A Study On The Effects Of Venture Capital In SME Performance

In the1940s, venture capital first appeared in the United States, and soonbecame famous for its high risk and high return. Today, after the development ofventure capital for several decades, high risk and high return became the mostsignificant feature that distinguishes it from other investments. Most of the high-tech,medium and small enterprises that have huge potential of development cannot get themoney they need from the traditional financing channel, but they are the invest objectfor venture capital. In addition to providing finance, venture capital offers servicessuch as internal management and external marketing, which supervises theenterprises’ management, and offers the follow-up services in management such asproviding strategical plan, interpersonal communication, and social resource network.It is these additional value added services bring tremendous return for venture capital,and sometimes the return on investment reaches dozens or even hundreds of times. Atthe same time of high return, venture capital has to face the extremely high risk offailure. Only about5%to20%of investment succeeds. The rest either totally fail, orsuffer reverses. Venture capital in China has been rapidly developed in recent decades,whether the total amount of venture capital, the number of institutions, or the singleamount of investment, all have a great leap forward development.In terms of research, although it is clearly identified in theories the role ofventure capital to enterprises that are being invested, there are relatively few empiricalresearch. SMSE stock market is the one that has venture capital intervention a lot andthe more mature listed companies. Therefore, this article has selected35companiesthat were on the SMEs stock market list in2009, including5companies with venturecapital institution intervened as the top10shareholder. Venture capital not onlyfinancially supports the companies, but also brings the extra value added services,which would influence the performance of companies. In choosing the empiricalmethod, this article first used the combination of qualitative analysis, quantitativeanalysis and the analytic hierarchy process (AHP), which was suitable for analyzingcomplex questions to establish a venture capital value-added service evaluationsystem, and analyzed the value added services that venture capital institutions hadbrought to the listed companies, and then found out what factors have large effect tothe venture capital’s value added services. After that, the article ranked the value added services that the5listed companies with venture capital intervention obtained.Second, this article used data envelopment analysis that was suitable for solving theproblem of multiple-input-multiple-output. It chose net asset value per share and theintangible assets to total assets ratio as the input target, and net assets income ratio,turnover of total assets ratio, and total assets growth rate as the output target. Then,comparing the efficiency of those35listed companies, it was discovered that theperformance of the listed companies with venture capital intervened were not betterthan the others. According to the projection analysis, it pointed out the specificimprovement of direction and numerical value of the listed companies who did notachieve the technology efficiency. Third, this article used Malquist index to comparethe company performance changes before and after the venture capital withdrew, andthrough the analysis of date in the year of2009,2010, and2011, it was found out thatthe performance of5listed companies with venture capital intervention took acontinued downward trend after the venture capital withdrew. Fourth, this articlecombined the result of analytic hierarchy process (AHP) and data envelopmentanalysis, analyzed the pertinence of the venture capital’s added-value services and theperformance of enterprises, and found out that there was no significant correlationbetween the venture capital value added services and the performance of enterprises.Finally, this article gave5proposals to the venture capital development.