【正文】 ensuring a clear path of liquidity to the venture capitalist. No professional venture capitalist can operate in an environment where he cannot see a path to liquidating the investment. Secondly, government funding is essential to generating basic technological advances. Only the central government can assume such risks and technological advances drive innovations with mercial implications.The venture investing processIn Silicon Valley the venture investing process has more or less evolved into a standard procedure. Some firms specialize in investing in the first round of funding where the risk is highest but the potential return is also highest since the amount invested can be relatively small for the equity stake parable to later rounds of investment at higher cost. Other firms prefer later rounds of financing。 some even invest only in the round just prior to the pany going public. By and large, venture capitalists never consider themselves as passive investors but claim to help their investments succeed by being active investors. They add value by serving on the board of the investee panies, by acting as advisors to the management team, by helping to recruit needed executives, by introducing the investee pany to other panies for the purpose of forming alliances and by introducing the pany to the financial munity (Wall Street). Not all venture capital firms are accorded with the same regard. Entrepreneurs pursue blue ribbon firms that consistently enjoy above industry average returns not just for their money and their connections. Having such famous venture capital firms as investors imply endorsement and validation of the pany and its business objectives.It should not be surprising that venture capitalists place highest importance in the character of the people they are investing in. The venture capitalist needs to know if the team of entrepreneurs has integrity, can get along with each other and can work with the investor. Their worst nightmare is to invest in a dishonest team who will stop municating with the investor after funding and run the pany without input from the venture investor. In Silicon Valley the due diligence process is rigorous. Usually the venture capitalist after extensive analysis and deciding that interest exists in investing in the pany will offer a term sheet outlining the boundaries of the deal. Such term sheets are always subject to verification of representations made by the entrepreneurs in the due diligence process. There are even professional service firms to perform the due diligence investigations. A typical claim by many venture capitalists is that out of every 100 business proposals and plans they review, only about 10 are invited to face to face meetings resulting in 23 term sheets and only about half or less of those conclude in actual investments.Despite the emphasis on technology, Silicon Valley venture capitalists are rarely dazzled by just the technology. They do not invest in “solutions looking for problems to solve.” They look for and ascertain that there will be markets for the products being proposed by the entrepreneur. In other words the business potential is more important than the novelty of the invention. They are fond of saying if they must have an “A” and a “B,” then they would rather have an A team for marketing and a B team for Ramp。D than the other way around.While venture capital has played a vital role in transforming Silicon Valley into a high tech capital, only about 25% of the Silicon Valley startups receive professional venture capital funding. Others start by their own bootstrap, or funds from family and friends. I have not seen a parison of the survival rates of the two kinds startups but not all professionally funded panies survive and nonprofessionally funded enterprises can also grow into major panies. The most famous example of the latter was HewlettPackard, which was started by the two founders long before there was a Silicon Valley and venture capital. Cisco was founded by a husband and wife team and grew for a long time without venture capital.ConclusionIn the final analysis, high technology development depends on having skilled and motivated people in an open environment where ideas can be freely tested. Entrepreneurs with the best ideas are more likely to attract professional investments. The best managed panies and sometimes the luckiest panies are most likely to reach the critical mass and bee an attractive investment for the investing public or as a target for acquisition. Venture capitalists with the best record of making successful investments will have the least problem of raising new funds to invest in new panies. As they bee successful, they bee better known and are likely to be introduced to superior ideas from more proven entrepreneurs. The quality of their deal flow improves and thus increases the probability of their making more profitable investments. Such accelerating cycle applies to both the proven entrepreneur and the successful venture capitalist. The market forces determine the fate of their efforts.Another question sometimes asked is: “How to attract premier venture capital firms from Silicon Valley to operate in places like China?” The answer is: “With a great deal of difficulty.” Venture capitalists are handson investors. They need to be near their investee panies and they need to be able to help their portfolio panies succeed. To most venture capitalists, with selected exceptions, China is far away and is a place they do not understand and can offer little added value. The exceptions are those individuals that are familiar with both sides of the Pacific, knowledgeable in both environments and can help their investee panies bridge the gap and gain an advantage by establishing cross border alliances. They can make astute investments on both sides and gain leverage by introducing panies from one side to work with the other.