Financing Sustainable Entrepreneurship: ESG Measurement, Valuation, and Performance in Token Offerings
55 Pages Posted: 12 May 2021 Last revised: 19 Jun 2021
Date Written: May 12, 2021
Sustainable Entrepreneurship (SE) targets profitability and sustainability goals. A major research gap concerns SE’s economic attractiveness for entrepreneurs and investors. The question is ambiguous because sustainability orientation creates costly constraints, while startups cannot fully appropriate their positive externalities. We relate startups’ Environment, Society, and Governance (ESG) properties obtained from a machine-learning approach (www.SustainableEntrepreneurship.org) to SE valuation and performance in token offerings. Startups with salient ESG goals are able to raise financing at more favorable valuations, incentivizing entrepreneurs to adopt ESG goals in the first place. However, their post-funding performance is weaker than in conventional startups, suggesting that investors incur a relative financial loss for backing sustainability-oriented entrepreneurs. The funding and post-funding performance is weaker in startups with high degrees of technological, network, and governance for- malization.
Keywords: Sustainable Entrepreneurship, Sustainability, ESG, Token Offering, Initial Coin Offering (ICO), Entrepreneurial Finance, Crowdfunding, Machine Learning
JEL Classification: L26, M13, Q01, Q56
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