VC and academic community. Then he took examples and demonstrated various problems about venture capital funds

Transcription

1 Index Coernicus Value (2015): Imact Factor (2015): Research on VC and PE Industry Chain Symbiosis Relationshi and Mode Address: Meng Fang-Lin, Tian Zeng-Rui 1 PhD candidate in Management College of Donghua University, mfanglin[at]163.com, Jinhai Road No. 2727, Pudong district, Shanghai, China, Shanghai Shanda University, Lecturer. Mobile No.: Doctoral Suervisor, Management College of Donghua University, Shanghai, China zrtian@dhu.edu.cn; Address: Donghua University, West Yanan Road No. 1882, Shanghai, China (DongHua University Management College, Shanghai Abstract: This article analyzed VC and PE symbiotic relationshi which combined the characteristics of VC, PE and their industry chain based on the symbiotic theory. It will identify and describe the VC and PE industry chain mode. Moreover, it will use analyze Method to study two kinds of modes and the overall mode of symbiotic develoment. Based on the above research, derived the whole VC and PE symbiotic system. With the adatation to the symbiotic and itself evolving, the VC and PE symbiotic system will evolve into the integration mutualism symbiotic mode which is the most ideal. Finally, this aer uts forward the harmonious develoment ath for VC and PE in china achieving the recirocity continuous symbiotic from imroving the symbiotic environment and enhancing the symbiotic units viewoints. Keywords: VC; PE; Industry Chain; Symbiosis Mode 1. Introduction VC and academic community. Then he took examles and demonstrated various roblems about venture caital funds Researches show that VC and PE are extremely imortant based on colleges and universities. Avnimelech and for enterrise growth and develoment. The theorists focus Teubal(2004) combed the develoment rocess of venture on the relationshi between VC and PE in recent years. The caital in Israel, and conclude that venture caital funds investments of every stage suort the innovating ush the develoing of innovative enterrises. They also enterrises during its raid growth by the successful analyzed the co evolution and dynamic growth of VC and business such as Ale, alibaba, IBM and so on. Venture innovative enterrises by methods of variation, selection Caital and Private Equity form the industry chain from the and reroduction. Avnimelech and Teubal (2006) analyzed different invest stage reference. This industry chain can the and evolution of VC and high-tech industry in meet financing needs of different stages. As caital Israel by the industry life cycle model. In China, Yuan amlifier, risk conditioner and enterrise incubator, the chunqing(1998) formulated the theory on the industry chain romotes the develoment of innovating and base of economic ersective for the first time, and traditional enterrises. From the ecology view, VC and PE researched the small business roblems. Venture caital relevant economic symbionts based on the relation between clusters were divided into homogeny, suly and demand under the certain diversity and comounded by Yang environment, they can create and share rofit through some Qing and Zhang Lily(2010), they established network tye kind of model. model, satellite model and combined tye model of venture industrial caital cluster, and through the 2. Literature Review emirical research to test in Wuhan. The related research of scholars at home and abroad concentrated mainly on the Germany Biologist Anton De Bary(1879) roosed alication of theory, the secies of concet, that is different organisms live together model. But the research of VC and PE industry is less. closely. Economists and managerialists try to use the theory in the economic life through develoing 3. Research on the Symbiosis relationshi of and erfecting. Frosch and Gallooulos(1989)roosed VC and PE industrial ecology and industrial ecological system based on theory, hereafter theory begin to be 3.1 Analysis of VC and PE Industry Chain widely used in industry research. Bradford(2003) summarized the and evolution ath of VC refers to that the investors receive funds in a certain way, biotechnology industry and venture caital industry chain then ut the equity share caital into early stages of through analyzing the develoment history of venture innovating enterrises which are emerging, high-growth or catial industry in America. Lerner(1999) indicated that enormous otential. The investors have rich industry colleges and universities would like to establish indeendent exerience, secialized knowledge, then they can articiate in the management of the innovating enterrises by taking VC deartment on account of the investment scoe full advantages of their efficient administration and limitation after he researched the relationshi of financial exertise rorating. The investors will choose to 1312

2 Index Coernicus Value (2015): Imact Factor (2015): IPO, M&A, Buy-back or transferable stock otions to exit they coexistence and co-evolution can romote the venture to get high returns when the enterrise has matured caital industry to sound develoment and win-win. relatively. The key three elements of VC and PE symbiotic system are units, model and symbiotic VC invests innovating enterrises which are start-u stage environment. VC and PE are the basic material conditions in or growth stage in general. PE invests mature enterrises symbiotic system, they invest into innovating enterrises, so which have gradually formed a certain scale, generated VC and PE belong to homogeneous symbiotic units. The stable cash flows and management's efficiency. They focus quantity and variety of symbiotic units are the imortant on the equity investments of the innovating enterrises' later character in symbiotic system, they are also the fundamental stage. VC and PE industry is a value-added chain that its constraints which to decide the formation and develoment oerational object is caital. This industry kees closely of symbiotic system. The quantity of the same kind with the cycle rocess of the venture caital. The roviders symbiotic units reflects the density. The symbiotic density of caital(investors), the oerators of caital(venture of VC and PE will develo to the maximum which the investors) and the users of caital form the trinity venture symbiotic environment can sustain because of the similarity. caital cycle system. One of the subjects is the VC The moderate symbiotic density benefits the evolving of oerator.vc and PE should raise money from investors first, symbiotic system which would to the symmetry mutualism. select and decide, then invest into the innovating enterrises. VC and PE rely on their rocession and resource The intrinsic nature of VC and PE and variation in sueriority, and they take full advantage of caital to the symbiotic system deend on the quality arameters of innovating enterrises which are high growth otentiality, symbiotic units. In the symbiotic system, the quality high-tech, high-risk, high-return.vc and PE articiate in arameter is not the only, but is a grou. There is one cororate governance, suly value-added services, when quality arameter which is the main arameters lays a they realize enterrise-hatching, they will exit the leading role in the secial financial, legal olicy and investment. The caital would return to the VC or PE, the industry environment. We choose ROI (Return on investment income would be distributed to the investors, investment) as the main quality arameter. While the then the caital can continue to start a new-round arameters reflect the external characteristics of VC and PE investment oeration. in the symbiotic system, they are the aearances of symbiotic units. We would identify the symbiotic The formation of VC and PE industry is closely bound u relationshi through analyzing quality arameters, and the with the develoment rocess of the innovating enterrises, main quality arameters are the determinants of a large number of innovating enterrises establish characteristic and coefficient. They can rove the multi-layers network. The rogress of innovating enterrises relationshi of VC and PE. went through five stages: Seed, Start-u, Develoment, Exansion and Maturity. Different VC and PE would invest Table 1: Qualitative Parameters and Parameters in VC and to the same innovating enterrises or the same venture PE Symbiosis System caital also invests to the different develomental stage of Qualitative Parameters Parameters the same innovating enterrises. VC and PE industry in this VC PE VC PE study is comosed of multitudinous investors, including VC which invests in Seed, Start-u, Develoment and PE which Investment Investment Registered Registered focus on the exansion and maturity. They form a size size caital caital connecting and interdeendent chain-tye associated Investment Investment Organization Organization organization according to logical relationshi and stage stage mode mode sace-time layout. Investment Investment Caital size Caital size industry industry 3.2 Symbiosis relationshi Analysis of VC and PE Industry Investment Investment Administration Administration chain round round mode mode Return on Return on Number of Number of The symbiotic relationshi of VC and PE include three categories: the internal symbiotic of various subjects in VC investment investment investment investment and PE industry on the micro level; the symbiotic between roject roject various subjects in the VC and PE industry on the medium Annualized Annualized Shareholding Shareholding level; the symbiotic relationshi between venture caital return return ratio ratio industry and other industries on the macro level. The key Value-added Value-added Human Human oint of this aer is the symbiotic relationshi on the service service resource resource medium level. Exit way Exit way Investment Investment According to the theoretical analysis about symbiotic (Yuan decision decision Chunqing,1998),VC and PE are indeendent, they attract each other and cooerate because they can share the same Main quality arameter:roi resources or comlement different secies resources, then VC and PE would inherit and retain their resective 4. Symbiosis Characteristic Correlation of VC roerty and state. The benefits of VC and PE can both and PE increase when the internal and external resources collocation efficiency have imroved, which would generate new energy in the whole symbiotic system. The essential Symbiosis characteristic correlation of VC and PE is a kind characteristic of VC and PE is cooeration. That of association degree between the main qualitative 1313

3 Index Coernicus Value (2015): Imact Factor (2015): arameters, which reflect the degree of interaction effect (2.1) that from VC and PE resective return on investment. This is the most basic characteristic, the relationshi of Hyothesis VC is V, PE is P, Z v is ROI of VC, Z is ROI of PE, then v is characteristic correlation characteristic correlation and is of VC and PE: shown in Table 2. dzv / Z v dz / Z v Z dzv Z P Z v ( dz 0) ( non consecutive) Z v dz Z v Z Table 2: The relationshi of characteristic correlation and Symbiosis >0 <0 Characteristic v v v v v v v v correlation Symbiosis Positive symmetric Positive Reverse Reverse status non-symmetric symmetric non-symmetric The coefficient of VC and PE The coefficient of VC and PE describes the interactional degree between the main qualitative arameters of the two units. v v v v (2.2) v v v v v v 1 (2.3) In the general way, the coefficient v will decrease with v increase, there are some conditions shown in Table 3: Symbiosis coefficient Imact of units Table 3: The imact of coefficient and units v v 0 v v 1 v VC have no PE have no VC's imact on Interaction VC's imact on imact on PE imact on VC PE is greater than imacts of VC PE is less than PE's imact on and PE is same PE's imact on VC VC 5. Analysis on Symbiosis Mode of VC and PE Industry The interaction form of units is the mode of VC and PE. The interactional function mode of VC and PE, the functional intensity, the substance information and energy exchange relation of VC and PE are the embodiment of the mode. On the basis of theory, the model consists of organizational mode and behavioral mode. 5.1 The Symbiosis Organizational Mode of VC and PE The organizational mode divides into oint, interval, successive and integral according to the connection level of VC and PE. VC and PE cooerate by accident form oint mode, which is the first stage of interval, successive and integral. The sot mode is rudiment of other modes. In the venture caital industry, the of VC and PE is homogenous, they lay a role each other in romoting. When the various business interact more and more frequently between VC and PE, the benefit mechanism can drive VC or PE, even both of them to romote organizational mode to a higher level, then form a stable mutualism in the end. 1314

4 Index Coernicus Value (2015): Imact Factor (2015): Table 4: The organizational mode of VC and PE The organizational Stage Feature Develoment mode of VC and PE direction The oint mode lower 1. short-term, random, occasionality and uncertainty in interaction The interval 2. They make efficiency finitely, the evolved result is not obvious. mode The interval mode low 1. looser cooeration relationshi The successive 2. relative stability, but incoherence mode 3. They form the co-evolution feature. 4. They can evolve and innovate resectively, and they can interact on The oint each other to evolve and innovate. mode The successive mode higher 1. continuous, internal inevitability, stability The integral 2. obvious evolving feature mode 3. They obtain resources and energy that they needed, in the mean while they kee indeendence,which romote VC and PE industry evolution. The integral mode The 1. Ecto evolves into endo, indeendence fades Ideal state, it is highest away, VC and PE form symbiont. difficult to 2. VC and PE rely on the symbiont, and the secialization degree achieve in reality deeens vertically, the scoe of division exands in horizontal. 3. VC and PE can evolve and innovate faster and better 5.2 The Symbiosis Behavioral Mode of VC and PE The behavioral mode can be dividing into arasitism, commensalism, dissymmetry mutualism and symmetry mutualism according to the equality degree of energy distribution between VC and PE. The behavioral model will evolve into energy distribution symmetry from asymmetry. a. The arasitism mode of VC and PE shows that one unit hatching another, but arasitism model doesn't make new energy by itself. In this rocess, unidirectional energy and matter flow to arasite from the host of arasite. So the comanies don't want to rovide service to another comany without rewards, this behavioral mode just the abstract in theory. Because of the active-assive relationshi between the units, there is little chance to realize arasitism model in VC and PE industry. b. The commensalism mode of VC and PE shows that one unit suorts another, this model is single-win which can make new energy, and the new energy can transfer from one unit to another. When one unit benefits from another, it can't damage the benefit of another. This model is conducive to the innovating of rofitable unit. But another unit is adverse while there is no comensate mechanism. So it is not win-win mode, this behavior model lacks motivation. It is not steady and long although it occasionally aears. c. The cooeration and communication of VC and PE can form the dissymmetry mutualism model gradually. VC and PE benefit from win-win,the new energy from division and cooeration can allocate with asymmetric broad sectrum. The allocation of achievement is asymmetrical. One unit obtains more, and another obtains little. VC and PE evolve unsynchronized because of the energy accumulation difference. This model is the most common and it is heavily influential. d. Dissymmetry mutualism and symmetry mutualism are collectively called the recirocal. The new energy from division and cooeration is the greatest. The new energy will allocate evenly and broadly between the units. VC and PE obtain the benefit equally and accumulate the equal energy, then finish concurrent evolution. The mutuality mode is the most efficient, the most cohesive and the most stable in the four forms. It is the most recious and ideal tye in the VC and PE industry. The active-active interaction makes the evolution synchronous and romotes them to take innovation advantages, then develo toward the win-win cooeration. 5.3 VC and PE Symbiosis System State The organization mode M consists of oint mode M1, interval mode M2, successive mode M3 and integral mode M4. The behavior mode P consist of arasitism mode P1, commensalism mode P2, dissymmetry mutualism mode P3 and symmetry mutualism mode P4. In theory, the two models combine together to deduce 16 mode. But not all VC and PE modes exist in reality. The deduction is as follows: M 1 M 2 Pi={ P 1, P2, P3, P4 }; Mj= ; S=M P M 3 M

5 Index Coernicus Value (2015): Imact Factor (2015): connect and balance in venture caital oerating rocess, M 1P1 M 1P2 M 1P3 M 1P4 which includes financing, investment, administration and M 2P1 M 2P2 M 2P3 M 2P4 exit. S=M P= = M 3P1 M 3P2 M 3P3 M 3P4 To enhance VC and PE industry chain stability and romote M 4P1 M 4P2 M 4P3 M 4P4 the co evolution of VC and PE in China, the environment should be imroved. The government should M 1P2 rovide the olicy suort to romote the develoment of VC and PE industry chain; regularize and guide the M 2P2 M 2P3 economic behavior of each articiates to increase the M 3P3 M 3P4 oeration efficiency of venture caital institutions. Firstly, M financial service and financial innovation are the essential 4P4 guarantee of VC and PE industry chain sound develoment. According to the develoment environment and So we should accelerate the reform and innovation of the characteristic, any modes related to arasitism financial system, establish a multi-level caital market don't exist. The commensalism mode (P2) only beneficial to system, give full lay to new tertiary board, growth one unit can't be consecutive, it only exist in enterrise market and small late market. Over-the-counter oint model or interval mode(m1p2 market and technology roerty transaction market can M2P2). The interval mode and the successive offer erfect roerty regime environment. Secondly, the mode can aear dissymmetry mutualism mode. develoment of venture caital industry needs the venture This model mainly is successive mode on account caitalists that have rich financial knowledge, erfect of broad sectrum, that is M3P3. The interval mastery of moral sentiments, acute insight and business mode is difficult to form symmetry mutualism mode, so it administration exerience. The scientific and technological mainly is dissymmetry mutualism mode. If there is talents who master cutting-edge technology in high-tech symmetry mutualism mode, it is certainly enter into fields and the entrereneurs with innovative ioneering successive mode(m3p4). The integral consciousness are essential for the sustainable imrovement mode belongs to bureaucratic organization, it must be of VC and PE industry chain.a favorable talent symmetry mutualism relationshi once this haens which environment should suort the exloitation, cultivation, is symmetrical recirocal integration mode full and free mobility of talents. Thirdly, the high-tech (M4P4). industrial arks which are high scientific and technological content, the high density of caital, high degree of industrial 6. Conclusion and Suggestion mutual relation and rich human resource can gather various innovation resources and build a higher latform for the The system of VC and PE form mutual develoment of VC and PE industry chain. The harmonious interdeendence by a certain mode in the secific and healthy successive mutualism model develoment of environment. The environment of VC VC and PE industry chain in China need the joint effort of and PE industry includes macro-economic environment, government, venture caital industry and high-tech laws and olicies environment, financial environment, enterrises. We should strengthen the business cultural reserve of talents, technical innovation, social and cultural construction of honesty, secification and cooeration in the environment, intermediary service system etc.the external cultural traditions which is rational, inclusive and environment and the system internal function which can diversified. It benefits to sread the develoing sace of VC self-adjust, self-udate and self-organize form good and PE that constructs sociocultural environment which interaction through the communicating and sharing of encouraging creative sirit. material, information and energy. VC and PE industry system develo from oint commensalism model References to ideal successive mutualism model, then move toward the co evolution finally. The ideal venture caital industry [1] Bradford T C. Evolving Symbiosis-Venture Caital and develoment mode is that VC should focus on the early Biotechnology[J].Nature Biotechnology,2003,21(9): stage of innovative enterrises. The value-added service such as high-efficiency business administration, olicy [2] J. Lerner. Venture Caital and the Commercialization of grass accurately and the sharing of ustream and Academic Technology : Symbiosis and Paradox in downstream resource make the innovating enterrises grow Branscomb,L.,Kodama,F. and Florida,R.(eds.) to maturity. PE will join in to invest when the innovating Industrializing Knowledge [M]. The MIT Press. Boston. enterrise develo to the middle and late stages. PE can give Mass.1999 full lay to advantages to hel the innovating enterrises [3] G. Avnimelech & M. Teubal. Venture Caital Start-u choosing IPO, M&A, MBO and so on.both PE and Co-evolution and the Emergence & Develoment of innovating enterrises will realize value-added. The Israel s New High-tech Cluster[J]. Economics of short-sighted quick results investment mentality of VC and Innovation and New Technology,2004,13(l):33-60 PE would lead the venture caital industry to the disorder [4] G. Avnimelech & M. Teubal. Creating Venture Caital develoment. But the of VC and PE need to Industries that Co-evolve with High-tech: Insights from 1316

6 Index Coernicus Value (2015): Imact Factor (2015): an Extended Industry Life Cycle Persective of the Israeli Exerience[J].Research olicy,2006,35(10): [5] Yuan chunqing.symbiosis Theory---and smallbusiness[m]. Beijing : Economic Science Press,1998 [6] Zhou Yueling. Symbiosis Develoing Evaluation Research of VC and PE industry [D].Shanghai:Donghua University. [7] Yang Qing,Zhang Lili.Symbiosis Model and Emirical Research of Venture Caital Cluster[J]. Pioneering with Science & Technology Monthly,2010(11):44-45 [8] Ashton, 2009 W.S. Ashton, The structure, function, and evolution of a regional industrial ecosystem, Journal of Industrial Ecology 13 (2) (2009): [9] Dushnitsky, G., and Lenox, M. J. When does cororate venture caital investment create firm value? [J]. Journal of Business Venturing, 2006(21): Author Profile Meng Fanglin, mfanglin@163.com, Mobile No.: , Address: Room 8426 No. 2727Jinhai Road, Pudong district, Shanghai, China 1317