Research On Investment Values And Strategies For Hi-Tech Startups

Since 1980s, the development of hi-tech new ventures which is based on the new and high technology has got the attention of different countries and their theory fields. Amount of practices of foreign hi-tech industry and regional economy development show that the hi-tech startups, which contribute much for developing countries'hi-tech industry and building national innovation system, can incubate new industry, activate regional economy, improve industry grade, and enhance national comprehensive competence. As the new enterprises type, hi-tech entrepreneurial ventures, which were very different from traditional enterprises, have many new characteristics and special rules of founding and growing. Because our country's new economy is not developed, and the internal mechanism and rules has not been known by the theory fields, this paper systemically researches their internal disciplines, and discusses these ventures'investment values and strategies.During the process of founding, growing and investing, these new ventures are full of kinds of huge and complicated uncertainties, which make it hard for the prediction for future development and the evaluation of investment value. Therefore, the appropriate investment strategies should be taken to reduce these uncertainties, and enhance confidence of investors. The premier task of investing these ventures is to understand the founding mechanisms and developing rules, evaluating reasonably, and taking right strategies to control and reduce risks. Using corporation theory, entrepreneurial theory, chaos theory, principal-agent theory, real option pricing theory, game theory, investment theory, utility function, and Macromedia Flash language, this paper bases on the uncertainties appearing in the process of hi-tech startups to analysis the founding and developing process, investment value and investment strategies. Some theoretic and practically innovative conclusions are received, which is beneficial for managing, investing, and controlling these special enterprises.The nature, founding mechanism, growing laws, investment value and investment strategies of these hi-tech startups are studied systemically. As a brand new enterprise type, hi-tech entrepreneurial ventures have completely different characters from traditional or mature ventures. Therefore, the investors should understand and grasp these important special characters, and take unique evaluation methods and investment strategies. From the point of investors, this paper starts from knowing the nature of these startups, masters the outstanding characteristic of huge uncertainties, and uses methods of quantitative, qualitative and cases study to research these ventures'values and strategies.The main study fields and results are summarized as followings.(1) As a new kind of enterprise, scientific startups are the important carriers of the knowledge economy. Basing on the corporation theory, the dissertation explains the basic definitions, meaning and economic natures of these ventures. The scientific startups, full of big uncertainties, are the hi-tech ventures which are seed, entering, and growing time during their life time. The economic nature and core competition are tightly related with the essence of innovation economy, so have some important economic characters. Furthermore, the paper analyses the investors, the main body of investing. The investors have not only different types, but also different risk preference and endure capacity. Consequently, they show different investment behaviors during different phase of ventures growing up. (2) The dissertation analyses entrepreneurial behavior and founding mechanism from the point of entrepreneurial cause and environment. Based on comparing several traditional firm founding theories, the transaction-cost theory is used to explain that these ventures are founded by the core technology innovation. It also establishes the AOVINB model which looks on the entrepreneurship as a serial process of function forming, and the ventures as changing ideas to entities. The organizational evolution and the main obstacles in different phases affecting ventures development are discussed to investigate the growing process, which provide references and suggestions for the managers.(3) The managerial activities, environment and strategies are related tightly, and the management problems are considered from the points of open system, dynamic system and complicated system. With the chaotic characteristics of high uncertainties, sensitive dependence to initial condition, and unprediction, scientific startups are really a kind of complicated system, so it is reasonable to use chaos theory to explain these ventures'developing traits. Therefore, the chaotic growing model is deduced, which is combined by numerical calculation and case study. At last, the conclusion is drawn that the scientific dynamical management methods, which are completely different from the traditional ones should be taken. The management at the chaotic forks should be paid much attention, so to get strategy goals by applying the development rules and the magnifying positive feed mechanisms of scientific startups.(4) Because of high uncertainties and unreversibilities, scientific startups'investment values can be analyzed by the real option theory. Because the investment of startups often have multiple options, it is much convenient to use log-transformed binomial method to unify these real options into a model, a computational program edited by the macromedia flash language. In view of these firms'characteristics, another model based on a real case, is founded to ensure the important parameters in the model. The investment value of these ventures could be underestimated if the nested effects of their multiple real options are neglected. Meanwhile, the simple plus of single options and the combination orders would overate the investment value.(5) The high uncertainties, high risks and returns need special investment decision programs, entering time, and industry choosing for the scientific startups. The utility function theory is referred to build a comparing model to explain that the convertible bond is better than the common bond and ordinary shares when investors make decisions at the time of the second investing contract coming, whatever the nature is certain or the information is completed. Periodical and multi-stage are the main characteristics of the scientific start-ups. Investors often use multi-period financing method for the startups. Based on simplifying and improving Ramy Elitzur's multi-period game theoretic model, this paper takes into account of the characteristics of staged financing, the security of funding, and the necessary to keep away the moral hazard of entrepreneurs. At the end, this paper suggests a decision-making game model to guide kinds of investors on multi-stage investment, which is very meaningful for financing start-ups. The paper use utility function to build a model to discuss how to choose entrepreneurs when investors have chosen debt contracts. It is concluded that the net asset rate has positive effects on startups fate, so the entrepreneurs with richer self resources are preferred.(6) According to the characteristics of scientific start-ups, and the limits of the former evaluating model for traditional firms in M&A, this paper sets forth the relation between M&A and real options from the point of compound options. It is considered that the value of a start-up in M&A should include its investment growth option value before M&A, and the additional options value after M&A..The innovations are the followings:(1) The AOVINB model, which looks on entrepreneurship as a realization process of a serial functions and translate ideas into entities, is built to study entrepreneurship.(2) The chaos theory is used to explain the development characteristics of startups, and the chaotic growing up model is built to suggest that the dynamically chaotic management method is suitable for these ventures.(3) The log-transformed binomial method is employed to unify muiltiple real options into a model, a computational program edited by the macromedia flash language. In view of these firms'characteristics, another model based on a real case, is founded to ensure the important parameters in the model. The utility function theory is referred to build a comparing model to explain that the convertible bond is better than the common bond and ordinary shares. The convertible bond can keep away the entrepreneurs'moral hazard, and enhance high returns for investors. Based on simplifying and improving Ramy Elitzur's multi-period game theoretic model, this paper suggests a decision-making game model to guide kinds of investors on multi-stage investment, which is very meaningful for financing start-ups. The paper use utility function to build a model to discuss how to choose entrepreneurs when investors have chosen debt contracts.(4) This paper sets forth the relation between M&A and real options from the point of compound options at the exit time. It is considered that the value of a start-up in M&A should include its investment growth option value before M&A, and the additional options value after M&A.