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Study On Fund-raising System Of Venture Capital

Posted on:2011-03-02Degree:MasterType:Thesis
Country:ChinaCandidate:Z Y WangFull Text:PDF
GTID:2166360305456896Subject:International Law
Abstract/Summary:PDF Full Text Request
Venture Capital (VC), which invests into new industry and high-tech industry for maximizing revenue, originated in U.S. In this investment mode, fund-raising system take the most important position, because fund-raising system determine the target, scale, management mode and profit mode of the whole VC process.So every country all over the world has different law systems and police incentives to encourage the development of VC.Comparing to the highly-developed US VC industries which has set a model for global venture capital sector in the world, the Chinese VC industry started only in the 1980s, now at the initiative developing stage. And since 2000 the Chinese VC industries has been much affected by the depressed world VC industrial downturn. So it is necessary to reference to the VC system in US, for integrating our VC system and US VC excellent policies and law system to make Chinese VC more mature.This paper is composed of four parts.Part I:The outline of fund-raising system of VCFirst of all, VC is a type of private equity capital typically provided for early-stage, high-potential, growth companies in the interest of generating a return through an eventual realization event such as an IPO or trade sale of the company. VC investments are generally made as cash in exchange for shares in the invested company. It is typical for VC investors to identify and back companies in high technology industries such as biotechnology and ICT (information and communication technology).Secondly, there are two types of VC fund-raising mode. One is government-led mode. The other is non-government-led mode, which contains bank-led mode, company-led mode and private-led mode.Part II:Fund-raising system of American VC is best part around this paper.First of all, American legal environment has so many positive impacts to fund-raising system of VC. On one hand, American legal system is the strongest support to ensure that VC could develop rapidly. On the other hand, Small Business Investment Act promoted establishment of small enterprises, and promoted capital support system to the ventures. Moreover, American government enacted several bill about incentive VC until 1980s.Those bills greatly increased development of fund-raising system.Secondly, there are two type subjects of VC in America, institutional investors and individual investors. There are six key characteristics of the VC subjects:ⅰ.they finance new and rapidly growing companies; ii.they purchase equity Securities; iii. they add value through active participation as a director; iv.they assist in the development of new products or new services.ⅴ.they take higher risk with expectations of higher rewards; vi.they have a long-term orientation.At last, fund-raising mode in America has four main types, public offering, private offering, commercial loans and private capital.Part III:Policy incentives in U.S. are very important to the development of VCFirst of all, the U.S. tax legislation is formed of the federal legislation and state legislation. Federal legislation does not specifically have the tax code, but it identifies a number of venture capital and tax incentives clauses, which are workable and stable. In the state legislation, most of the states give angel investors a tax credit on investment. Secondly, in the secured loans, the federal government's Small Enterprise Guarantee Loan Scheme, which is based on the "Small Business Act", provide capital for those enterprises which is hard to obtain funds from the normal channels. At last, government in U.S focuses on protection of intellectual property during the VC process.Part IV:Suggestions for improvement of Chinese VCThere are two main legal difficulties of Chinese VC fund-raising. One is access system of VC funds, and the other is the shortage of legal clauses about loans and guarantee. We should improve our legal system reference American policy, to ensure that the number of subject of domestic capital and foreign capital grow steadily.
Keywords/Search Tags:Venture Capital, Fund-raising System, Legislative Incentives Improvement
PDF Full Text Request
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