Purpose: Due to the existence of information opacity, there is a common problem of adverse selection in the process of screening alternative technology start-ups (TSs) and determining investment targets by venture capital institutions, which does not reveal the true value of enterprises and makes the market inefficient. The aim of this paper is to design an evaluation and screening system help venture capital institutions to select the qualified TSs as their investment objective.
Design: A research framework of four dimensions that include conception, technical innovation, business model and team structure, was built based on previous studies. Based on the research framework, 15 second-level indicators and 33 third-level indicators were extracted with literature research method. This paper proposes an evaluation model with back propagation neural network (BPNN) optimized by genetic algorithm (GA) to improve the rate of selecting and investing in qualified start-ups.
Findings: The results show that the evaluation accuracy of the evaluation model for qualified and unqualified enterprises can reach 80.33% and 93.67% respectively, which has verified the effectiveness of the model and algorithm.
Originality/value: This paper established an effective evaluation system based on PCA and GA-BPNN to help venture capital institutions preliminarily screen potential technology start-ups, which provides the possibility for venture capital institutions to greatly reduce the screening time and cost, improve the screening efficiency of TSs, and scientifically assess the risk of investee projects or investee enterprises to obtain sustainable and stable excess profits.
Copyright: © 2024 Li et al. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.