Research On VAM In Private Equity Financing Of Innovative Small And Medium-Sized Enterprises

As the main body of technological innovation,innovative SME is an important part of China's innovation driven development strategy.It has the characteristics of "high growth,high investment,high risk and high return".Because of the limited profitability of the innovative SMEs,their endogenous financing is difficult to meet the funds needed for innovation.The innovation of SMEs not only has the features of small scale,imperfect governance structure like general SMEs,but also has the feature of high risk,which makes it difficult to obtain bank loans.Innovative SMEs are difficult to achieve legal qualification of bond financing and equity financing The innovative SMEs in China are facing serious financing difficulties.In recent years,with the rapid development of China's capital market,the development of private equity financing has been promoted.Private equity financing has become an important financing channel for innovative SMEs to seek rapid development.Private equity financing is often accompanied by the signing of VAM.Private equity investors often use VAM to lock their own risks,reduce the problems caused by information asymmetry between investment and financing parties,and also can restrain and motivate financiers.However,the unreasonable design of the VAM will lead to the imbalance of the interests of both sides of the investment and financing,which makes the investment and financing parties face greater risks.This paper studies the case of the Mandalat Software Corporation to demonstrates that private equity financing is one of the effective ways to solve the financing problem of SMEs,then analyze the necessity of the VAM and various types of risk.and put forward the corresponding strategy of signing the VAM.The design of VAM should carefully consider the following points: determine a reasonable agreement onVAM,a reasonable set of financial performance terms,reasonable design time to market terms,careful to set up special rights provisions,hope provide some suggestions for other innovative small and medium-sized enterprises when sign VAM in private equity financing.