Cyber Financial Intermediaries: Perspectives and Problems of the Internet Venture Capital and Internet Investment Banking

Abstract

The trends and changes of the private equity market have opened up opportunities for alternate business models from the seed financing to the open initial public offerings (IPO) by Internet. We examine Internet matchmakers, Internet venture capital, and Internet investment banking companies. These cyber financial intermediaries represent a growing trend of companies that admit ordinary investors from the seed financing to the exit stage of IPO. All three models take advantage of the rise in the use of the Internet among users locally as well as globally. Just as the Internet and e-commerce are revolutionizing the purchasing of goods and how companies are doing business, we scrutinize the impact of the Internet technology on the private equity markets. Though these new services cater to only a niche group of people, who live in an Internet environment, some of these companies have successfully prospered and co-existed with the traditional brokerage houses. The important question is whether this trend of using the Internet in the private equity market will sustain and take off or become an interesting but unimportant niche. Key words: Venture capital; Private equity; Investment banking