The Research On Decision-making Of Venture Capital Based On Real Options

In comparison with developed countries, venture capital of China is still in the primary stage. Traditional investment assessment and decision theory invalidates on assessment and decision of risk investment project because of speciality of venture capital. The lagging of appraisal method has delayed the development of China's venture capital. Therefore it is of great significance to find an appropriate investment appraisal method.This paper reviews the methods of traditional investment assessment and decision theory and its application to risk investment project assessment and decision. Secondly, it points out that because of having not taken irreversibility, time selectivity and decision flexibility of risk investment into account, the traditional investment assessment methods neglect the value of uncertainty which embeds in risk investment project. Lastly, it attempts managing risk management from a option viewpoint, and well grapples with problem of uncertainty in risk investment project.This paper attempts importing real option theory and method to risk investment assessment and decision, proves the real option speciality of risk investment, then interprets its applicability for risk investment assessment and decision, and divides the real option into different types according to the characteristics of high risk, high win and grading injection of fund of risk investment project. And this paper makes sure of the applicability and feasibility of the theory for risk investment decision in China by comparing the theory to the traditional one. On this base this paper designs the frame and the process of assessing risk investment decision using real option theory and method, builds a system of risk investment decision assessment based on real option theory, and interprets the frame with a case.This paper emphasizes the significance of option in investment decision, holds that under current economic environment it's more important to manage uncertain investment decision with the mind of real option, find and build real option, and it's should not be stood on complex computational details. It's should be cautious to estimate the real option because of multi reasons involved.