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vc green scheme

A framework to assess the sustainability impact of tech startups

The VC Green Scheme supports venture capitalists in their due diligence and investment decisions. It helps them to understand the (future) sustainability impact

QUALITATIVE RESEARCH SKILLS

DESIGN SCIENCE

VC Green Scheme

Impact of the study

Venture capitalists (VCs) have a unique role in fostering sustainable development by funding and supporting those tech startups that create a positive sustainability impact. The VC Green Scheme is a sustainability impact assessment process to identify and assess the sustainability impact of tech startups. This assessment process directs VCs toward sustainable investment decision-making. 

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This research raises awareness among scholars and practitioners alike to consider the sustainability impact as a crucial criterion for VC investment. â€‹Furthermore, my study offers theoretical and design knowledge in the form of design principles that contribute to an increased understanding of sustainability impact assessment in the context of VC and early-stage technology startups, which can be used in further research.

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The solution design: VC Green Scheme

The sustainability impact should not be assessed at a single point in the investment process. Instead, it should be an integral activity throughout the investment process, with varying methodologies and levels of comprehensiveness. To assess the impact potential of an investment opportunity holistically and across its entire lifetime, VCs must understand both positive sustainability impact and environmental, social, and governance (ESG) risks, which should be assessed differently. The assessment process consists of four phases, each consisting of multiple assessment activities and various steps, assessing both positive and negative impacts. ​​

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why 

The role of venture capitalists in fostering sustainable development

Tech startups can considerably impact sustainable development, positively or negatively. Venture capitalists (VCs) have a unique role in fostering sustainable development by funding and supporting those tech startups that create a positive sustainability impact.
VCs should critically evaluate the impact of tech startups. However, a sustainability impact assessment for Venture Capitalists (VCs) was absent.

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EU's Sustainable Financial Disclosure Regulation

In 2023, the European Union had just introduced the Sustainable Financial Disclosure Regulation (SFDR). The SFDR is an EU regulation that makes financial firms disclose how they handle sustainability in their investments. It prevents greenwashing by classifying financial investments into three types: Article 6 (no sustainability), Article 8 (promotes ESG factors), and Article 9 (focused on sustainability). VCs were struggling with how to translate these complex and fuzzy regulations into concrete actions.

 

VCs thus require a sustainability impact assessment that helps them identify and assess the sustainability impact of tech startups and directs them toward sustainable investment decision-making. 

how: design science

Design Science

Design science lays the basis for designing the framework. Design science aims to contribute to scientific knowledge while simultaneously solving a relevant problem in practice. A four-step design cycle is performed iteratively. The design science research cycle suggests four iterative steps where design principles play a central role (see figure on the right):

  • Exploration: investigate the context, define the problem, and collect theoretical and empirical material.

  • Synthesis: make sense of the collected data, use induction and abduction to distil design principles.

  • Creation: design the artifact (solution design) guided by the principles.

  • Evaluation: test the artifact, observe outcomes, and refine both the artifact and principles.

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Thus, besides a design solution as an important outcome of a design study, design principles are proposed to ensure that the findings of one design process are also applicable to another. â€‹â€‹â€‹Design principles include a clear set of thoughtful ideas and suggestions based on research used to create design solutions, which are formulated based on theory and form the basis for a solution design. â€‹In my study, I applied a combination of a theory- and practice-driven approach. That means I used insights from both theory and practice to formulate design principles and create a design solution.

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Exploration

In the exploration step, I performed a theoretical and empirical study. For the theoretical study, part of the theory-driven approach,
I collected and analyzed theoretical data by performing a systematic literature review. ​For the empirical study, part of the practice-driven approach, I gathered from practice by performing a multiple case study. I performed a multiple-case study to investigate what successful approaches for sustainability impact assessments were employed by VC practitioners at that moment in time. It helped to better understand sustainability in the entrepreneurship and venture capital context by investigating it across various cases and discovering patterns, similarities, variations, and differences.​​​​​​​

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Synthesis

In the synthesis step, I synthesized the information collected in the previous steps through inductive and abductive sensemaking to formulate design principles and requirements.

 

Creation

In the creation step, I designed the solution design based on these design principles and requirements. The main activities in this step included ideation, conceptualization, and prototyping.

 

Evaluation

In the last step, evaluation, I tested the practical value of the solution design in a highly iterative manner through experimentation and prototyping. I performed alpha tests to validate that the solution met the design principles and requirements. ​The beta tests aimed to identify if the solution design was workable, attainable, and clear to end users. Based on this evaluation, I adapted the earlier developed design principles to ensure that my insights can also support other design scientists. 

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my role

From January 2023 until September 2023, I was a graduate intern for a deeptech Venture Capital fund located on the High Tech Campus in Eindhoven. As part of my thesis, I developed the VC Green Scheme, a sustainability and ESG assessment to assess technology startups. I developed this assessment in a highly complex and dynamic period with newly introduced EU regulations. Following design science, I gained experience with translating complex scientific insights and regulations into practical, actionable tools.

  

My Master's thesis research was awarded a 9.0/10, and I graduated with a 'Cum Laude' distinction. With my research, I won the third prize of the Faculty Thesis Awards 2023. Moreover, a scientific publication is in the pipeline. I was driven by the ambition to design a rigorous framework, ensuring VCs invest in those technologies that contribute positively to sustainability.

Portfolio Charlot Felderhof, 2025

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