Is Venture Capital Interested in Sustainable Development Technologies? An Analysis of the Russian Market

The paper explores how the focus of Russian startups on investment in sustainable development technologies affects their attractiveness to venture capital investors. Venture capital plays a significant role in financing rapidly growing companies as they develop new technologies and thereby supports industries that drive economic growth. However, venture capital activity in recent years has been flagging both globally and in Russia. Sustainable development technologies mitigate environmental and social risks in the economy and in society and have been increasingly attractive to investors since the mid-2000s. The article analyzes to what extent sustainable development technologies may appeal to venture capital investors in the Russian market despite the current turbulent environment. The study used panel regression analysis of 850 venture capital deals concluded between 2018 and 2024 and found a significant relationship between a company’s focus on sustainable technologies and the amount of venture capital it raised. There was also a positive correlation with the probability of securing subsequent rounds of funding, which was also influenced by the age of the portfolio company. These findings show that mature companies can better integrate ESG principles and therefore become more attractive investments for venture capital. The study also indicated that syndicated investor participation in deals and the degree of innovation in the technology developed by a company had a positive impact on attractiveness to venture capital. The article is one of the first quantitative studies to explore the relationship between a company’s concentration on sustainable development technologies and the attention it receives from venture capital investors. As such, its findings may be of interest to researchers studying both sustainable development and venture capital, and they can also be utilized to enhance Russia’s venture capital market.