First, the impact of the financial crisis on venture capital investment in 1.1 to create a sharp decline in investment
as shown in Figure 1, China’s third quarter of 2008, the number of newly established venture capital fund was only 20, a decline of $50%, to raise funds of only $490 million, a decline of 84%. The number of venture capital fund to raise funds and the number of fallen, the financial crisis on the Internet showed investors risk appetite reduction.
due to the particularity of the Internet industry, venture capital can be said to be the lifeblood of China’s Internet industry. Reduce the risk of investment funds, the financial crisis will make it difficult to raise funds for the development of Internet companies, will lead to a large number of start-ups or Internet companies in the development of bankruptcy.
1.2 Internet venture capital exit difficult trend
as shown in Figure two, the 2008 third quarter of China’s Internet industry IPO and M & A cases were significantly lower. IPO only 2 cases, the chain fell by 50%, the number of cases of mergers and acquisitions in only about 7 cases, the chain also fell by 50%. The number of mergers and acquisitions in the field of IPO and the number of cases fell sharply, indicating that the financial crisis IPO window is almost closed, mergers and acquisitions cases also fell sharply.
IPO is the favorite and most commonly used exit mechanism of venture capital. IPO window is closed and the timetable for the reopening of uncertainty, will lead to a more conservative and cautious venture capital investment in the Internet industry.
merger and acquisition is also an exit mechanism of venture capital, but the ROI (return on investment) is relatively low. The financial crisis in the market on the emergence of a number of price is lower than its reasonable valuation of the quality of Internet assets, but large holdings of cash flow of Internet companies are still waiting for the PE to buy lower quality but the tight cash flow of small companies to obtain greater benefits. In the market continue to fell to a certain extent, the risk of investment will be another wave of mergers and acquisitions and leading out of the market. The merger can not be profitable Internet companies will face the risk of liquidation.
1.3 Internet venture capital funds tend to be conservative
as shown in Figure three, the number of investment cases in China’s Internet industry and the total amount of investment funds in 2008 after the beginning of a downward trend. 2008 third quarter, the number of cases has been disclosed only 28 cases, a decline of $26%, the amount of investment funds have been disclosed only $365 million, a decline of 7%.
worsening funding sources and the uncertainty of the exit market, is the cause of the number of cases of venture capital and the sharp decline in the amount of funds.
conservative venture capital, financial crisis will have a serious negative impact on China Internet Corporation.
two, the impact of the financial crisis on Web2.0 company 2.1 video site control costs
video site revenue model is not clear, high operating costs, copyright issues such as copyright issues, their lack of profitability, is still in a lot of reliance on venture capital maintenance >