The Value Assessment Of Venture Business Based On The Expansion Of NPV Method

As venture capital emerged and growing up rapidly in China, high-tech ventures have become the most popular area of venture capital. Valuation of those high-tech ventures, which is indispensible in an investment transaction, not only gives each side of the transaction a better understanding of the venture’s value drivers, but is also important to the pricing decision for a real deal, therefore, a scientific assessment approach has great significance to those venture capitalists and venture entrepreneurs. However, because of the high-risk and uncertainty of management of venture firms, when we use traditional approaches to value those firms, the results are usually inaccurate. In order to breakthrough those limitations, this article mainly focuses on dealing with the high-tech venture valuation, through the study and analysis of those researches at home and abroad, this thesis aims to create a model-expansion of NPV method that can assess the value of venture business accurately. A conclusion has been reached that a high-tech venture’s value consists of two parts, one of which is the value of static NPV of venture business and the other is option value created by potential opportunities. So that we can get a more reasonable and scientific results used to ensure the feasibility of venture capital investment and to make sure the amount of money and way of payment, at the same time, venture business can raise funds to develop and grow and then make a huge profits. In addition, venture capitalists can get return because of accuracy of investment project and solve the financing difficulty of venture business as well, finally, a win-win situation will be achieved for both parties.The structure of this paper will be divided into five chapters as follow:the first chapter is about the research background of assessment for venture business, raising the research questions and making an analysis; the second chapter is literature review, the author will introduce the related concept of risk investment and venture business, the ordinary assessing method of risk investment and its limitations will be presented in this chapter; the third chapter includes the creation of expanding NPV model and the figure of each parameter will be confirmed; the application of the expanding NPV model in case analysis will be provided in chapter four, the conclusion will be achieved after the analysis, then a comparison between the traditional assessment method and the NPV model will be conducted according to the research results; the last chapter, chapter five, reaches a conclusion of the whole paper and gets some implications and limitations for the convenience of further study.