A Research On Venture Capital Decision-Making Based On Case-Based Decision Theory

With the steady operation of China's economic development and the strengthening of China's support for innovation and entrepreneurship,the Venture Capital(VC)industry is also ushered in the spring.However,the VC market is complicated at present.The VC institutions do not have a deep understanding of venture enterprises.They choose the investment projects through personal views or previous experience,which lacks reasonable basis.In addition,VC is a field with high uncertainty.How to maintain a high return under the control of uncertainty is a question that this thesis and many scholars have been thinking about.In addition,it needs to make satisfactory decisions with limited information in VC field,which poses great challenges to research methods and research means.In order to solve the above problems,this paper proposes a venture capital decision method based on Case-Based Decision Theory(CBDT).This method can make a satisfactory decision in the VC field with high uncertainty and little information,and consider the behavioral characteristics of VC institutions and the utility level,which is more similar to the thinking of venture capitalists.Therefore,this method has practical significance and theoretical value in decision-making.Throughout this thesis,the work done in this paper is mainly divided into the following four aspects:(1)The rationality of CBDT method applied in the field of venture capital is discussed.Firstly,literature review is made on the research of CBDT,VC decision-making and decision methods.Secondly,by summarizing previous researches on venture capital,this paper finds that venture capital is characterized by uncertainty,information asymmetry and bounded rationality.Through the discussion of the practice of venture capital,this paper finds that the behavior of venture investors has the characteristics of relying on experience,constantly updating the case base,constantly adjusting the psychological expectation of case income,and considering the case income,etc.And CBDT can meet these characteristics.Therefore,compared with other methods,CBDT has good research significance and application value in the field of venture capital.(2)The calculation method of similarity and the calculation method of similarity threshold level are proposed.Firstly,this paper proposes the similarity calculation method and gives the specific calculation formula of qualitative data,clear number and language variable data.Secondly,this paper adopts simple majority method,average method,median method and fluctuation principle method as the calculation method of similarity threshold.In the case of considering only the characteristics of VC projects,a moderate threshold should be adopted through the test of empirical data.And for the purpose of reducing risk and prudent investment,the median method is suitable to calculate the threshold value in this thesis.In this way,the interference of more irrelevant cases can be eliminated while more relevant cases are guaranteed to participate in the calculation.Moreover,the difference between the results of the calculation is large enough with the calculation of the median method,so that the decision makers can clearly judge the pros and cons of each alternative case,which is conducive to VC institutions to make a relatively reasonable investment decision.(3)The calculation method of utility value of similar historical cases and the optimization method of alternative cases are put forward.Specifically,this thesis discusses the calculation method of the attribute utility value of similar historical cases,the calculation method of the utility value of similar historical cases,the calculation method of the expected level of alternative plan and the optimization method of target cases.And the calculation method of attribute utility value of similar historical cases is given for two data types of attribute value,which are clear number and language variable.(4)The CBDT-based venture capital decision-making method is constructed and its validity is tested.Based on the CBDT model and the characteristics of the VC market,this paper proposes a VC decision-making method based on CBDT and introduces each step of the method in detail.Afterwards,37 venture enterprises that have withdrawn by VC institutions are selected as historical cases,and another 5 NEEQ enterprises are selected as target cases.The cases are simulated with the VC decision method based on CBDT.Finally,this thesis explains the rationality of the calculation results from three aspects.It is found that CBDT based venture capital decision-making method can summarize the past successful experience and learn the lessons of failure,and can select the target cases that are similar to the successful cases,so as to avoid human intervention in decision-making.It shows that the VC decision-making method based on CBDT is practical,valid and rational.