The Research Of Governmental Venture Capital Guidance Funds Management In The Case Of Yancheng

Venture capital, as a kind of innovative financial instruments, not only can meet capital requirements for start-up companies, but also enhance the capability of independent innovation, promote innovation-based economic development and accelerate the pace of industrial transformation and upgrade as the important engines. Some provinces and cities established the government’s leading venture capital institutions to explore the use of venture capital with guidance of funds first in 1999. In November 2005, venture capital guidance funds were formally putted forward in the startup investment enterprise management interim measures which were introduced by National Development and Reform Commission and other ten ministries and commissions. Venture capital guidance funds had been set up and it stepped into the stage of comprehensive development.Since 2011, the governmental venture capital guidance funds, which were 100 million yuan, had been set up in Yancheng to satisfy the needs of economic development. The funds were mainly used to guide the startup investment enterprises to focus on supporting four strategic industries. In 2012, the government of Yancheng signed a cooperation agreement with the provincial government in the form of provincial and municipal supporting financial and established development funds (40 million yuan) for Yancheng key regional growth enterprises. The first mode of investment through equity investment to Jiangsu Yueda Logistics Co., Ltd. had achieved good results, initiating the governmental venture capital guidance funds in Yancheng. But it started late and developed slowly, the problem that how to manage government venture capital guiding funds were urgently needed to solve.This paper analyzes the current situation of the Yancheng governmental venture capital guidance funds management and discusses on how to strengthen the governmental venture capital guidance funds management. First, it starts from the concept of the venture capital guidance funds management and takes the "market failure" theory and the fiscal policy’s effect theory as the theoretical basis for the study.Firstly, by sorting the current policy documents of venture capital guidance funds, we could summarize that politic venture capital guidance funds should follow the three principles:the combination of government guidance and market operation, the contention-free profits between people and governments and the prominent public financial guidance to focus the management on the whole process of capital supervision, standardize and restrain from the establishment, delivery, recovery, performance or other aspects of funds.Secondly, the main problems have been founded after the study of two projects of Yan Cheng’s venture capital guidance funds. The main problems exist in five aspects as follows. First, the single source and small scale of funds cannot meet the needs of local economic development. Second, the mishandling of government guidance and market operation relations leads to the government failure and market failure. Third, the exit channels for venture capital guidance funds are not smooth, which hinders the recycling of venture capital funds. Fourth, the performance management of venture capital guidance funds operation is not complete, and the government regulations have "vacuum". Fifth, the lack of policy causes the preferential terms and the guidance of scientific funds management difficult to adopt workable measures.Thirdly, this paper researches on the status quo of governmental venture capital guidance funds of four municipalities in America, Australia, Taiwan Province and Jiangsu Province. And it also sums up experience drawn through the politic venture capital guidance funds. They are the multi-channels for fund-raising, scientific decision-making mechanism, the thorough exit strategy, the reasonable evaluation system.Fourthly, drawing on the experience of advanced areas, basing on Yancheng’s realities, the integrated using of "market failure" theory and fiscal policy spending effect theory, the author proposes the five recommendations to strengthen venture capital guidance funds management. First, expand the scale of guidance funds by increasing financial investment, encouraging investment in state-owned enterprises and attracting private capital to enrich guidance funds. Second, clarify the relationship between government guidance and market operation; ensure the normal operation of the funds through market-oriented forms and policies. Third, make up exit channels through timely exit, set up complete channel, develop agencies. Fourth, establish performance evaluation mechanism in line with the principles of public finance. Fifth, implement talents, taxes, subsidies and other financial incentives to optimize the development of the external environment to guidance fund.