HOW DO DIFFERENT VC INVESTORS FINANCE SUSTAINABLE STARTUPS? THE MODERATING ROLE OF ENVIRONMENTAL POLICIES

Abstract

Sustainable startups are recognized as pivotal in providing green technologies to tackle climate change. However, since they are characterized by unfavorable financial conditions, attracting venture capitalists (VCs) is vital for them. Different VCs such as independent venture capitalists (IVCs) and corporate venture capitalists (CVCs) have different approaches when taking investment decisions. Thus, this paper aims at exploring the relationship between VCs financing and sustainable startups, by discerning the differences in the investment decisions between IVCs and CVCs. Moreover, since governments promote investments in sustainable startups, this paper also aims to understand how different environmental policies intervene in the investment decisions of IVCs and CVCs in sustainable startups. Our preliminary results show that IVCs invest lower amounts of money in sustainable startups, while CVCs are willing to commit high amounts of money to sustainable startups. Moreover, we found that environmental policies play a moderating role in the investment decisions of IVCs and CVCs investing in sustainable startups. Our findings attempt to both extend previous literature and provide implications for startups’ managers and for policymakers tackling climate change.