Impact-driven venture capital finance: Exploring impact management practices between limited and general partners
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School of Business |
Master's thesis
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Authors
Date
2024
Department
Major/Subject
Mcode
Degree programme
Creative Sustainability
Language
en
Pages
96
Series
Abstract
This thesis delves into the management of impact in venture capital investments aimed at fostering positive social and environmental change. Addressing a significant gap in early-stage impact investing literature, the research constructs a theoretical framework based on agency and stewardship approaches and draws insights from interviews with Limited Partners and General Partners in Europe and North America. Venture capital impact investors employ the most robust impact assessment and quantification practices during the ex-ante due diligence phase. Subsequently, investors adopt a monitoring approach to ex-post evaluation, characterised by growing degrees of stewardship, collaboration, and trust vis-a-vis their investees. Many impact management practices, such as impact-linked monetary incentives, are not dictated from above by the Limited Partners. Instead, they are implemented in a bottom-up fashion, with General Partners proactively implementing mechanisms like impact-carry to signal mission alignment. The study underscores the significance of stewardship relations within impact- driven venture capital. Impact investors are intrinsically motivated, identify with their organisations, and autonomously engage in impact measurement. These findings challenge the conventional applicability of agency theory and suggest that the impact-driven venture capital industry is propelled by a shared sense of purpose and collaboration among stakeholders.Description
Thesis advisor
Lankoski, LeenaKeywords
sustainable finance, impact investing, venture capital, agency theory, stewardship theory, impact-carry, investment chain, impact management