The Evaluation Of Venture Capital Company

According the experience of developed country, Venture Capital Company is the one of drive of the technology. A lot of international companies, just like Microsoftft, Yahoo, Oracle, Google, are very small company in the their beginning. These Company all got investment from venture capital. The gain of venture investment lies on the capability of their value discovery and their value evaluation. The system and method of evaluation will influence the development of Venture Capital Company. The lag of evaluation thought and evaluation tool is the reason why I want to write the thesis. I think that we don't really understand the specialty of Venture Capital Company. We gave the definition of Venture Capital Company at first, then we illustrate that the value of Venture Capital Company mainly is the present value of rising opportunity. Real option is the effectively estimate tool to evaluation of uncertainty. In the first chapter, we compared the different result between the Real option and Index system through two cases. We defined the Uncertainty and Risk and expounded the value of opportunity. The character of Venture Capital Company is the value of opportunity. We can use real option to evaluate the value of the opportunity. Option is a kind of decision of probability, Uncertainty is valuable. In the second chapter, we introduced two popular evaluation methods: Index system and DCF. We illustrated that DCF is the effectively method of evaluation mature company, but we should not use it to evaluate venture capital company that it have huge uncertainty. We used cash flow template to calculate NPV. Because of submarine problem, we cannot use it to evaluate the value of uncertainty. In the third chapter, we introduced the history, formula, application precondition and model how to use it evaluate company. We summarized the outline how to use real option to evaluation. Real option is not only an evaluation tool, but also a strategic thinking that it provided a different angle of view to look on uncertainty. In the second section of the third chapter, we illustrate the four steps using real option method. We can use it to build the framework step by step. Because of thecount of real option is very complicated, we should introduce someway to simplify the count of real option for the use of non-professional person. In the third section of the third chapter, we introduced the key how to evaluate the value of increasing opportunity by using the real option. We emphasized that the higher the uncertainty is, the higher value of increasing opportunity is. We should focus on the stock market to collect information. We should pay attention to framework and need not waste the time to the precision. We should confirm and execute option. We also need a team cooperate to reach the goal. In the forth section of the third chapter, we introduced a program to simply the count of real option In the forth chapter, we introduced the decision-make tree that we can use it to evaluate private risk. We built a two-phase evaluation template that it integrated marketing risk and private risk. At the ending of article, we use an actual case to illustrate how to use real option and decision-make tree to evaluation. In the first section of the forth chapter, we introduced the make-decision tree to weigh the private risk of the venture capital company. The re-design of project can improve the value of the venture capital company. In the first section of the forth chapter, we introduced supplementary concept and two-phase score template. The private risk discount makes the output of real option near reality. The two-phase score template systematize all indexes. In the fifth chapter, we use an actual case to illustrate the progress of evaluation. Compare the DCF and real option; we illustrated the value of market increasing opportunity and probability in the future. We used Excel as a tool to make calculation of real option very easy. We use an evaluation template to systematize a lot of factor and condition. Evaluation template made the complicated question very simple. Evaluation template included all indexes that they are an interacted system. We integrated a lot of investment theory , option theory , Excel, financial model during the writing process. Our mainly contribution is that we integrated different theory and computer tool according practice instance in china; we made the application of real option operationally.