The Risk Management Of New & Hi-Tech Agricultural Venture Capital Investment In China

This paper takes the VC (Venture Capital) company as subject and several of risk factors which occurred in the process of agricultural VC investment as object to research the risk and risk management in new & hi-tech agricultural VC investment. This study roundly analyses the VC investment risks including environment risk, financial risk, entrepreneur's agency risk, screening and decision-making risk, VC-backed firm's growing risk, and exit risk, and establishes risk management model by using methods of quantitative analysis and qualitative analysis based on defining the meaning of risk management of agricultural new & hi-tech. We investigate 36 VC companies and 40 agricultural venture-backed firms and gain much first-hand data such as the subject's cognition to risk management, the information source and obstacle in decision-making, the presentation of agency risk, post-investment control, demand and supply of value-added services, exit channel selecting and exit time selecting. Based on analyzing the fore mentioned data, we study on the wholly risk management and control mechanism in agriculture VC investment combined with economic and management theory. This paper is divided into10 chapters according to their logic relationship, and it is outspreaded from two aspects including outside condition and inside management mechanism.Chapter 1 is introduction, including researching background, researching purpose and meanings. On basis of referring to the document, we comment on the risk management theory of venture capital investment objectively and generalize the important viewpoints, primary theory and principle methods which can be used for reference in this study. Taking Tybjee and Brunos'theory and research method as reference, this paper gives prominence to the application of quantitative analysis in risk management of new & hi-tech agricultural VC investment.Chapter 2 is the theoretic frame of the risk management of new & hi-tech agricultural venture capital investment. Firstly, we define the financial supporting system and VC mechanism for the agricultural new & hi-tech industrialization, secondly, compare VC risk management to traditional risk management, analyze the risk factors in agricultural venture capital , lastly, we summarize the content of VC risk management mechanism including environment risk, financial risk, agency risk, screening and decision-making risk, firm's growing risk and exit risk according to the researching route.Chapter 3 analyses the present risk situation of agricultural new & hi-tech VC investment in China. We analyze the character and style of Venture Capital Company and VC-backed Firm, and point out that government-backed VC Company is the main body of agricultural new & hi-tech VC investment system, foreign VC Company is more popular than domestic VC. Current VC investment hasn't eliminated the financial bottle-neck in the agricultural new & hi-tech industrialization effectively because venture capital was concentrated in the venture enterprises'metaphase and anaphase. Finally, we make a conclusion by a survey to 36 VC institutions that biggish risk is consist in agricultural new & hi-tech VC investment, and VCs (Venture Capitalists) pay little attention to the risk management.Chapter 4 analyses environment risk factors which affect agricultural new & hi-tech VC investment including policy risk, law (rule) risk, market risk social culture risk and human-resource risk, and makes a conclusion that there are many problems existed in the 5 aspects which add risk to the agricultural VC investment by comparing to the VC environment in developed countries. This is a special risk that VC companies, as the risk management mainbody, can't control it on their own initiative, they can't eliminate the environment risk without the governments'policy supporting. Finally, we put forward the countermeasure.Chapter 5 analyses the financial risk of new & hi-tech agricultural VC investment, lists and analyses the potential sources for agriculture VC investment in detail. On this basis, we create the financial risk evaluation model. The emphasis of financial risk management is to confirm capital source and scale, establish effective organization system, and appropriate profit distribution mechanism.Chapter 6 demonstrates entrepreneur's agency risk from incentive mechanism and retraining mechanism. On the one hand, the establishment of incentive mechanism is outspreaded from 3 aspects including risk return, reputation and control right. On the other hand, the establishment of retraining mechanism is outspreaded from 3 different stages including pre-investment, post-investment and exit. Finally, we design the optimal risk sharing arrangement based on the investigation on risk attitude and tendency of venture capitalists and entrepreneurs.Chapter 7 analyses the character of the screening and decision-making risk, which is outspreaded from decision-making procedure and decision-making method. We make a survey on the sources and information obstacle of agricultural VC item screening in China, and point out that foreign VC companies profits from perfect intermediary market and developed information network, which is deficient in our country. Then we contrast three decision-making methods in common use in screening course so as to obtain best choice. Furthermore, according to the common characters of venture capital programs, we construct the simple installment real options model, which could be applied in agricultural item popularly.Chapter 8 mostly studies on the growing risk management outspreaded from control activities and investment preference. We make a survey to VC investors and VC entrepreneurs and demonstrate the problems of control including control patterns, control instruments and control obstacles, then, we put forward the countermeasure. We make conclusion that there is contradiction in demand and supply of value-added service by the quantitative analysis, and we give some suggestions to resolve this problem.Chapter 9 analyses the management of exit risk of VC investment outspreaded from the selection of exit channel and exit time. On the exit channel selection, we make a survey as well, and analyze the problem that the exit channel is limited, and both the capitalists'and entrepreneurs'anticipation is too high. We construct simple investment terminate model, and bring forward suggestions for exit risk management.Chapter 10 is conclusion, deficiency and prospect of whole paper. We conclude the studies on risk management of new & hi-tech agricultural VC investment in China, and analyze the deficiency in research, and lastly point out some issues which are not included or not lucubrated in this paper.