| Author | He, Qichun |
| Call Number | AIT RSPR no. SM-01-37 |
| Subject(s) | Venture capital--China
|
| Note | A research study submitted in partial fulfillment of the requirements for the degree of
Master of Business Administration in the International Business, School of Management |
| Publisher | Asian Institute of Technology |
| Series Statement | Research studies project report ; no. SM-01-37 |
| Abstract | Entrepreneurship plays a significant role in the development of an economy, especially in
structural transition. Entrepreneurial finance differs dramatically from corporate finance and
is key to ventures' success. The research is a comprehensive exploration made into the
various sources of capital such as venture capital, stock market and other debt sources, the
financial climate for entrepreneurs in China in terms of historical development, and general
procedures and principles to be followed by entrepreneurs in fundraising based on the external
environment survey.
Basically, there are three major channels that could provide substantial amount of capital for
new ventures: venture capital, which takes high risk in equity investments and accordingly
requires high return; stock market, which channels capital into ventures through public
flotation and serves as an exit for venture capitalists; bank debt, which is generally risk-averse
and less accessible unless a venture establishes a track record or has enough tangible
collateral. There are some complementary sources of capital that ventures can resort to at
different stages of development.
Arguably, the entrepreneurial financial infrastructure is taking shape in China. The venture
capital industry, with serious efforts by the government as well as sustaining involvement by
international players, has achieved significant development since 1993. However, by western
standard, the industry is still far from efficient, due to both microeconomic and
macroeconomic problems such as inexperience of fund managers and entrepreneurs alike;
insufficient capital flow into the industry; and some other institutional and legal impediments.
Hopefully, the promulgation of a law regulating the industry will further level the playground
and the ever-deepening involvement by international investors will set up industrial standards
to be followed by local practitioners. The stock market has been virtually closed to ventures
because of the high thresholds and some institutional arrangement like the quota system. The
impending birth of a NASDAQ-like secondary market will open another financing channel by
itself for entrepreneurs and it will also function as an exit mechanism for venture capitalists,
leading to a favorable cycle in the industry. In the banking sector, the burgeoning city
commercial banks as well as urban credit cooperatives will be entrusted as vanguards in
providing debt capital to ventures. The maturing guarantee system for providing debt to
small-and medium-sized enterprises as well as the overall reform taking place in the industry
will make credit even more accessible to ventures.
In the financing process, a venture at a certain stage of development should develop a
financial strategy framework to guide its financing activities. In China, the government can
always be a source of help in many forms. Also, ventures should always try to seek valueadded services besides money in each round of financing. There are a handful of other
financing tips a venture should in fundraising in China. The case of WULEESC is studied to
illustrate how a venture raises capital at different stages of development in China and to
provide insights into the key principles ventures should observe in raising capital.
|
| Year | 2001 |
| Corresponding Series Added Entry | Asian Institute of Technology. Research studies project report ; no. SM-01-37 |
| Type | Research Study Project Report (RSPR) |
| School | School of Management |
| Department | Other Field of Studies (No Department) |
| Academic Program/FoS | Master of Business Administration (MBA) (Publication code=SM) |
| Chairperson(s) | Ramachandran, N.; |
| Examination Committee(s) | Tang, John C. S. ;Sununta Siengthai ;Gupta, Jyoti ; |
| Scholarship Donor(s) | Government of People's Republic of China ; |
| Degree | Research Studies Project Report (M.B.A.) - Asian Institute of Technology, 2001 |