An Approach to Select Pareto-Optimal VC Project Portfolios

To solve the problems of current portfolio selection methods of venture capital (VC) projects, resulting from the capital indivisibility and the scrutability of return of investment (ROI) of VC projects, two key concepts of project portfolio preference rate (TPR) and the variance of TPR (VTPR) are defined based on the project evaluation criteria (PEC) for VC projects, using the technical thought of mean-variance (MV) model. On the basis of TPR and VTPR, a model named VCP- DEA/AR, which is able to derive the Pareto-optimal project portfolios, is presented by way of the principle of data envelopment analysis (DEA) with assurance region (AR). Applied to an illustrative example, the VCP-DEA/AR model is proved to be scientific, reasonable, and well applicable to real-world portfolio-selection problem of VC.