Strategic Benefits?Agent Problem And Corporate Venture Capital

Corporate Venture Capital(CVC) usually investing in start-up companies is to pursue strategic interests, not just to obtain financial benefits. On the one hand, the existence of strategic benefits will affect the availability of financing for entrepreneurs; On the other hand, the existence of strategic benefits makes the threat of terminating the investment by corporate venture capitalist incredible as entrepreneurs choose to shirk, resulting in agency problems.This paper begins with the strategic benefits pursued by corporate venture capital and demonstrates:(1) Compared to IVC, given the existence of strategic benefits between the parent company of corporate venture capital and start-ups, start-ups financing availability has been improved;(2) However, a problem is imposed: the behavior of corporate venture capitalists and entrepreneurs is distorted as the existence of strategic benefits, i.e. the agent problems. Specifically, the existence of strategic benefits will result in insufficient efforts by entrepreneurs and the threat of liquidating the entrepreneur's start-ups is incredible. Excepting the larger strategic benefits corporate venture capitalists will capture as the project succeed, entrepreneurs will choose shirking, in this case,the project should be liquidated, but corporate venture capitalists make this project continue.(3) In addition, when financing entrepreneurs as the presence of strategic benefits, corporate venture capitalists will make a higher valuation for start-ups and the larger the strategic benefits between the parent company of corporate venture capital and start-ups, the conclusion is more proper.