A Study of Venture Capitals¡¦ Investment Decision-Making and Performance in Taiwan:
A Case of C Venture Capital
Abstract
Info-tech industry plays an important role in Taiwan¡¦s economic development, and for the last eighteen years a huge amount of capital invested in domestic high-tech industry by Taiwan¡¦s venture capitalists has been spurring capital formation of its high-tech industry. Moreover, the investment by venture capitals in earlier technology companies provides technology start-up teams with outstanding capital backup for management, which thus effectively promotes innovation and development of technology industry. Also, the provision of capital by venture capital industry, the talented technicians trained by ITRI, and the cluster of vertically related industries in Hsinchu Science-based industrial park jointly offer advantaged conditions for the development of such tech industries as semi-conductor, electronics information, and opto-electronic, which makes Taiwan one of the major manufacturing countries in global info-tech industry.
However, venture capital is a high-risk, high-stakes investment industry; issues such as whether domestic venture capitalists have preferences in investment decision-making in terms of investing in high-tech companies at stages of seed, early, expansion, and mature, as well as which one¡¦s performance will be better when it comes to investing in domestic or foreign (mainly in America) high-tech companies are worth investigating. Still, little research on venture capitals was conducted to explore key decision factors for whether to invest and what factors cause investment projects to succeed or fail. Using C venture capital as a case, the primary purposes of this study are therefore to examine if there exists any one certain preferred decision factor for investment, to follow up the outcomes of investment projects, and to seek the factors of success and failure for these projects.
The results of this study show that venture capitalists do prefer to invest at the stages of expansion and mature, for it is easier to predict the outcomes of investment projects. In addition, as a result of Taiwan¡¦s tech industry relocating to mainland China, venture capitalists¡¦ being still forbidden to invest in China, and the significantly decreasing number of domestic profitable projects, the ratio of increasing investment at the seed and early stages has been rising accordingly. Furthermore, it can be found that the investment performance on foreign high-tech companies is better than that on domestics, the ratio of investment continues rising year by year, and venture capital is moving toward globalization.
In this study, the decision factors directing the investment decision-making of the board of directors in the case company are based on four dimensions of evaluation principles: (a) business starter & management team; (b) industry & market; (c) product & technology; and (d) financial planning & reward. The findings of this study show that investment target companies are more likely to be invested if they possess better technology platforms or patents than their competitors, or their products are more unique. But they are unlikely to be invested if their industrial future is uncertain or the product market is small.
Also, according to the analysis of factors for the outcomes of investment projects, projects invested based on their advantaged conditions in the dimensions of industry & market and product & technology have better chance to succeed; while those invested due to being advantageous in the dimensions of business starter & management team, and financial planning & reward are more likely to fail. This study indicates that although the two decision factors of finance and management team have advantages, without the matching of industry & market and product & technology, high-tech industry is not necessarily able to gain profit; but if there are problems with the latter two factors, the companies will definitely fail, leading to bankruptcy and liquidation. To sum up, having advantages in both factors of industry & market and product & technology is more likely to profit a company, but only with the positive incorporation of management team and financial planning can it further ensure a company¡¦s success.
| Identifer | oai:union.ndltd.org:NSYSU/oai:NSYSU:etd-0828103-092846 |
| Date | 28 August 2003 |
| Creators | CHEN, WAN-PING |
| Contributors | David Shyu, Ping_Yi Chao, Chau-jung Kuo, Chang-yung Liu |
| Publisher | NSYSU |
| Source Sets | NSYSU Electronic Thesis and Dissertation Archive |
| Language | Cholon |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | http://etd.lib.nsysu.edu.tw/ETD-db/ETD-search/view_etd?URN=etd-0828103-092846 |
| Rights | restricted, Copyright information available at source archive |
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