Venture Capital In Risk Control And Case Studies

Venture capital investment is a new type of investment, which targets rapid growing enterprises in the form of equity investment to realize the increase and flow of capital. Today, high technologies emerge rapidly, industrialization of high-tech accelerates, and the period for industry innovation and industry substitution also shortens. In such a modern economy, venture capital and venture capital investment become the incubator and propeller of technology and industry innovation, and thus the major force of technology development. According to its name, because of the uncertainty of market economy, limited rationality of investors, there's great risks inherent in the venture capital investment, which may result in great losses for the investors. Thus, how to efficiently identify, control and evade the risks is key to the success of the venture capital investment, and also the core content for the venture capital analysis. This thesis begins with the definition of venture capital, followed by the theoretic analysis on the origin and management of risks, and the key issues of venture capital investment——the design of transaction structure. Based on the above analysis, this thesis studies a case the author was once involved in, to demonstrate the origin of the risks, the commercial and legal approaches to the control of the risks, the framework of risk analysis and the way to design a transaction structure.To be convenient and concise for the research, this thesis consists of four chapters. The first chapter, "the origin and control of risks", focuses on the theoretic analysis of risk, venture capital investment and risk control. This chapter lays the theoretic foundation for the whole thesis and is divided into three parts. The first part introduces the concept of risk and venture capital investment, and analyses the origin of risks. Generally speaking, the risks in the venture capital include risks caused by the asymmetry of information, technical risk, market risk, financial risk and managerial risk. In the second part, the author expands the risk management method to different stages of venture capital investment, i.e., before and after the capital input. Before the capital input, investors should focus on the forecast and evaluation of risks, while after the capital input investors should focus on the evasion and control of risks. As for the third part, the author points out the key issue of risk control, i.e., the design of the transaction structure. Transaction structure, namely, means investment contracts between venture capitalists and entrepreneurs. As for the venture capitalist, it means what kind of equity and right he get in the invested enterprise, while as for the entrepreneur, it means what kind of equity and right has sold out. In fact, the contract is an agreement between the two parties on the sharing of risk and equity. A sound and precise transaction structure is essential to the success of the venture capital investment project; it also determines the structures of governance and management, and development strategy of the future enterprise.The second chapter is the case study about Chengdu Tairan New Material Co., Ltd., which is an assumed name. It is a typical example of venture capital investment project in the seed period. After introducing the background of the project, the authormakes initial design for the project and finishes the feasibility study. The project originates from a special technology invented in one of the sky research labs of Chinese Academy of Science, i.e., the technology of manufacturing of nano material. This technology is used in manufacturing hard alloy material of high quality and excellent performance. This case has several aspects attractive to venture capital. In the aspect of technology, the project itself has a comparatively advanced technology and technology monopoly. In the aspect of product market, it has great potential for reality and commercial value; in the aspect of capital market, the nano material concept is quite attractive and a h...