The five stages of venture capital, including seed stage, initial stage, growth stage, expansion stage and maturity stage, all involve high risks, which are embodied in project screening, due diligence, post-monitoring, intellectual property rights, technology selection, public policy, highly asymmetric information, moral quality, management team, business partners, financial supervision, environment, taxation, politics, communication platform and so on. In western countries, according to incomplete statistics, for every 10 project invested by venture capitalists, only 3 are successful and 7 are unsuccessful. It is precisely because of this that the venture capital circle will adhere to the principle of "don't put eggs in one basket".

The purpose of venture capital is not to hold shares. Whether it is successful or not, withdrawal is an inevitable choice for venture capital. The exit methods of citing venture capital include initial public offering (IPO), acquisition and liquidation. At present, the main exit channels of domestic venture capital companies in IPO are: listing overseas in the form of offshore companies; Domestic joint-stock companies issue H shares abroad to achieve overseas listing; Domestic companies are listed indirectly by backdoor overseas, and domestic companies are listed by backdoor overseas; The joint-stock company established in China is listed on the main board of China; Indirect listing of domestic A shares of domestic companies through backdoor; Another indirect listing method is the backdoor listing of A shares of domestic companies.

Private equity

It is often called private equity investment in China. It refers to the equity investment in private enterprises, that is, unlisted enterprises. In the process of transaction implementation, considering the future exit mechanism, that is, through listing, mergers and acquisitions or management buyback, the shares are sold for profit.

According to the investment stage, private equity investment in a broad sense can be divided into venture capital, development capital, M&A fund, mezzanine capital, revitalization capital, pre-listing capital and others, such as post-listing private equity investment, bad debt and real estate investment.

Domestic active PE investment institutions can be roughly divided into the following categories:

First, specialized independent investment funds, such as Carlyle Group and 3i purogetc；;

The second is the direct investment department under large diversified financial institutions, such as Morgan Stanley Asia, JPMorgan Chase, Goldman Sachs Asia, CITIC Capital, etc. ;

Third, newly established private equity investment funds, such as Hony Capital and Shen Bin Investment. After the promulgation of laws and regulations on Sino-foreign joint venture industrial investment funds;

The fourth is the investment fund of large enterprises, which serves the development strategy and investment portfolio of their groups, such as GE Capital.

Fifth, other companies, such as Temasek and GIC.

Both PE and VC are investments in pre-listed enterprises, which are quite different in investment stage, investment scale, investment concept and investment characteristics.

At present, many traditional VC institutions are involved in PE business, and many institutions that are traditionally considered to specialize in PE business are also involved in VC projects, which means that PE and VC are only a conceptual distinction, and the boundary between them is becoming more and more blurred in actual business.

In addition, PE funds are essentially different from what the mainland calls "private equity funds". PE funds mainly invest in the shares of unlisted companies in the form of private placement, while private placement funds mainly refer to funds that raise funds from investors through private placement and manage and invest in the securities market (mostly secondary market).