.But the problem that SMEs have enormous desire for capital and it's still hard for them to raise money is still serious.In fact,apart from the money from the formal financial market,rich private capital has become an important capital source for SMEs.On the basis of this fact,this paper change the perspective from formal financial market to informal financial market,trying to offer new methods for SMEs to solve the problem.The financial system of every country consists of formal finance and informal finance.Due to the covertness and legality of informal finance,present study about SMEs'money raising concentrates on formal finance field.But the enormous private capital and active investment and money-raising activity ,like the contritution SMEs has been madding to national economy,has become an important channel to raise money apart from the formal financial market.But we also find that the private mainly enters enterprises in the form of debt(forming debt capital of enterprises) instead of equity investment(form equity capital).The capital in former case is ususlly characterized by short time and high interests.Because of this,on one hand,it's hard for SMEs to get longterm stable capital,and they need to continuously borrow and pay back.On the other hand,high capital cost lays enormous pressure on SMEs who live in the crevice of market competition.At the same time,the increase of debt also inceases the financial risk of enterprises,making SMEs who have had huge operational risk more vulnerable.Because informal finance can be divided into informal debt market and informal equity market.,according to the features of informal financial market,through rules or contract design as well as the choice of financial tool, changing the money-raising structure of present informal financial market and promoting some private capital into informal equity market from informal debt market to realize the way private capital enters enterprises from debt to equity is an important way to solve the problem of inadequate capital of SMEs fundamentally.So the key of this paper is that SMEs raise money in the form of equity through the equity market of informal financial market,basically not involving informal debt market and formal equity market.Informal finance plays different roles in the different phase of the development of SMEs.On the informal financial market,capital that enters enterprises in the form of equity capital is mainly composed of angel capital ande venture capital.Angel capital mainly comes from personal investment of angels,while venture capital mainly comes from venture investmen institutions.The same thing is they all prefer enterprises on the starting phase,so they are also called initial capital.The difference is angel mainly focus on enterprises on seed stage and start-up stage with the aim of making the inventions or the seed stage project survive.And making them develop further is the task of venture capital.That is to say,venture capital mainly chooses enterprises at the growing stage or the mature stage.In some sense,angel capital is a a special form of venture capital,and an important way for personal investor to take part in enterprises.It has large developing room and good developing prospect,so it is also the emphasis of this paper.The paper,on the basis of analysizing the features of angel capital and venture capital,analysizes the time,stage initial capital enters enterprises and tool design and venture capitalist participation in the management of enterprises and their quit way.Finally,it proposes some advices for the relative mechanism for initial capital to enter the informal equity market,especially angel capital market and develop.The first section is introduction,focusing on the study backgtound,purpose,ideas and ways and proposing the innovation and deficiency of this paper. The second section is the summary of informal finance theory, forming the dialectical and systematic understanding of informal finance. The third section systemtaicly sets forth startup capital,introduces the meaning,features of angel capital and venture capital,analysizes the forms,scale,operational mechanism and exit way of two capital. The forth section analysizes SMEs'strategy to attract venture capital and designs financial investment tool for SMEs.The fifth section analysizes management of raised money of SME as well as venture capitalists and exit ways of startup capital. The last section is the conclusion and against the status quo of underdeveloped angel capital in China,proposes the strategy of improving development mechanism of China's startup capital market.