How equity funding shapes green start-ups success: Insights from Dutch start-ups

Abstract

In light of the global transition towards sustainability, green start-ups have emerged as key players in driving environmental innovation. These start-ups often face unique challenges, such as extended development timelines and the need for specialised knowledge. While equity funding is frequently cited as critical for start-up growth, little is known about how it affects green start-ups specifically. In addition, the role of different types of investors, who offer specific financial and strategic support, has only received limited attention in this context. This research therefore investigates not only the way in which equity funding influences the economic success of green start-ups, but also how the support characteristics of different investors shape these outcomes.

Using a dataset of 968 Dutch start-ups, a two-step quantitative analysis was carried out. Based on their compatibility with the SDGs, 147 of these were designated as obviously green. The first model tested whether green start-ups benefit differently from funding than their non-green counterparts. Green start-ups are more dependent on strategic resources in addition to money due to their complex innovation processes. Findings confirm that while funding generally leads to more economic success for green start-ups, obviously green start-ups are better able to translate funding into growth. This highlights the complementarity between equity investor support and the resource needs of green firms.

The second model examined which investor types contribute most to the success of green start- ups. The results show that green start-ups benefit most from investors who offer high levels of human resources, such as mentorship and strategic advice. This aligns with the Resource-Based View, which emphasizes the value of non-financial, firm-specific resources in complex contexts. Contrary to expectations, having multiple investor types, receiving high support on organisational resources, or support from corporate venture capitalists (CVCs) alone did not guarantee better outcomes. This may reflect the limited fit between certain investors’ strategic goals and the specific needs of green start-ups.

This research extends the Resource-Based View by showing that the quality and relevance of investor support outweigh the benefits of having a diverse or large number of investor types. Green start-ups thrive not from more investors, but from the right resources, particularly those offering hands-on, strategic human resource support. For green start-ups, it means that carefully selecting investors based on the specific non-financial support they can offer can significantly enhance their chances of achieving economic success.