Aspects considered by investors when evaluating the impact of startup companies - A cross-sectional study of the criteria investors consider when evaluating the impact and sustainability status of target companies in the screening process

Abstract

Background To attain the objectives set for the sustainable development goals within the Agenda 2030 the SFDR regulations were created as part of the EU taxonomy. The new incentives have caused many investors to cope with the new regulations which have pushed startups to not only achieve profitability, but also achieve it in a way that considers different ESG factors. The recent evolvement of sustainability in the screening process has led to a need for an understanding of what factors investors consider when evaluating the impact of target start-up companies. Purpose The purpose of this research is to investigate and create an understanding of the different factors and aspects that different types of investors consider when evaluating a target companies level of sustainability and impact. This would potentially benefit investors wanting to improve the incorporation of ESG factors in the screening process, but also the companies intending to achieve sustainability status among investors. Method To answer the research question and its sub-questions a cross-sectional research method was chosen to analyse the results of the 18 interviewees which were conducted using a generic purposive sampling technique. The data were analysed thematically, and the themes were compared with the relevant theoretical concepts obtained from a literature review. Conclusion The research shows that the area of impact evaluation from an investor perspective is a relatively unexplored area where a lot of development will occur in the coming years as the evaluation understanding matures. The aim of this research was to make the area of sustainability evaluation clearer, both from a startup perspective that intends to raise capital, but also to extend the knowledge of how investors are working practically with ESG questions, especially in the screening process.