A Design of the Incentive and Restraint Mechanisms for Venture Capitalists in the Venture Funds of the Limited Partnership

Abstract---There is a principal-agent relationship between investors and fund managers- venture capitalists for the venture funds in the limited partnership. The compensation for the venture capitalists is mainly from the fund management fees and carried interests. For the venture capital funds in the different stages, the forms and degrees of compensation mechanism are also different because of the differences of venture capitalists and their environment, as well as some other factors. The thesis focuses on the effective incentive mechanism for the fund managers with funds in the newly founded stage as well as the stage of development, so that the quality and efficiency of the fund regulation can be improved. Keywords-limited partnership; venture capitalists; principal-agent relationship; incentive and restraint mechanisms I