Venture Capitalist Certification In Start-ups’ Initial Public Offerings

China’s Capital market started much later than the developed market. Since the first venture capitalist, China New Technology Venture Investment Company, established in1986, the history of China’s venture capital has only more than twenty years. However, venture capital has played an important role on fostering the start-up business growth, improving the structure of capital markets, and promoting China’s economic development. In Oct.2009, China’s GEM (Growth Enterprise Market) was successfully launched, and many start-up companies have been listed through IPO, at the same time, the venture capital instructions have a smoother way to exit. The mechanism of the participation of venture capital influencing on IPO has caused extensive attention of financial and academic people.There are already many existing literature on the mechanism of venture capital participation on IPO. But it can be seen that, first, the existing literatures are mainly based on the American market, while researches based on Chinese market are not enough; Second, the existing researches mainly focus on the influence of having or not venture capital on IPO, while not studying deeply about the degree of venture capital participation.This research uses the data of281companies which were listed in China’s GEM between Oct.30th,2009to Dec.31st,2011, based on the "certification-monitoring" model, studies the certification function of venture capital participation on IPO deeply and systematically. This topic is researched by two steps:First, assumed venture capitals are homogeneous, then studying the influence of having or not venture capital on IPO; second, giving up the homogeneity assumption of the venture capital, and deeply studying how the degree of venture capital participation influence IPO from the view of venture capital reputation, the number of venture capital investment in the same company, the shareholding ratio of venture capital, whether to send directors, the relationship between venture capital and underwriter.According to the empirical test, we can know:(1) Companies which have the support from venture capital pay a higher opportunity costs in the process of IPO;(2) Venture capital having an high reputation can effectively reduce the direct costs and opportunity costs in the process of IPO;(3) The reputation of underwriter can effectively regulate the certification role of venture capital on company IPO;(4) Factors such as the number of venture capital, the shareholding ratio, the number of sending directors have an limited certification function on IPO.