Research Of Syndication Strategy Of Venture Capital

Venture Capital is a new way of investment and finance and it means to invest capital toward the founding of hi-tech industries for purpose of recovering investment and obtain investment returns through equity transaction. Since the first venture capital company set up in 1946 in America, venture capital has developed rapidly in world and has been the basis of the development of hi-tech industries. High risk and uncertainty of return are the main characteristics of Venture Capital. In order to decrease the risk and increase the profit, various strategies have been developed by venture capital companies and syndication has been a common strategy. The syndication of Venture Capital means that several venture capital companies invest the same period of the firm at the same time or at different time. The development of China's venture capital is late and faces a series of barriers, e.g. Non-normative of capital market, immaturity of market mechanism, legal faultiness etc. Therefore, there must be many issues when syndication is used by venture capital company, and must be deal with urgently. Herein, this paper begins with analyzing the development process of venture capital, and then compares the West developed countries' venture capital with ours and point out the research trend of syndication. The main research of this paper is analyzing the issues that exist in venture capital companies using syndication strategy, and finally proposes some specific suggestions to solve these issues. The research achievements of this paper are mainly embodies in several perspectives as follows: First, analyzing the adverse selection and moral hazard of syndication, and proposing the solutions, such as, signaling mechanism, screen mechanism and incentive mechanism. Second, analyzing the free rider of syndication and putting forward that the arrangement of equity can incent the non-lead venture capital company and mitigate its motivation of free rider. Third, analyzing the issues of the evaluation of syndication and bringing forward the index system and method of evaluation.Forth, analyzing the problems of looking for syndication partners and pointing out that by setting up the nationwide venture capital association and syndication network, the selection range of partners can be broadened. In a word, the research of this paper is useful of syndication and can provide several theoretic references for venture capital companies to using syndication strategy.