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Orlova Kristina Yurievna
VENTURE CAPITAL MANAGEMENT .
economic sceinces
УДК 330.42
DOI: 10.26140/anie-2019-0803-0067
УПРАВЛЕНИЕ ВЕНЧУРНЫМ КАПИТАЛОМ: КОМПЛЕКСНАЯ ОЦЕНКА ИННОВАЦИОННЫХ ПРОЕКТОВ И ФОРМИРОВАНИЕ ПОРТФЕЛЯ
© 2019
Орлова Кристина Юрьевна, ассистент кафедры математических методов в экономике Самарский национальный исследовательский университет им. академика С.П. Королева (443086, Россия, Самара, Московское шоссе, 34, e-mail: orlova.ssau@gmail.com)
Аннотация. В статье описывается механизм управления венчурным капиталом. Представленный механизм включает три этапа. Первый этап заключается в оценке ожидания прибыли инновационного проекта с учетом риска на основании модели, использующей метод реальных опционов для многостадийных проектов. Значения венчурного риска были рассчитаны на основании статистических данных о количестве проектов, проходящих каждую стадию инновационного процесса. На втором этапе применения механизма происходит интегральная оценка проекта, учитывающая ожидание прибыльности, временной лаг, а также экспертные оценки качественных критериев, характеризующих возможность реализации проекта: квалификация команды проекта и востребованность разрабатываемого инновационного продукта на рынке. Комплексная оценка использует метод анализа иерархий. Результатом оценки являются приоритеты проектов. Третьим шагом механизма является последовательное распределение инвестиций между проектами в соответствии с их приоритетами. Распределение инвестиций представлено в виде алгоритма. Предложенный механизм позволяет инвестору сформировать портфель потенциально прибыльных проектов, характеристики которых свидетельствуют о высокой вероятности успеха н рынке.
Ключевые слова: инновационный проект, инновационный процесс, реальные опционы, комплексная оценка, метод анализа иерархий, инвестиционный портфель, формирование портфеля
VENTURE CAPITAL MANAGEMENT: INTEGRATED ASSESSMENT OF THE INNOVATION PROJECTS AND PORTFOLIO BUILDING
© 2019
Orlova Kristina Yurievna, assistant lecturer, Department of Mathematical methods in economics Samara National Research University (443086, Russia, Samara, Moskovskoe shosse. 34, e-mail: orlova.ssau@gmail.com)
Abstract. The article describes a mechanism of the venture capital management. The introduced mechanism includes three steps. First step is estimation of the innovative project expected profitability with allowance for risk using the model based of the real options method for multi-stage projects. Values of venture risk are calculated from the statistics about average outcome of the projects at different stages of innovative process. Second step is integrated assessment of the project that accounts expectation of the profitability, time lag and expert judgements about qualitative criteria that characterize ability of the project to succeed: qualification of the project team and the market attractiveness of the future innovation product. Complex evaluation is based on the analytic hierarchy process. The result of evaluation is set of priorities of the projects. Third step of the mechanism is successive investments allocation between the projects in accordance with their priorities. The allocation technique is represented as an algorithm. The offered mechanism allow investor to build portfolio of potentially profitable innovation projects which characteristics indicate a higher probability of the market success.
Keywords: innovation project, innovation process, real options, integrated assessment, analytic hierarchy process, investment portfolio, portfolio building.
Implementing of innovations is a key factor in competitiveness on the modern markets. Innovation development demands venture investments, which are highly risky, but potentially highly remunerative. Therefore, venture investor needs to build innovation projects portfolio, which would commit a higher profit with lower risks.
Suggested mechanism of the innovation projects portfolio management includes three steps.
I. Assessment of the projects expected profitability using real options method.
II. Complex evaluation of the considered projects and further determining of the innovation projects priorities.
III. Building the portfolio of the projects according to their priorities and considering financial constraints.
Assessment of the projects expected profitability using real options method
At the first stage we evaluate potential profit of the innovation project with allowance for risk[1, 9]
Estimation of the venture investment risk was presented in the article «3000 Raw Ideas = 1 Commercial Success» by G. Stevens and J. Burley. The scientists described stable trend, which was observed during 40-years research: only one from 3000 raw innovation ideas leads to successful sales of the product. At that, risk of the project declines from stage to stage: according to this statistic, probability of the investments recoupment at the pre-seed stage is less than tenth of the percent, but at the expansion stage this value is more than 50 percent [6].
The results of this research are arranged in the table 1, where pf - probability of the transition to the next stage, Pi -282 Azimuth of Scientific Research: Economics and Administration. 2019. Т. 8. № 3(28)
probability of success of the whole project.
Table 1 - Statistics of the innovation projects realization
П.6. 81.
Stage Stage result Proportion Pi. % Pi, %
Fundamental Science Applied Science Pre-seed Seed Early venture capitalinvestment Early Growth Production Expansion Haw idea Submitted Idea Small Project: Patent Submission Earlv stage development Major development Launches Commercial Success 3000 300 125 9 4 1,7 1 10,00 41,67 7.20 44,44 42.50 53.32 0.03 0J5 0,80 11,11 25.00 58.82
For evaluation of the project profitability we have chosen the real options method. According to this method, investment projects are evaluated by analogy with financial options [4].
Model of the innovation project evaluation using real options method is represented in the figure 1 |3|.
Applüd Science Pre-seéd Early Early gronlh Production Expon tian
I П Ш TV V VI
>'_ = 0.Ю03 P2 = 0.0033 P3 = 0.008 P^ = 0.1111 P5 = 025 P6 =0.5882
R-0.1 Ä= 0.4167 Pi = 0.072 Pn = 0.4444 = 0.425 = 0.5882
4-1 = 0.9 $2 = 0.5833 = 0.928 =0.5556 & =0.575 <?6 = 0.4118
0 = 0.9997 Qi = 0.9967 Й = 0.992 04 = 0.8&S9 Qi =0-75 = 0.4118
¡i Ь Í! U is 4
Figure 1 - Model of the innovation process
экономические науки
Орлова Кристина Юрьевна УПРАВЛЕНИЕ ВЕНЧУРНЫМ ...
Proposed model of the innovative process represents a chain of the sequential call options. Investment at the expansion stage is a real option for selling innovative production, and investment on previous stages is option for the further option.
Investor has an ability to place the capital in amount IU1 into project at the '-th stage. Success of the current stage; gives ability to invest at the next stages. Success of the whole project means having income (or part of the income) from the sales of the innovative production.
Value of the '-th stage option C characterizes expectation of the gain G . with allowance for 'risk and discount rate r:
C = P/G/ C-1 "(1 + r ?
Interpretation of the gain depends on stage. Gain represent value of the further option and account possible cash flows net of investments.
The analysis starts from the last stage. If option value at current stage is less than needed investments, the same analysis continues till decision stage. Else, project is not advisable.
Expectation of the innovation project profit represents a difference between value of the option and investments at the decision-making stage.
G.. " N.. -1. '
The model was deeply considered in the article "Venture capital management technique based on real options" [1].
However, the estimation is based on average statistical data, thus we need to consider individual features of the project that determine probability of the project success.
Complex evaluation of the considered projects and further determining of the innovation projects priorities
Hence, we move to the second stage of the mechanism - multicriteria assessment using analytic hierarchy process.
Decision maker can select for the further analysis projects with allowable values of expected profit. The obvious critical value is zero; since we used average statistical values of risk, we may also consider projects with negative expected profit.
We propose the following criteria of the integrated assessment.
Profitability of the project.
Project team qualification.
Project importance - expert valuation of demand on the future innovative product.
Time lag of the project - average term of the investments immobilization [11].
Team qualification and importance of the project are qualitative criteria. Hence, marks with respect to these criteria would be synthesized by pairwise comparisons.
Profitability and time lag are quantitative criteria.
Profitability of the project j is calculated as a relation of the expected gain at the decision-making stage k to sum of all discounted investments.
П
(k )=
G
k-1
Ik-1+s
I=k
(1 + Г )T
t = S t,
12 + £
(1 + Г f
(1 + Г )'3 (1 + Г )'3 (1 + Г f-
mark o. with the following formula:
°j =
П - Птп
n -n
max mm
where o. - modified mark of the j-th project profitability criterion value, n. - profitability of the j-th project, nmax -maximal profitability value from the considered projects,1"!^ - minimal profitability value from the considered projects.
Thus, obtained modified mark of the project with maximal profitability will equal one, with minimal - zero. Other marks will lay in this range.
Time lag of the j-th project L. is calculated as weighted average term of the diversion of the investments till the end of the production expansion stage when mass sales will start:
l} = j • +Y •j
Y • Z6J =Y/l • zu
where:
- share of the investments needed at the
Y-1 =
S I,-
i -th stage;
ZJ = S tT
- diversion term of the i-th stage invest-
ments.
Since integrated assessment represents maximizing criterion - the more is total mark, the better is project - we need to turn minimizing criterion of the lag into maximizing. We propose to calculate modified mark as a relation of the minimal value of lag within considered projects to the lag of the j-th project. Hence, modified mark of the "best" project will equal one, and the other marks will lie in range from zero to one. Thus,
o = L = -ss-
j j T
Lj
Modified marks of the profitability and lag are normalized by the following formula:
J=1
m
Hence, S
J=1
x, = 1.
For example, considered project is at the seed stage (third). Hence, k = 3. Thus, the expression below characterizes this particular case.
J (3) = -
To dispose of negative values, we calculate modified
Expert judgements need to be checked for the consistency and adequacy [2-5].
The last stages of the complex assessments represent calculation of the local priorities of the alternatives (projects) and synthesis of the global priorities [2-5].
Building the portfolio of the projects according to their priorities and considering financial constraints
The last, third, stage of the mechanism is building the investment portfolio by successive resource allocation according to the projects priorities that are determined by the integrated marks of the projects. First of all investor should finance the most priority projects that have the highest integrated mark. If resource is not enough for the project, less preferable projects are to be considered.
Let us consider the statement when investor develops plan for term of A periods that covers term of realization of
/
т=г
°
°
N2 - 12
N2 - 12
п
I
1
h
Orlova Kristina Yurievna
VENTURE CAPITAL MANAGEMENT .
economic sceinces
any project. Duration of the stage of the project is measured in time units that are less than period of investment planning. Thus, one planning period includes k units of project stage duration. For example, investor makes quarterly planning, and duration of the project stages is measured in months (k = 3). We will consider mentioned units further.
Investor commits capital Ki for each quarter X. Savings from previous quarters can be also used for investments in quarter X. Thus, accumulations VX in the quarter X would equal:
V, = I Rv
V"1
Accumulations of the first quarter equal zero, V1 = 0.
Investor considers m projects ranged by descending priorities determined after integrated assessment. Thus, mark of the j-th project is higher than (/+1)-th.
We denote // as investments needed to the j-th project
at the moment t, S , as total investments needed to the project in the A-th quarter:
3,
Sj" I Ij
t=3(,-1)+1
Consequently, in general case:
Sj" I Ij
t=(,-1)k+1
Allocation of the resources shall satisfy the following conditions:
first of all, investor funds the most priority projects with higher total mark;
the following constraints shall be considered:
total investments made in each quarter can not exceed quarterly budget with savings from previous periods;
investor has two alternatives: finance in full or dispose of the project.
The constraints can be represented as a system below:
2 Dj • Sj < Kл+ VA
j=i
h =Dj
2 s
=i
Innovative projects portfolio can be built with the algorithm of the successive resource allocation in accordance with priorities.
The algorithm uses the following variables:
K - budget of the X-th quarter;
S j - total investments needed for the j-th project in the X-th quarter.
D. - decision about j-th project (D . = {0;1}): 0 - overrule the project, 1 - finance the project;
F A - funds, that are actually remained in the quarterly budget after making investments to already considered projects;
R A - funds, that could remain in the quarterly budget in case of positive decision about the project;
V - current accumulated remainders;
N - sum that is lacking for the project being considered.
The considering is started from the most priority project. For each quarter decision maker conducts the analysis whether budget is enough to finance the project in the current
quarter (Sj v F1) or, if there is lack of funding, with account for savings from previous periods( S j v F , + V,).
Wherein savings from the later quarters, starting from (X-1)-th, are spent first. If financing is impossible in current X-th quarter, the decision about j-th project is negative, D. = 0. Thus, investor considers further projects.
Flowchart of the algorithm is represented in the figure 2 [12].
Figure 2 - Flowchart of the investments allocation algorithm
Conclusion
In summary, the offered mechanism of the venture capital management allows investor to make a well-founded decision about building the innovation projects portfolio.
The result of the applying the real option model of innovation project is estimation of the profitability with allowance for average statistical innovative risk. Complex assessment allows investor to define priorities of the projects considering, firstly, qualitative indicators of expected profitability and term of the investments diversion, and, secondly, expert judgments about key factors that determine success of the project: qualification of the team and market performance of the innovation project being developed. The allocation of the investments is processing with the algorithm according to the priorities of the projects and with allowance for budget constraints.
Complex assessment can be expanded with including "deal killer" factors that can be a reason to dispose of the project. Such factors [7] can be linked with team: for example, when founder is unwilling to step aside, if necessary, for the new CEO. Another factors illustrate weak opportunities: low market capacity or low forecasted revenue for the five years after sales started.
Besides, evaluation of the financial attractiveness of the project may account not only expectation of the profit with allowance for risk, but also potential profit in case of the project success.
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Статья поступила в редакцию 02.06.2019 Статья принята к публикации 27.08.2019
