The Ascent of Impact Investing Venture Capital Firms: The Correlation Between the Impact Investing Orientation of a Venture Capital Firm and the Financial Success of its Portfolio Companies.

Jakob Kaspar Kleihues

Student thesis: Master thesis


This empirical study examines the correlation between the impact orientation of a venture capital firm and the success of its portfolio companies. Although the field of impact investing is on the rise and venture capital firms could play a decisive role in developing successful impact ventures, the research area of impact venture capital is still emerging. One of the central points of discussion that prevents a rapid distribution of impact VCs is the distrust in the financial performance of impact ventures due to modern portfolio theory and transaction cost theory. In a review of the existing literature on impact investing and venture capital, the paper argues that impact ventures could generate market-rate financial returns due to market inefficiencies. In order to test the performance of impact ventures empirically, 30 impact VCs with 370 portfolio companies are identified and compared to 25,877 portfolio companies of socially neutral VCs. The Total Equity Funding Amount of the start-ups serves as a proxy for financial success. The data are obtained from Crunchbase, a crowd-sourced data base for VC investments. With the help of a t-test and a regression, the work finds out that there is no significant correlation between the impact orientation of a VC and its portfolio companies. These results indicate that impact ventures can achieve market-rate financial returns. In addition, the paper finds that the location, the number of founders, the funding year, the leverage taken, and the industry specialisation have a significant influence on the financial success of start-ups.

EducationsMSc in Management of Innovation and Business Development, (Graduate Programme) Final Thesis
Publication date2019
Number of pages98