Investing in Happiness: A Venture Capital Assessment Framework

As venture capital assets under management continue to grow, investors are increasingly scrutinizing the quality of management in relation to climate impact, social inequality, and other ESG criteria. Looking at ESG criteria alone, however, misses important information—the effects on the well-being of a given investment’s key stakeholders. The authors present a framework (known as the happiness return framework) through which a venture capital fund evaluates its investments relative to the simultaneous pursuit of both positive financial returns to investors and positive social and environmental value returns to the well-being of other stakeholders. This framework, developed collaboratively between Happiness Capital and SVT Group, assesses how the investment alters the conditions that influence a stakeholder’s happiness or well-being (objective dimensions) and identifies how a stakeholder experiences the change in these conditions (subjective dimensions). With this framework, the fund can account for and support portfolio companies to strengthen both business operations and their impact on stakeholder well-being.