The Function Mechanism of Social Networks in Venture Financing

Information asymmetry and high uncertainty of venture business plan lead to the difficulty in entrepreneure and investors makeing a deal. Economic theory based on contract design can't explain the venture financing phenomenon completely, and the social network theory provides a new method. This research starts from previous studies and proposes three theoretical hypothesizes. The statistical analysis results from 81 cases of 24 Shanghai ventures show that the function mechanism of social networks on the venture financing takes special information as the base, personal trust as the core, and coexistence of selfishness and altruism as the chaeacterization.