Start-up Of High-tech Corporate Finance Issues

As the world enters the era of knowledge-based economy, emerging high-tech firms are becoming the mainstream driving force of technological progress and innovation. However, newly-established high-tech companies are facing acute shortage of fund. This gap in financing thwarts the further development of those firms, which in turn has negative impact on technological progress and economic growth. The root of the gap lies in the huge informational asymmetry between potential financiers and start-up firms. Yet the asymmetry is generated by start-up companies' high risks, technological uncertainty and creativity. It' s the friction between start-ups' unique demand for financing and the inherent nature of capital, that is, maximum return under minimum risk that brews the gap in financing. Based on an analysis of characteristics of this kind of financing, this article aims to find out financing channels and strategies suitable for high tech firms. There are four parts of this article.In the first part, the authors will introduce characteristics of high-tech firms and analyze the difference between the demand for and supply of high-tech financing. The authors will point out that since what the high-tech start- ups actually possess are intangible assets; neither do they have mortgageable asset nor qualified collateral. What exasperates the problem is the fact that as start-ups, those firms are unable to present significant sales volume, profit and cash flows, which are vital for repaying their short-term debts. Their ability to maintain long-term profitability and repay long-term debt is even weaker. As a result, traditional bank financing usually avoids start-ups. In addition, as the second-board securities market has been called off, these firms' financing choices are further limited.In the second part of the article the authors suggest four financing options based the characteristics of start-ups. The first option is venture capital financing .The authors will provide some knowledge on a) how to recognized VC financing; b)how to make VC business planning; and c) how to present their business plans effectively. The second option is financial leasing. The third one is knowledge capital financing. For example, scientists in high-tech firms can be allowed to convert his knowledge capital such as patents and franchise to company shares. In this way talented people will feel compelled to make greater contribution to firms .The fourth option is technology contract financing, which is actually another kind of knowledge capital financing. The authors will introduce the concept of technology contract financing and its execution plan.In the third part, the authors will elaborate on how high-tech firms take different financing channels and strategies according to their financial characteristics during the incubation and starting periods.In the fourth and the last part of this article, the authors put forward her new conception on start-up high tech firms: to closely stick to the three steps of financing, to link with knowledge and capital and to further improve ability to create and innovate after introducing VC. Conclusion: The shortcomings and inadequacy of this article. This article is weak in empirical evidence to support its theoretical founding. There are many articles on the financing of high-tech firms home and abroad. Yet most of them try to tackle the problem from the perspective of the financing environment and government's role while leave the issue of high-tech firms' own financing structure and demand rarely touched. This article seeks to tackle the problem by subdividing its stat-up period and designing their financing channel and strategy.