Research On Venture Capital Contract Terms’ Impact On Venture Growth Performance

The rise of venture capital has greatly promoted the entrepreneurial and innovative process of our society. It has triggered the formation of a great many high-tech industries and world-class companies, and has played an important role in the world’s economic growth and renewal. In recent years, the venture capital industry has achieved rapid development, and has become an important driving force of China’s independent innovation and industrial upgrading.Contracting is a key step in a venture capital transaction. A well-designed contract can provide effective constraints and incentives to the venture capitalist and the entrepreneur, thus improving the long-run competitiveness of the venture. Venture capital contracts commonly consist of a set of terms, thus research on the impact of venture capital contract terms on ventures’growth performance can provide important guide to the optimization of contract design.Based on literatures and interviews with industry experts, this paper developed measuring scales for venture capital contract terms and venture growth performance, conducted a questionnaire survey among venture executives, and analyzed the data of129valid questionnaires. Results show that venture capital terms have a significant impact on venture growth performance. Specifically, venture capital control, value-added service and share repurchase terms all have a positive effect on venture growth performance, while valuation adjustment term has an inverted U-shaped relationship with venture growth performance. This paper also ran reliability test, validity test, non-response bias test and common method variance test to ensure the reliability and validity of the results. Based on conclusions above, this paper proposed recommendations for the optimization of local venture capital contract design, thus making venture capital contracts play a better role in promoting venture growth.