Abstract
To address global sustainability challenges, major investments are required in sustainable businesses that deliver triple bottom line results. Although interest in sustainable businesses is on the rise, these businesses are not yet widespread. Venture capital investment has a key role to play in the development of sustainable start-ups. The research area of ‘sustainable’ venture capital is still emerging. More research is required to understand how venture capital can support the development of sustainable businesses. This paper provides insight into how venture capitalists can contribute to sustainable business success, by investigating their role, motivations, investment theses, and barriers and enablers to success of sustainable ventures. The following question is investigated: How can sustainable venture capitalists contribute to the success of sustainable start-ups? Interviews were conducted with an expert sample of leading sustainable venture capitalists and other key stakeholders in sustainable entrepreneurship. It was found that next to financial support, venture capitalists provide triple bottom line business advice and network support. Key success factors include business model innovation, collaborations and a strong business case, whereas failure factors include a lack of suitable investors, a strong incumbent industry and a short-term investor mind-set. Sustainable start-ups should focus on triple bottom line business model innovation, find opportunity in new technology and funding platforms and develop multiple business cases to create success beyond the ‘green customer base’. Sustainable venture capitalists can help prove the success of sustainable business formats, mitigate financial risk through co-investments and exercise patience by balancing financial with social and environmental returns.
Highlights
Entrepreneurship has been recognized as a major conduit for sustainable products and processes, and new ventures are viewed as an answer to many social and environmental problems (Hall et al, 2010; Pacheco et al, 2010)
Marcus et al (2013) define research challenges including: what role should venture capital play to help transform our economy and society in a more sustainable direction? This paper focuses on the emergence of start-up sustainable businesses and the key role of “sustainable venture capitalists”, those that invest in businesses, which deliver triple bottom line benefits
In the eyes of sustainable venture capitalists, the business model of a sustainable business needs to significantly outperform current incumbents' business models to ensure success and the financial business case of the new start-up needs to be strong regardless of the environmental and social business case
Summary
Entrepreneurship has been recognized as a major conduit for sustainable products and processes, and new ventures are viewed as an answer to many social and environmental problems (Hall et al, 2010; Pacheco et al, 2010). Venture capital may be viewed as an important catalyst to develop sustainable businesses (Bürer and Wüstenhagen, 2008) e those that contribute positively to the environment and society while generating a profit. Already in 2003, the Journal of Cleaner Production dedicated a Special Issue on “Financing Cleaner Production” (Huhtala, 2003) emphasising the importance of the role of finance in promoting cleaner production and sustainability in businesses more broadly. The focus is on gaining insight on the role of venture capitalists as supporters and promoters of sustainable businesses and the potential barriers and opportunities associated with this
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