The Operation Mode and Core Challenges of Venture Capital in China: Fund Raising and Investment

The Operation Mode and Core Challenges of Venture Capital in China: Fund Raising and Investment

China’s venture capital (VC) industry is becoming an important engine to finance technology-driven innovation under China’s domestic innovative development strategy, but VC fundraising is contracting, the policy/regulatory environment is increasingly uncertain, and the exit market is deteriorating. This paper researches the fundraising, business decision operation and funding operation situation of China’s VC operation system. The analysis indicates that exit channels have caused a negative feedback loop, i.e., compressed returns, declining Limited Partner (LP) confidence, fundraising difficulties, investment shrinkage, and internal capability deficiencies in technical assessment and value-added post-investment support all exacerbate portfolio growth and exit performance. In order to overcome the obstacles, the paper suggests two-track solutions. Institutional improvement via interdisciplinary research capability, Artificial Intelligence (AI)-driven risk management and timely, on-the-spot, post-investment monitoring, as well as a solid partnership with industry and capital. Optimizing the external environment by providing more foreseeable exit-related policy signals, upgrading the VC information infrastructure, bringing in more long-term funding participants, and systematically developing the talent ecosystem. This study gives real ideas to VC groups and people who make decisions about making things happen.