Conclusion

With the mirror of the practice of American VCs, this book has demonstrated that the corporate governance of Chinese state-controlled listed companies has badly hampered the healthy development of Chinese domestic VCs. Overall, under the negative effects of the control-based model, the majority of Chinese domestic VCs are GVCs, and private domestic VCs only represent the minority. As for GVCs, because of the lack of involvement of institutional investors, the amounts of their funds are much smaller than those of their American competitors. Meanwhile, confronted with the intervention of governments, venture capitalists in GVCs feature a lower risk tolerance level and the deprivation of independence. In addition, various incentive mechanisms are also not able to function well in the investment of GVCs. Finally, even if their invested projects are successful, GVCs cannot smoothly and efficiently achieve exits through IPOs. As a result, the array of defects of GVCs which is largely linked to the control-based model determines that their investment is generally associated with small scales and low success and return rates. With regard to private domestic VCs, the shortage of their fund sources is more severe than GVCs, which has substantially weakened the risk tolerance level of venture capitalists working for them. Moreover, VC investors of private domestic VCs are usually not able to remain passive. Consequently, the intervention of VC investors has replaced the autonomy of private domestic VCs in the process of selecting projects. In the aspect of exits, similar to GVCs, the IPO road of private domestic VCs is still uneven. Therefore, the combination of the above disadvantages of private domestic VCs which are closely ascribed to the control-based model has led to the fact that their investment scale is small and their return rate is low. Even though empirical evidence to analyze the influence of the control-based model on the application of incentive mechanisms in the investment of private domestic VCs could not be collected, this limitation just reflects the basic fact of academic research but does not substantively affect the verification of the hypothesis of this book because private domestic VCs only belong to the minority of the aggregation of Chinese domestic VCs.