The Study Of Models That Chinese Securties Invest In VC

For venture capital's unique economic function, venture capital (VC) investment has played an increasingly important role in the modern economic society. From the experience of western developed countries, the development of venture capital investment can not be separated from the support of investment banks at all. Investment banks are not only the intermediaries of venture capital investment, but also are the main participants of venture capital investment. In another word, no investment banks, no the development of venture capital investment today. However, in view of the risk of financial market, that Chinese securities invest in VC is prohibited by law, which greatly restricted the development of its business innovation.First of all, this paper compares the business of Chinese securities with the foreign securities', and points out that Chinese securities have the problem of less business innovation, narrower sources of income, as well as severer homogeneous competition, and so on, and then discusses the significance of its business diversification for Chinese securities, and the importance of investing venture capital companies. At last, from the organization model of VC that securities invest, to evaluate the value of VC based on the real options of trigeminal tree, and to select a suitable retreat mechanism, this paper discusses the possibility of investing VC for Chinese securities.At present, there are three main organization models for VC companies: corporate, partnership and contract. Chinese securities should choose limited partnership in organization models, as the system of this model is more flexible, so that it can bear less law risk during the process of VC. Compared with the other two organization models, the limited partnership has three advantages in incentive mechanism, restriction mechanism and cost-control mechanism. In the aspect of investment models, it should be based on the real options of trigeminal tree to evaluate the value of VC for Chinese securities. Compared with the traditional method of net present value(NPV), as the traditional method of NPV neglects of the value of operating flexibility in the course of VC, that if we consider the value of real options, the real value of VC calculated is far more than the method of NPV. In the retreat mechanism, the common modes of retreat mechanism are four: IPOs, Mergers and Acquisitions, Stock Repurchase, and Write-offs. To retreat from IPO is the best retreat model. Because there are no Growth Enterprise Markets for VC to retreat in Chinese, Chinese securities could consider supporting VC companies through Buy Shell to retreat, which can achieve the same purpose as IPOs.