Project complexity, the structure of venture capital syndication, and the success probability of projects

Chen Minling; Dang Xinghua; Chen Hongxia

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Science Research Management ›› 2012, Vol. 33 ›› Issue (12) : 94-103.

Project complexity, the structure of venture capital syndication, and the success probability of projects

Chen Minling^1,2, Dang Xinghua¹, Chen Hongxia³

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Abstract

A new theoretic model of two-stages Venture Capital (VC) finance sequence for the entrepreneurial firms project from dual perspective is set up based on project characteristics and venture capitalists, the effort level of venture capitalists and their equilibrium solution within syndicate financing modes are analyzed, the relationship among project complexity, the structure of VC syndication, and the success probability of projects is studied. Finally, the following conclusions are drawn: (1) Due to the contract structure of VC syndication, a low level of effort is provided by the venture capitalist with a high-cost VC, and a high level of effort is provided by the venture capitalist with a low-cost VC. (2) Firms having less complex projects are more likely to seek financing from a single VC, because it needs less heterogeneous expertise, firms having more complex projects are more likely to seek financing from a VC syndicate, because it needs more heterogeneous expertise. (3) Both the structure of VC syndication and the effort level of venture capitalists influence the success probability of projects interactively.

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project complexity / VC / effort level / structure of venture capital syndication / project success probabili

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Chen Minling, Dang Xinghua, Chen Hongxia. Project complexity, the structure of venture capital syndication, and the success probability of projects[J]. Science Research Management. 2012, 33(12): 94-103

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