Problems And Prospects Of Venture Capital Management Essay

Venture capital is a type of private equity which provides support for concerns which are freshly started with high possible growing. Venture capital is really of import to states ; this is because it creates occupation chances, progress engineering, which in bend additions economic growing of the state. ( Mason, C. Pierrakis, Y. 2009 )

What distinguishes between venture capital and private equity is that private equity is normally involved in puting in big company where as venture capital invest in little start up companies. These little and immature concerns by and large have high degree of uncertainness, therefore doing them more hazardous. In extra, these concerns by and large do n’t hold many touchable assets doing it highly hard for them to procure bank loans, hence doing venture capital a really good option for them. VC houses are non interested in companies that are seeking to make a market, or companies that are in a mature market, alternatively they look for markets that have a big figure of possible users. ( Mason, C. Pierrakis, Y. 2009 )

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A typical venture capital investing normally lasts from 3 to 7 old ages, and the standard sequences of venture capital investing are the undermentioned: The laminitis of an thought or merchandise will seek and carry the venture capital house that their idea/ merchandise is reasonable and profitable. If the venture capital house is happy with the laminitis ‘s proposal, it will supply support for the laminitis to set-up ; this includes direction squad, development of a to the full functional paradigm, selling research. In return the VC house will acquire an equity interest of the invested company. Once the setting-up is finished, the VC house will supply support and support on advancing and selling the merchandise. If the merchandise is successful, making the targeted market portions, the VC house will go out cashing in its investing. ( The Smart Set-Up 2008 )

The first VC house was found in 1946 by MIT President Karl Compton and General Georges F. Doriot named American Research and Development ( ARD ) which was structured as a stopping point ended fund. ARD was highly successful since it turned an investing of $ 70,000 in Digital Equipment Corporation to a value of $ 355 million after the company ‘s initial public offering. A figure of VC houses which was structured as near ended fund was established after ARD, but it was n’t until 1958 the first VC limited partnership was established by Draper, Gaither and Anderson. Limited partnership became more common in the sixtiess and 1970s ; nevertheless the bulk of VC houses are still structured as near ended fund. ( Gompers, P. Lerner, J. 2001 )

Today, Venture Capital has been affected by the recession. Not as much money is being invested as 5 old ages ago during the tallness of the engineering bubble. Currently Venture Capitalists are diminishing at that place overall sums invested but are traveling towards apportioning more to later-stage investings. Presently there are fewer immature enterprisers with great new thoughts who are willing to put on the line edifice and prolonging a concern. However this downswing is non expected to go on everlastingly and it is China that will take the manner as the new most exciting venture market with 1.3 billion possible consumers. Yet, it is non merely China who will lift from this downswing, UK along with other traditionally strong venture markets will reappear, but the inquiry remains whether or non it will pull as much venture capital as it one time demanded. Although China is set to go the biggest venture capital market, it can without a uncertainty learn an atrocious batch from past experiences of the UK market to help its development. ( Deloitte. 2009 )

UK Venture Capital Industry Overview

Introduction: importance of the UK venture capital industry

Although the private equity industry in the UK founded its roots back in 1940s, it started to take off and turn quickly from the mid 1980s, and now is 2nd merely in importance globally to the USA. In Europe the UK private equity market is regarded as the most mature ( Tannon et al. 2005 cited in Soderblom 2005 ) . 40 % of the European PE industry is shared by the UK financess. As of % of GDP, the UK is the most important private equity investor in Europe at a degree of 1.10 % ( Figure 1 ) , but out of this lone 0.21 % goes into venture capital funding while the remainder is invested in the buyout sector ( EVCA, 2005b cited in Soderblom 2005 ) . It is of import to observe that in Europe the footings “ venture capital ” and “ private equity ” or “ risk capital ” are frequently used interchangeably, as European private equity financess typically include three chief sub-categories: venture capital for start-up concerns and early phase companies ; subsequently phase enlargement capital ; and direction buy-outs and direction buy-ins. This nomenclature differs from the one in the US, where private equity financess are considered as separate establishments from those pull offing venture financess ( European committee 2006 ) . That is why in UK venture capital is regarded as an built-in portion of private equity, but as the riskier portion of the whole portfolio of PE financess.

The UK VC Industry has been ever compared to the US VC Industry in its public presentation and chief development drivers. However, Richard, president of Library House ( 2007 ) , argued that alternatively of benchmarking each European state against the whole US, it is more sensible to research the difference in VC public presentation between separate provinces, and so compare them with states in Europe. Thus, Library House has produced a conference tabular array, which put the UK a 3rd in this ranking in 2006 with 515 minority bets deserving a‚¬1.78bn. California was foremost with 1,367 trades deserving a‚¬9.1bn, followed by Massachusetts with 338 trades deserving a‚¬2.1bn.

Development of Venture Capital Industry in UK and recent tendencies

VC Industry in the UK started from 1945, when Industrial and Commercial Financial Corporation ( ICFC ) was created ( Clarysse et.al. 2009 ) to supply capital to turning independent concerns, which subsequently became a planetary private equity house, with a‚¬8bn of assets under direction ( 3i 2009 ) . However, in 1970s handiness of experient VC directors proved to play an of import function in taking-off the industry and developing it to the most successful in Europe. From early times of the development, the UK VCs were concentrated on leveraged buyouts and enlargement type trades, as start-up chances were weak and non promising ( Clarysse et.al. 2009 ) . This is still the instance in a current VC industry in UK doing investings in established companies traditionally more attractive. However, the UK VC Industry has shown a extremist addition from ?26m invested in 1983 to ?1,048 in 2008. High-technology companies made more than 50 % of those investings ( Clarysse et.al. 2009 ) .

Over the last decennary, the UK has been keeping the mean degree of VC investing in early phase development of new ventures between 20 % and 30 % of entire VC ( BVCA 2009 ) .

VC Industry in recession

Business Forty ( 2009 ) studies that investings in ventures have decreased since 2006: 2 billion compared to estimated 750 million in this twelvemonth. This suggests that venture capital industry was affected by the fiscal crisis. In the face of the recession that has challenged their bing portfolio companies, VCs are seeking to procure more money to back up those companies. Therefore, most of the emerging chances are go throughing by without being considered by venture capitalists. Even though lower ratings of ventures seem to be a good trade for timeserving VCs, harmonizing to Deloitte Research ( 2009 ) , planetary tendencies indicate that big VC houses ( $ 500million or more ) have cut their investings more than little investing houses ( $ 99 million or less ) .

As the figure shows after the “dot-com” bubble in early 2000s the value of VC investings was falling bit by bit. But so, harmonizing to BVCA ( cited by Mason et Al. 2009 ) private equity and venture capital investings tripled in value between 2003 and 2007 from ?4bn to about ?12bn. However, the value of investings fell by 28 % in 2008 as the fiscal crisis took topographic point. These tendencies indicate thatinvestment activities in Venture Capital Industry are really cyclical and reasonably dependent on the general province of the economic system.

Beginning: BVCA Report on Investment Activity ( assorted old ages )

Importance of VC industry for growing of the UK economic system

Harmonizing to BVCA ( 2009 ) , companies backed by venture capital are more efficient and grow faster: VC-backed houses compared to those that do non have venture capital backup are more advanced and bring forth more patents ( Kortum et al. 2000 ) , they develop and launch their merchandises to the market faster ( Hellmann et al. 2000 ) , and have faster managerial professionalisation ( Bruton et al. 2005 ) .

In the UK during the clip 2002-2007, the one-year growing in figure of people employed in VC-backed companies was 6 % , gross revenues growing was 12 % yearly, and exports were 14 % yearly ( BVCA, 2009 ) . Research undertaken by IE Consulting ( 2008 ) implies that venture capital support plays a important function in doing the whole UK economic system more productive and competitory. VCs provide seed capital for new concerns assisting them to develop the new hi-tech merchandises, market them, and to turn farther to set-up their fabrication and gross revenues operations. Even though VC ‘s part to growing of national economic system is indirect, through funding new venture companies, this function is so the basis of increasing invention activities and development of advanced high-technology based houses in the state.

The study among 1013 VC-backed concerns ( IE Consulting 2008 ) in UK identified that 86 % of respondents have grown their concerns “organically” since having venture capital support.

91 % of the surveyed venture companies confirm that “venture capital was responsible for the existence/survival of their concerns and allowed them to turn more rapidly” ( IE Consulting 2008 ) . Furthermore, there are besides revenue enhancement deductions from the growing of VC-backed houses: public grosss increase as a consequence of growing in gross revenues of those houses, and accordingly more revenue enhancements are received by the authorities ( including non merely corporate revenue enhancements, but some other revenue enhancements ensuing from turning venture houses ‘ operations ) . All these facts underlie the positive impact of venture capital industry on the overall economically of import factors of the state such as occupation creative activity, growing of little and moderate-sized concerns, investings in invention and high-technology houses.

Problems of Venture Capital industry in the UK

Although UK is considered to be a universe leader in Private Equity and Venture capital sector, 2nd merely to the US ( IE Consulting 2008 ) , still there are jobs to be resolved as there are concerns that UK lags behind in the growth of ‘new high-tech based economic system ‘ and invention activities. The figure below taken from the study by Think Play Do Group ( 2009 ) prepared for BVCA, comparing VC industry development to US and Israel, the world-leaders in VC, shows that VC investings in the UK as a % of GDP are much lower than those in the US and Israel ( Figure 3 ) . This confirms the concerns that underinvestment in VC industry should be resolved and underlying jobs identified and treated suitably.

Supply and Demand drivers for Venture Capital in the UK

Since Venture Capital is so of import for the economic development of the state, it is necessary to derive insight into how VC Industry is driven by supply and demand determiners. Furthermore, the jobs in the development of this industry can be identified through the closer expression into both sides of it.

Main demand side determiners of VC public presentation in the UK

The demand for venture capital is drawn by the measure and quality of advanced companies looking for support and that are able to bring forth peculiar rates of return on those investings ( Clarysse et.al. 2009 ) . So, first of all, demand for VC is extremely driven by early-stage entrepreneurial activities in the state.

Harmonizing to GEM Global study ( 2008 ) , which explores the relationship between entrepreneurship and economic development, and peculiarly investigates “Entrepreneurial Attitudes, Activities and Aspirations” across 43 states worldwide, in the UK 41 % of big population agreed that there are good chances to get down a concern in the following half of the twelvemonth, and 52 % considered entrepreneurship as a desirable calling pick. However, merely 5 % expected to get down a concern in the following three old ages. All of these resulted in a really low rate of entrepreneurial activity, particularly at the early phase which is merely 5.9 % of the whole population. Compared to the US ( 10.8 % ) , this entrepreneurial activity is rather low, and might be a consequence of high per centum of respondents ( 38 % ) , who believe that fright of failure would forestall get downing a concern.

Clarysse et.al. ( 2009 ) explain that with bankruptcy Torahs that are more entrepreneur-friendly in the US compared to the UK, where there is high correlativity between company and personal bankruptcies.

One of the most of import factors impacting the demand of VC is a stock of cognition, which can be gathered through universities or national research labs. Strong R & A ; D civilization and easier spin-outs from those universities proved to hold really positive consequence on formation of new companies. It is besides normally considered that due to the deficiency of a civilization of commercializing research in most of the European Universities ( including the UK ) , these conditions are less effectual in easing the commercialisation of concern thoughts compared to states where universities are usually private and dependent on commercializing research in order to increase grosss. Therefore, indicants of technological chances, such as growing rate of R & A ; D investings, handiness of patents and entree to university spin-outs seem to hold a great impact on the demand for venture capital support chiefly through increasing figure of new start-up houses working those available chances.

Statistical informations ( Worldbank 2008 ) indicate that between 1996 and 2006 R & A ; D outgo in the UK as a per centum of GDP was stable between 1.5 % and 2 % .

Reasonably low capital additions revenue enhancements in the UK have had favorable consequence on demand for VC in the UK, as it makes more people willing to get down their ain company. CGT rate has been reduced since 1988 from 40 % to 10 % for higher-rate revenue enhancement remunerators for long-run investings. Though in 2008 this rate increased once more from 10 % to 18 % in 2008, it is still low plenty to promote new concern start-ups. ( Clarysse et.al. 2009 )

Harmonizing to statistical analysis conducted by Clarysse et.al. ( 2009 ) entrepreneurial activity is an of import determiner of VC investings in the UK, so in order to heighten VC activities in thecountry policy shapers should work on increasing entrepreneurial activity.

Main Supply side determiners of VC public presentation in the UK

There are different factors placing the degree of supply of VC, such as the state of affairs on the issue markets, ordinance policies, the financial environment and wider economic state of affairs.

The chief job is that the sum invested in early phase company is still low in the UK. The investors in the state are more interested in established concerns instead than in new advanced little companies, which is evidenced by the ruling buyout sector. Harmonizing to Martin et Al. ( 2003 ) and EVCA ( 2005 ) cited by Soderblom ( 2006 ) , over 70 % of all private equity goes into buyouts. For the last few old ages the early phase investings have well decreased in the UK, where VC allotments to seed and start-up stages account for merely about 5 % out of entire PE investings ( EVCA, 2005b cited by Soderblom 2006 ) . Even with the fact that between the early 1990 ‘s and 2001 the volume of investings in high-technology companies in the UK increased tenfold ( Martin et al. , 2003 ) the VC investings in high- tech houses as a per centum of GDP was merely 0.21 % in 2005 ( EVCA, 2005b cited by Soderblom 2006 ) . The Figure 4 below illustrates these tendencies during the last decennary.

These low investings in early phase houses can be explained by the impression of “short terminism” which is the prevailing attitude towards returns on investings in the Capital market in the UK ( Oakey 1995 ) . It is apparent that new high-tech based houses ( NTBFs ) have had a bad repute among investors for being undependable due to their inability to run into “fast return” demand and other “milestones” predicted in their concern programs ( Oakey 1995 ) .

Even more recent surveies ( Lockett et al. 2001 ) on “whether or non the UK VC industry has become less colored against investing in new technology-based firms” conclude that, although, investing in new high-tech based houses have increased by 2000s, the investors do non look to be take downing their mark rates of return for technology-based investings compared to non-technology-based investings at the same phase. So, even with higher credence rates for NTBFs, engineering still proves to be a more of import hazard factor than phase of investing. Particularly, the study by Lockett et Al. ( 2001 ) indicates that venture capitalists believe that many of NTBF proposals continue to be riskier than non-technology undertakings due to issues in direction quality, rational belongings protection and possible market size.

So there comes the job of equity spread for the NTBFs. These houses are unable to acquire investings from either concern angels or venture capitalists. The ground is that the little private Investors have limited fiscal resources and by and large put comparatively little sums of equity that is non plenty for the new ventures and at the same clip venture capitalists invest in bigger undertakings and the minimal amount they provide is higher than that the company asks for. Harmonizing to the 2004 Bridging the Finance Gap study, the equity spread affects concerns seeking to raise between about ?250,000 and ?2 million of equity finance, and that this spread is most terrible for sub-?1 million investings and for advanced concerns at an early phase of their development.

Exit scheme for investor. On the supply side, stock market activity and the handiness of trade sale chances were found to be of import elements. VCs think in mileposts but dream of issues. Visible issues such as stock market debuts are of import for VCs to raise financess. It does non truly count whether these companies are introduced on local or international public markets every bit long as the stock market is liquid. ( beginning )

Ideally, investings are realised through an IPO, an industrial trade sale, or a secondary sale ( Soderblom 2006 ) . However, deep and liquid stock markets and favorable conditions to recognize trade gross revenues tend to be the most of import factors for VC industry to boom. Bringing a company to IPO indicates the quality of the VC and is of import for investors in sing subsequent support unit of ammunitions, even though IPOs merely account for less than 5 % of entire issues. A secondary market in for stock exchanges in the UK was created with AIM ( Alternate Investing Market founded in 1995, and has grown significantly, from holding a capitalization of ?82.2 million in 1995 to about ?40 billion at the clip in 2008. Furthermore, the London Stock Exchange launched techMARK to assist advance bing quoted engineering stocks and pull new 1s to the exchange. However, harmonizing to BVCA there is a slow development of early phase VC in Britain and the whole Europe because of the absence of a functioning pan-European stock exchange for early phase ventures. The job is that the European second-tier markets are fragmented ( as several second-tier markets were launched ) which resulted in limited capitalization and liquidness of single markets. Therefore, reforms in capital market ordinances may be needed to let the creative activity of a individual stock market for growing companies ( including the UK markets ) advancing economic systems of graduated table ( Clarysse et.al. 2009 ) . The sizes of public financess in the UK have non enabled the industry to make a sufficient critical mass and the limited handiness of follow-on funding has resulted in a “second equity gap” . To turn to this, the authorities could cornerstone an investing into a fund-of-funds that would pull private capital from institutional investors which would put in venture capital financess able to show a path record of strong public presentation. ( beginning )

The Importance of balance between private sector and public sector investors in VC industry

Since the early development of venture capital industry boulder clay tardily 1990s venture financess were chiefly publicly-funded and supported by Business Expansion Scheme, which was replaced in 1994 by the Enterprise Investment Scheme ( Mason et al. 2009 ) . At the beginning of twentieth century Many of these financess became ‘hybrids ‘ , affecting a combination of public money and private investors, with inducements which enhance the risk-reward profile to pull private investors. Although free-standing private sector investings increased in numerical footings from 2002 until 2006, they have declined as a proportion of entire investing activity from 81 % in 2001 to 56 % in 2008. In the UK the increased engagement of the populace sector is even more evident in the early phase venture capital market ( Mason et al. 2009 ) accounting for the bulk of such investings. In 2001 public sector financess were involved in 36 % of investings. By 2003, as the assorted financess established by the Labour Government came on watercourse, this had risen to 51 % and by 2008 accounted for 68 % of all investings. The proportion of public sector investings in the signifier of co-investment strategies has grown from 28 % in 2001 to top out at 56 % in 2007, falling back to 45 % in 2008. ( beginning )

However, emerging grounds from a NESTA/BVCA survey ( Nightingale et Al, 2009 cited by Mason et Al. 2009 ) indicates that companies that have received support from public sector venture capital financess have non performed significantly better than those houses that did non have funding from such beginnings. One reading is that public sector venture capital financess may non be able to add value to the companies they manage, because there is a “necessity to pull, wages and keep together experient and committed venture capital executives to pull off public funds.” In other words, the persons running populace sector financess are extremely rewarded and incentivised to do the best possible returns. On the other manus, public sector venture capital financess may non be able to pull capable investing directors, and accordingly they are unable to do good investings ( quality of trade flow, sphere cognition, effectivity of their due diligence ) . Therefore, ruling place of publically funded VC financess particularly in economically lagging parts resulted in inefficient public presentation of regionally based financess in the Midlands and North of England, along with Scotland, Wales and Northern Ireland due to miss of entrepreneurial eco-system and necessary webs with adept VC directors and external investors, and this in bend resulted in the VC industry in UK being concentrated and limited in traditionally active Centres as London and Cambridge.

Analysis

Such a market would hold two important benefits ; foremost, it would greatly better the ability VC-backed companies to raise big amounts of capital required for planetary enlargement and secondly, it would assist to increase the mean ratings of M & A ; A minutess. Further research should be conducted to make full the spreads and update the bing literature on the feasibleness of a Pan-European stock exchange.

A briefly description of development of VC

industry in China

How it originated and developed?

China ‘s venture capital concern started from the center of 1980s. For about 20 five twelvemonth ‘s development, China ‘s venture capital has made a great betterment, particularly in the recent four or five old ages. However, there are still a batch of troubles and jobs confronting China venture capital. For illustration, deficiency of appropriate ordinances and policies, inflexible venture capital investing mechanism, deficiency of diverseness of support beginnings or deficiency of effectual issue mechanism and so on.

In 1983, the State Science & A ; Technology Commission ( SSTC ) ( now the Ministry of Science & A ; Technology or MOST ) set up a Research Group of Countermeasures to the Influence of the New Technology Revolution in order to carefully analyze the international engineering state of affairs. ( This was the first clip for China to truly confront the deductions that were taking topographic point in the development of the planetary economic system. After that from 1985 to 1995, the Cardinal Government and some local authoritiess financed and set-up investing establishments that intended to prosecute the venture capital concern. ( Jack C. Fensterstock, Aimin Li 2001 )

In the twelvemonth 1999, tonss of authorities support were lost, because of non deeply and truly understand VC. After that both authorities and private started to alter, for illustration, do some constabularies and gave better conditions for those who is good at VC.

Since 2006, VC is on its roar in China, with the authorities providing bulk of it, nevertheless the sum of both private support and the support from abroad has developed significantly,

More, VC in China is paying more and more attendings on new engineerings.

( Jack C. Fensterstock, Aimin Li 2001 )

Policy support in China

Venture capital as a hazard investing, it is extremely hazardous but besides extremely profitable. More incorporate Torahs or ordinances are needed for China ‘s venture capital development.

In China, to protect and modulate the VC markets, Chinese authorities had made some National Torahs and some local Torahs couple to its ain background. ( As the graph shows below ) In China, there are several different concern activities of Venture capital. However, it is non permitted for VC endeavors to put in warrant services or existent belongings concern activities.

Venture capital investing concern ;

Venture capital investing concern carried out on behalf of other organisations such as VC enterprises or persons ;

Venture capital investing consulting concern ;

Venture capital investing direction services provided to VC endeavors ;

Engagements in VC endeavors and venture capital direction consultancies.

( China: Venture Capital Regulations Published January 6, 2006 – Hong Kong )

With the development of policy, technological and apprehension of VC, both organisational and institutional elements in China are going more and more complex. The system that has emerged so far is extremely complex in footings of assortment and figure of organisational histrions.

Although the consequence has been dramatic, the series of alterations are best seen as evolutionary and chiefly driven by China ‘s larger aim of national technological and economic development. As such, cardinal alterations in China ‘s scientific discipline and engineering policy and concern system construction during the passage epoch can be linked to the outgrowth and nature of China ‘s venture capital industry. In this context, venture capital is at the same time an extension of anterior policy flights, every bit good as a possible reply to jobs that other policy enterprises have non been able to work out.

Balance between private and public

For the venture capital industry in China, unlike other states, it has been promoted non as a means to private addition ; it is a critical mechanism to link among scientific, technological capablenesss and end product. one manus, with national and regional economic and societal development on the other which includes the entire set of related histrions and establishments, has undergone a dramatic transmutation over the last two decennaries.

The beginning for fund is really individual, most of them are from authorities, or mixed by both private and authorities. Besides, for Chinese authorities, it is ever believed that both scientific discipline and engineering are the most important parts of its hunt for economic development. ( Steven WHITE, 2008 )

Most venture capital financess have a fixed life of 10 old ages, with the possibility of a few old ages of extensions to let for private companies still seeking liquidness. The beginning for fund is really individual, most of them are from authorities, or fixed by both private and authorities, and authorities takes the risky, compared with others, this sorts of fund do non desire to take high hazard investing.

The national and local authoritiess may set up venture capital investing counsel financess. The financess are to back up the constitution and development of VC endeavors by taking equity engagements and supplying fiscal warrants, etc. The province shall utilize good revenue enhancement policies to back up the development of VC endeavors and to promote them to put in little and average size endeavors, in peculiar in the high tech sector. The predating discriminatory policies shall be set Forth in ordinances to be drafted by the relevant governments.

Exit mechanism of Venture capital in China

China ‘s venture capital concern started from the center of 1980s ( 2 ) . For about 20 five twelvemonth ‘s development, China ‘s venture capital has made a great betterment, particularly in the recent old ages. Yet there are still a batch of troubles and jobs confronting China venture capital. Compare to developed states, China venture capital still dawdling far behind. Exit mechanism as the major procedure of doing net income from investing, it is really of import to Venture capital. However, Because of the deficiency of appropriate Torahs, ordinances or market constructions and so on, issue become highly hard for China venture capital industry.

Exit mechanism of venture capital chiefly including four methods, initial public offering ( IPO ) , amalgamations and acquisitionsi??repurchasei??write- off ( 10 ) . In China, approximately 15 % of venture capital issue mechanism is by IPO in recent old ages, this is higher than in developed states, this is non good because over half of listed companies are overseas-listed ; over 37 % of venture capital issue from amalgamations and acquisitions which is the highest comparison to the other issue mechanisms ( Qisong Wang, 2004 ) , and this is still increasing. Both Numberss are turn outing that China ‘s venture capital issue mechanism deficiencies of flexibleness, the grounds lead to go out inflexibleness can be described as follow: deficiency of appropriate Torahs, policies or ordinances ; insufficiency of a good organized market construction ; absence of a efficient intermediate service system ; restriction on endeavor ownership construction, and so on.

One large really of import component should be taken into consideration is that the Chinese authorities engagement. Most domestic venture capital establishments in China carry a authorities background or were one time province owned endeavors, this deprive them of the capableness of accommodating to the high marketization, fervent competition, high intelligence, and high-responsiveness of the venture capital industry ( Gongmeng Chen, 2005 ) . The inflexibleness of venture capital investing mechanism and deficiency of fight is another job to China venture capital development. If they do non exhaustively press forward with the marketization and globalisation reform, even though they can hold some development it will non be a long-run intrinsic development. No affair the market or policy environment in China, both have limited the accommodation of venture capital development. What the authorities can make is to construct a more specific ordinance system to govern the whole venture capital market. The Chinese market is attractive to foreign venture capitalists because of big domestic demand, rapid economic development ( Chang Sun, 2006 ) . Government itself can make puting but the more of import thing is to promote private equity and other signifiers of capital to affect into venture capital industry.

Decision

As can be seen from the analysis of the VC industry of United Kingdom as a developed state and China as the developing one, from the leader of the VC industry in Europe and the most attractive future venture capital market in Asia and in the whole universe – China, there are a batch of utile lessons to larn. First of all the venture capital system must be established on the regulations of market economic system. There should be a supply of VC and demand for it. Government can step in in the procedure of VC industry development by utilizing policy tools in order to hike these sides.

The investors should hold the ability to put in equity capital as the enterprisers should hold the possibility to acquire the resources for the development of their concerns. There should be developed capital market in order to procure an issue scheme for the venture undertakings. The hi-tech sector demands to acquire the authorities support and the chances for the venture capitalists to put in such undertakings. There should be attractive conditions for the international venture capitalists every bit good as they provide immense capitals and heighten the venture capital system with their competence and experience. For a effectual development of the VC industry the cardinal directors of venture capital establishments should be qualified specializers who have a engineering background, direction experience are unfastened to cooperation, and are willing to take personal duty for the concern determinations and their effects. Besides it is of import to better the position of enterpriser in the society and join forces more with the universities and the research centres.

In order to increase the supply of VC utilizing local resources the pension financess, insurance financess, webs of concern angels can be involved in the procedure of puting by acquiring revenue enhancement insensitive or holding minimum limitations to put.

The research made is broad but still there are many issues to turn to. Even if there are nice consequences in the industry of one state and there are ready formulas for get bying with the bing jobs still the success is non guaranteed every bit long as there are cultural differences and different contexts that can be research in progress.

Mentions

Gompers, P. Lerner, J. ( 2001 ) . The Venture Capital Revolution. American Economic Association. 15 ( 2 ) , p146-147

Mason, C. Pierrakis, Y. ( 2009 ) VENTURE CAPITAL, THE REGIONS AND PUBLIC POLICY: THE UNITED KINGDOM SINCE THE POST-2000 TECHNOLOGY CRASH. University of Strathclyde. p3.

The Smart Set Up. ( 2008 ) . Phases of Financing. Available: hypertext transfer protocol: //www.antiventurecapital.com/financing % 20stages.html. Last accessed 12 December 2009.

Deloitte. ( 2009 ) . Global Trends in Venture Capital 2009 Report, p4, p8.

Tannon et Al. 2005 cited in Soderblom 2005

European committee 2006

Library House ( 2007 ) ,

( Clarysse et.al. 2009 )

( BVCA 2009 ) .

IE Consulting ( 2008 )

Business Forty ( 2009 )

Deloitte Research ( 2009 ) ,

Statistical informations ( Worldbank 2008 )

( 3i 2009 )

( Kortum et al. 2000 )

( Hellmann et al. 2000 )

( Bruton et al. 2005 )

Think Play Do Group ( 2009 )

GEM Global study ( 2008 )

( Worldbank 2008 )

Consult the undermentioned beginning! ! ! ! : Mason C. , Pierraksi Y. ( 2008 ) . Switching Sands The Changing Nature of the Early Stage Venture Capital Market in the UK. Nesta, London.

Clarysse B, Heirman A. ( 2007 ) . Impact of VC on the Growth of Firms, Working Paper University of Gent..

Bruton G. , Fried V. , Manigart S. ( 2005 ) . An institutional position of the development of venture capital in the US, Europe and Asia. Entrepreneurship Theory and Practice. 29 ( 6 ) : 737-761.

Buckman, R ( 2009 ) Venture capital ‘s coming prostration, Forbes, 12 January.

About intercrossed financess: Murray, G C ( 2007 ) Venture capital and authorities policy, in H Landstrom ( erectile dysfunction ) Handbook of Research on Venture Capital, Cheltenham: Edward Elgar, pp 113-151.

Colin M. , Pierrakis Y. ( 2009 ) . VENTURE CAPITAL, THE REGIONS AND PUBLIC POLICY: THE UNITED KINGDOM SINCE THE POST-2000 TECHNOLOGY CRASH.

UK tops European venture capital trades Available from: & lt ; www.ft.com/cms/s/0/68db2414-bc99-11db-9cbc-0000779e2340.html? nclick_check=1 & gt ;

Clarysse B. , Knockaert M. , Wright M. ( 2009 ) . Benchmarking UK Venture Capital to the US and Israel:

What lessons canbe learned? Think Play Do Group. BVCA: 2009

European committee ( 2006 ) . Developing European Private Equity. Report of the alternate Investment Expert Group. EC: 2006

Guthrie ( 2007 ) . UK ace European venture capital trades. The Financial Times Limited 2009.

Deloitte ( 2009 ) . Global tendencies in venture capital 2009 planetary study Research.

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Early STAGE HIGH-TECHNOLOGYVENTURE CAPITAL FUNDS. DTI: 2006.

Uprint

1. Jack C. Fensterstock, Aimin Li STATUS OF VENTURE CAPITAL IN CHINA, 2001

2. China: Venture Capital Regulations Published January 6, 2006

3. Steven WHITE China ‘s venture capital industry: Institutional flights and system construction, 2008

4.Colin Mason* and Yannis Pierrakis VENTURE CAPITAL, THE REGIONS AND PUBLIC POLICY: THE UNITED KINGDOM SINCE THE POST-2000 TECHNOLOGY CRASH,2008

Mentions:

1. Zero2IPO group, China Venture Capital Annual Report 2008, 2008

2. David Ahlstrom & A ; Garry D. Bruton & A ; Kuang S. Yeh, Venture capital in China: Past, nowadays, and hereafter, February 2007

3. Jack C. Fensterstock & A ; Aimin Li, STATUS OF VENTURE CAPITAL IN CHINA, 2001

4. Anthony Aylward, Trends in Venture Capital Finance in Developing States, 1998 July

5. Steven White, Jian Gao and Wei Zhang, China ‘s venture capital industry: Institutional flights and system construction, November 2002

6. China Venture Capital Research Institute ( CVCRI ) , China Venture Capital Annual Survey Report in 2008, 2008

7. Maria Trombly, China ‘s venture capital market springs up, April 2006

8. Jerry Dauterive and Wing Fok, Venture Capital for China: Opportunities and Challenges, Volume 30, Number 2, 2004

9. China Venture Capital Research Institute, Venture Capital Cooperation and Development in China Roundtable, 2005

Fanke Xie and Qing Yang, Venture Capital Mana

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