Does ESG Investing Help VC Funds to Attract Startups? Experimental Evidence

69 Pages Posted: 12 Oct 2022 Last revised: 20 Dec 2022

See all articles by Ye Zhang

Ye Zhang

Stockholm School of Economics - Finance Department

Date Written: October 5, 2022


Despite recent progress of examining investors' ESG preferences, little is known about firms' preferences about ESG investors. This paper studies whether aiming for ESG influences startups' intentions to collaborate with venture capitalists through two complementary field experiments that involve real US startup founders and real-world stakes. The first experiment requires entrepreneurs to evaluate multiple randomly generated investor profiles so that they can receive a recommendation list containing real matched investors' information. The second experiment is a novel payment game, which is created to elicit entrepreneurs' taste-driven preferences. Provided with real monetary incentives, entrepreneurs decide whether to pay for a more comprehensive investor recommendation list which contains randomized number of ESG investors and is sold at a randomized price. Results find that (i) Aiming for E, S, and G has heterogeneous effects. Environmental initiatives reduce venture capitalists' attractiveness to startups while social initiatives might improve investors' attractiveness. (ii) Positive assortative matching based on ESG exists in startups’ fundraising process. (iii) Male investors benefit from aiming for social impact while female investors get punished for aiming for environmental impact. (iv) A random utility model suggests that startup founders have taste-driven preferences towards ESG investors.

Keywords: Venture Capital, Entrepreneurship, ESG, Sustainable Finance, Field Experiments

JEL Classification: G24, L26, C39, M14, C78

Suggested Citation

Zhang, Ye, Does ESG Investing Help VC Funds to Attract Startups? Experimental Evidence (October 5, 2022). Available at SSRN: or

Ye Zhang (Contact Author)

Stockholm School of Economics - Finance Department ( email )


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