Balancing Profit and Purpose: Venture Capital Risk in Impact Investing

Sammanfattning

Venture capital plays a vital role in financing innovative companies, especially in the earlyphases that are characterised by uncertainty. In line with the increased amount of impactinvestments the investment processes have become even more complex as they combine bothfinancial returns with societal and environmental aims.The purpose with the study is to examine how venture capital firms assess and deal withdifferent types of risk within the impact investment process. The study is built upon aqualitative method with semi structured interviews with actors within the Swedish venturecapital market that are active within impact investments.The findings present three main risks. The technological, regulatory and team risk. Thetechnological risk is seen as a major risk but often manageable through evaluating thetechnologies maturity and the entrepreneurial teams competence. Regulatory risk is on theother hand perceived as primarily external and difficult to control where changes inregulations can be very impactful. Furthermore it emerges that venture capital firms combineboth internal and external expertise in their assessment and do often avoid investments thatare strongly dependent on future regulatory changes. The study contributes to an increasedunderstanding for how different types of risk are integrated into investment processes withinimpact investing and emphasises the importance of experience and flexibility when dealingwith uncertainty.