The European technology ecosystem is set to reach a total market value of €3.5 trillion in Q1 2024, more than doubling in value over the past five years. This growth is primarily driven by venture capital. There are currently over 2,400 VC firms in Europe, and European VC-backed startups create 6.3 million jobs. There are around 200 unicorns actively operating in Europe, driving innovation and positive impact across a range of industries.
A new report by European Women in VC, Founders Forum Group and Tech Nation, “Beyond Returns – Venture and Growth Investments Driving Sustainability and Social Change,” states that VC-backed companies drive economic growth, create jobs, are often aligned with the Sustainable Development Goals (SDGs), and generate significant social and environmental benefits. Moreover, in both deep tech and digital spaces, mixed teams and women-led VCs are particularly effective in driving positive change within the ecosystem.
Increased VC funding for impact-focused startups
As stated in the report, European technology startups €53 billion VC investment amount in 2023 37 percent Of this amount, it was invested in impact startups that directly address one or more of the UN Sustainable Development Goals (SDGs), with almost a third of VCs surveyed saying they use the UN SDGs to guide their investments.
The report also reveals that the proportion of total venture capital investment raised by European impact startups has more than doubled in the past five years. 18 percent In 2019 37 percent VCs and LPs say they are increasingly prioritizing investments focused on climate, innovation, health and gender equality. Data shows that by 2023 €18.2 billion Launched by a climate tech startup €8.6 billion Similar trends were seen among health tech startups, and also when it came to investments in startups (co-)founded by women.
“Venture capital is crucial to the development of vibrant start-up ecosystems across Europe and to the disruptive new technologies and ideas that will change society for the better. Institutions that do not back ventures are missing out on an opportunity to drive European development, bring about real change and reap huge rewards.” – Brent Hoberman, Founders Forum Group, Founders Factory, First Minute Capital
LPs want to make a positive impact with their investment
LPs are strongly committed to incorporating sustainability and social responsibility into their investment strategies. 73 percent Seventy percent of LPs surveyed are considering aligning with the UN SDGs, according to the report. 60 percent LPs have already implemented ESG strategies or plan to do so within the next 12 months, 65 percent They have required or plan to require portfolio companies and funds to report on ESG performance.
The report also found that Nordic VCs and LPs prioritise the SDGs and environmental impact in their investment decisions more than other regions. 75 percent Two-thirds of Nordic VCs and LPs say alignment with the SDGs is a key factor in their investment decisions. 71 percent Those who answered that ESG strategies are key 62 percent said diversity on the founding team is important or very important.
Top priority for VCs – ESG performance
Half of the venture capital firms surveyed said improving the ESG performance of their portfolio companies is their top priority over the next 12 months. 28 percent We plan to explore new ESG investment opportunities for VCs. 23 percent We aim to increase the proportion of companies in our portfolio that meet certain ESG criteria. 38 percent Prioritize increasing diversity among partners, 33 percent We are committed to promoting climate change measures.
As stated in the report: 82 percent of VC firms surveyed that already have an internal ESG policy in place or plan to do so within the next year.
Greater diversity leads to better investment decisions and financial returns
According to the report, there is a strong belief among VCs and LPs (87 percentIt has been suggested that greater venture capital diversity leads to improved investment decisions and financial returns.
Other key benefits of increased diversity cited by VCs and LPs include access to a broader talent pool and a more supportive work environment.
Female venture capital partners are especially focused on making a positive impact through their investments, which is why one in three female VCs and LPs surveyed have strengthening corporate governance and reducing carbon emissions as their top goals when choosing companies and funds to invest in, the report said.
For more detailed insights, data and interviews with leading figures in the VC community, download the full European VC Impact Report 2024.
