Sources and Management Styles of Funds, and Size and Structure of Firms Portfolios: Survey from VC and PE in Mainland China

Abstract

Through total coverage survey and comparative analysis on VC funds in mainland China, some evidence findings are as follows in this paper. Firstly, these facts about the average size (number) and entrepreneurs (enterprise management teams) ownership percentage of firms' portfolios of funds invested in mainland China, are consistent with theorem in the VC literature. Instead in the Western Countries, holding equity percentage by entrepreneurs is empirical very different from VC theorem. The portfolio firms' number or entrepreneurs' profit share of government-sponsored VC funds is higher than other funds in China, which is wholly consistent with theory proposition in the VC literature and the evidence in Canada. Secondly, entrepreneurs' ownership percentage is less obviously with no more than 40% equity compared with Western Countries. Meanwhile, through comparative analysis, the management teams' average age is smaller in China, but the higher level of education. Thirdly, all fund managers concern the invested industry competition. Despite China's investment managers, which also even work longer hours to invested firms, copy the methods from Western Countries in the investment technical level, however, a notable fact is: domestic investment managers in China, whether educated period or work experience, much shorter than the counterparts in the Western Countries especially USA. Finally, holding periods of firms by the funds invested in mainland China, are even shorter than in Western Countries. The ratios of seeds to whole projects by all funds are simple arithmetic average of less than 5%. All these signal: VC in the traditional classic sense being the majority of similar PE business in mainland China.