The Application of Real Options in Venture Capital Project Evaluation

The reasonable evaluation and selection of venture capital project is the key point for venture capital companies to carry on risk management and realize the investment goal. It's also the prerequisite for entrepreneurial firms to seek the help of venture capital and to realize its business growth. Sometimes, the traditional project decision-making methods cannot give a clear idea to venture capitalists. But the real options take the investment flexibility into account. Applying real options, investor can evaluate the opportunity value of venture capital projects and make investment decisions. In this paper, based on the risk factors, many types of real options were identified in venture capital projects. This paper also analyzed the applicability of several real options pricing models to venture capital projects. This paper tried to provide some valuable suggestions for the perfection and practical application of real options pricing theory.