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Basing on the experience of Venture Capital (VC) development in China, we pointed out that, traditional agency theory is not enough to explain the staged investment of VC in China. We raised a new model to explain the staged investment of VC in developing countries, by adding a new process and two new constructs into the traditional agency model from prior research.Further, we used 1030 observations of VC investing entrepreneurial firms in China, to testify our model, which turned out to be perfect. Our models showed that, whether a foreign VC is localized or not, significantly reduced the duration of staged financing, and increased the financing size both per round and in total. The influence of firms’age was also discussed in the paper.Towards the new findings in the staged financing area, we concluded that, in developing countries, due to the limitation of local VC industry, foreign VC was or would be experiencing a process of localization. With more and more foreign VCs localized, VC would increase the frequency and the size when investing into local firms, because the monitoring became more and more convenient.
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