Stage financing is the basic operation of venture capital investment. In investment,
usually venture capitalists use different strategies to obtain the maximum returns.
Due to its advantages to reduce the information asymmetry and agency cost, stage financing
is widely used by venture capitalists. Although considerable attentions are devoted
to stage financing, very little is known about the risk aversion strategies of IT
projects. This paper mainly addresses the problem of risk aversion of venture capital
investment in IT projects. Based on the analysis of characteristics of venture capital
investment of IT projects, this paper introduces a real option pricing model to measure
the value brought by the stage financing strategy and design a risk aversion model
for IT projects. Because real option pricing method regards investment activity as
contingent decision, it helps to make judgment on the management flexibility of IT
projects and then make a more reasonable evaluation about the IT programs. Lastly
by being applied to a real case, it further illustrates the effectiveness and feasibility
of the model.