Venture Capital Introduction

Venture Capital ("VC") is also called venture fund. Nowadays, Venture Capital has shifted its orientation from traditional industry to high and new-tech business creation, while high and new-tech field is an important way to gain high investment return.

Characteristics of Venture Capital

• Object of Investment : Medium or small-sized enterprises in stage of business creation, and mostly being high and new-technology enterprises
• Term of Investment : 3-5 years or over, generally by means of equity investment, which usually accounts for 15-30% equity interests in the invested enterprise, without requirement for control power
• Decision of Investment : On the basis of expert assessment and evaluation
• Relation of Investment : Investment company will proactively take part in the operation and management of the invested enterprise, and provide value-added service
• Strategy of Investment : To determine the manner, scale and other aspects of investment according to different development stages of the invested enterprise (i.e. seedling stage, creation stage, growth stage, expansion stage, maturation stage), for the purpose of reducing investment risk
• Return on Investment : It is not aimed to procure investment bonus, but to withdraw investment by means of listing, acquisition, merger invested enterprise or other equity transfer

Manners of Venture Capital

• Investment directly in the invested enterprise by installments
• Procurement of bank loans through Venture Capital Company security
• Partly loans on security and partly direct investment

Standards of Venture Capital

• It has potential market
• Science and technology is specific to market demand
• It can set up market advantage
• It can become market leader
• Its management has talents and foresights
• It has significant return

Steps to draw Venture Capital

• To familiar with corporate finance process
• To show corporate value
• To prepare business prospectus
• To promote enterprise
• Evaluation and due diligence
• Transaction negotiation
• To sign agreement

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