Business angels investing in green ventures: how do they add value to their start-ups?

ABSTRACT

This study investigates how business angels (BAs) add sustainability value to green ventures and how these value-adding activities are dependent on the BAs’ sustainability characteristics, i.e., motivation to invest, sustainability competence, and sustainability investor activity. This explorative qualitative study is based on interviews with 14 BAs from Germany and the Nordics. A cross-case analysis of the interview data reveals that different groups of BAs invest in green start-ups: green angels and light green angels. These BAs differ in their motivation for investing in green start-ups, with some wanting to contribute to the sustainability transition and others investing to be a part of the shift of capital and talent toward green ventures. The BAs offer different sustainability-value-adding activities to their start-ups. Green angels provide activities that are aimed at enhancing the sustainability performance of their investees. Light green BAs add value very similar to conventional BAs. This study contributes to the green entrepreneurial finance literature by exploring the specificity of green angels. By shedding light on how BAs add sustainability value as investors for green ventures, the study places green angels more distinctly in the ecosystem of early-stage financing for green start-ups.

KEYWORDS:

• green start-ups
• entrepreneurial finance
• sustainability-value-adding activities
• angel investors
• case study

Introduction

Investments in green ventures are currently experiencing positive momentum (Croce et al. 2021). Financial capital used to be less accessible for green start-ups than for conventional start-ups, as investors perceived them to be unattractive, resulting in a financing gap for green ventures (Ghosh and Nanda 2010; Shepherd and Patzelt 2011). Only recently have investors begun to re-configure toward green start-ups, realizing green start-ups’ opportunity to leverage both economic and environmental benefits (Bocken 2015; Ghosh and Nanda 2010). Green start-ups are new and young companies that “develop and implement products or services that contribute to the goals of a green economy (reducing greenhouse gas emissions, improving energy efficiency, adopting a circular economy approach etc.)” (Bergset and Fichter 2015). Through sustainable innovation, they strive to meet a triple bottom line of economic, environmental, and social value creation (Bergset 2015). If green start-ups receive the financing they need to grow, they can play an important role in the transition toward a zero-emission society (Criscuolo and Menon 2015; Hummels and Argyrou 2021).

Due to longer development times and higher requirements for financial capital, green ventures have been perceived as less attractive by investors compared to conventional start-ups (Bergset 2018; Ghosh and Nanda 2010; Shepherd and Patzelt 2011). When conventional investors invest in green start-ups nonetheless, complex technologies in nascent green markets can lead to information asymmetries between entrepreneurs and investors, endangering the ventures’ mission to drift toward short-term profits (Bergset 2018; de Lange 2017; Demirel et al. 2019). Specialized investors who understand the fields in which the green ventures are operating in play a central role in overcoming the financing gap (Bergset 2018). One group of these specializing investors is business angels (BAs). BAs are high-net-worth individuals who invest on their own or with others in unquoted companies in which they have no family connection (Mason and Botelho 2018). They are fundamental to the entrepreneurial ecosystem, financing the start of the entrepreneurial pipeline (Landström and Mason 2016; Mason and Botelho 2021). They typically have an entrepreneurial background and management expertise themselves, enabling them to add human and social capital by offering value-adding services in addition to financial capital (Politis 2008). The value-adding activities can cover commercial skills and entrepreneurial experience or more specific industry know-how and personal networks, including as an advisor or member of the board of directors (De Clercq et al. 2006; Kelly 2007; Mason 2006). In recent years, interest in green investment opportunities has grown among many BAs as climate change has gained public attention (Mason and Botelho 2021). Despite BAs’ critical role in financing green ventures early on, the literature on them is very scarce (Bergset 2018; Marcus, Malen, and Ellis 2013; Owen et al. 2021). Only in 2023 has a study explicitly focusing on BAs investing in green businesses been published: Botelho, Mason and Chalvatzis (2023) investigate the motivations of green business angels to invest in the green/cleantech sector.

Most of the existing literature treats BAs investing in green ventures as similar to conventional BAs investing in non-green ventures. While BAs’ heterogeneity is widely acknowledged (Avdeitchikova, Landström, and Månsson 2008; Sørheim and Botelho 2016), the unique heterogeneity of BAs investing in green ventures and its consequences are neglected. It is likely that this heterogeneity has significant academic and practical implications for entrepreneurs and BAs alike. This study uses the term “green angel” for BAs investing in at least one green start-up. Green angels’ suspected advantage compared to other BAs is that they can overcome information asymmetries and the danger of a mission drift in favor of short-term profits that are imminent with conventional investors investing in green start-ups (Bergset 2018). We make the case for green angels adding sustainability value through specialized social and human capital value-adding activities. Sustainability-value-added incorporates the three dimensions of sustainability: economic, environmental, and social (Figge and Hahn 2004) – because in practice, the concepts of green and social value often go hand in hand. Since the focus of this paper is green start-ups, the term sustainability will be used mostly in the sense of environmental sustainability. Value-added is understood as a process coming from the hands-on involvement of a BA and resulting in the potential enhancement of value in a business (Politis 2016).

The aim of this study is to investigate the specificity of BAs investing in green start-ups. Hence, the overarching research question of the present study is: How do BAs add sustainability value to green ventures? Specifically, how are these value-adding activities dependent on the BAs’ sustainability characteristics, i.e., motivation to invest, sustainability competence and sustainability investor activity?

This study contributes to the existing literature on green entrepreneurial finance, particularly as one of the first studies to extend the knowledge on angel investments in green start-ups. By introducing green angels as a heterogeneous group that differs from conventional BAs, we place BAs investing in green ventures more prominently in the green venture ecosystem. The findings help to codify green angels and their contributions, revealing that green angels provide sustainability-value-adding activities. This study provides significant implications for entrepreneurs regarding expectations of the entrepreneur-investor relationship and outcomes of angel engagement, deepening their understanding of the specificity of green angels and their sustainability-value-adding activities as specialized investors (Botelho, Mason, and Chalvatzis 2023; Maxwell 2016).

This paper is organized as follows. First, the frame of reference is expanded, and the value-adding activities of BAs are outlined. We then contrast the lack of research on green angels with its relevance to the literature. Second, the methodology of data collection and analysis is described. Third, the findings and analysis are presented. The paper ends with a discussion of the findings, conclusions, and suggestions for future research.

Frame of reference

Green entrepreneurial finance

While investments in green ventures are developing rapidly in practice, the research field of green entrepreneurial finance is still nascent (Daggers and Nicholls 2016). Only a few scholars have merged the fields of entrepreneurial finance and environmental entrepreneurship to study green entrepreneurial finance. The main focus of the existing literature is the formal investor perspective, with scholars concentrating on (corporate) venture capital (VC) actors investing in green and especially cleantech ventures (Cumming, Henriques, and Sadorsky 2016; de Lange and Valliere 2020; Gaddy et al. 2017; Ghosh and Nanda 2010; Hegeman and Sørheim 2021; Lin 2022; Marcus, Malen, and Ellis 2013, Mrkajic, Murtinu, and Scalera 2019; Polzin 2017; Randjelovic, O’Rourke, and Orsato 2003).

A few scholars have compared green and non-green entrepreneurial finance (Bergset 2015, 2018; Bergset and Fichter 2015; Croce et al. 2021). One central challenge investigated in the literature is the financing gap between green and non-green ventures. Especially compared to conventional start-ups, green start-ups were once perceived as less attractive investments and avoided by investors (Lehner and Nicholls 2014). The aim of environmental entrepreneurship to “promote environmental welfare generally and address various sustainability problems specifically, while being financially sustainable” (O’Neil and Ucbasaran 2016) can make the process of growing the business and commercializing green innovation more capital- and time-intensive. They can thus be perceived to be riskier investments than other ventures (Cumming, Henriques, and Sadorsky 2016; Gaddy et al. 2017; Ghosh and Nanda 2010; Randjelovic, O’Rourke, and Orsato 2003). Additionally, information asymmetries across stakeholders are particularly challenging for green ventures competing for early-stage financing (Bergset 2018; de Lange and Valliere 2020). The entrepreneur typically has better information about their company than the investor (Berger and Udell 1998). Especially in environmental entrepreneurship, there is often a mismatch between the requirements of a green entrepreneur and the skill set of the typical VC-backed investor, as these investors tend to lack an understanding of sustainability-specific aspects (Bergset 2015; Cumming, Henriques, and Sadorsky 2016; Ghosh and Nanda 2010). In environmental entrepreneurship, not only products and services are new, but also the market itself is often newly emerged, e.g., emissions trading, supermarkets without packaging, car-sharing. In this context, informational asymmetries are likely to be intensified (Bergset 2015). To avoid a “mission drift” from long-term sustainability along the triple bottom line to a fast return on investment for the shareholders, green start-ups can benefit from like-minded investors (Bergset and Fichter 2015). As a result, green start-ups are advised to seek out specialized investors (Bergset 2015, 2018; Migendt et al. 2017; Demirel et al. 2019).

These challenges can make investors hesitant toward green ventures (Bergset 2018). This hesitance in turn leads to finance gaps for green ventures (Ghosh and Nanda 2010; Shepherd and Patzelt 2011). Only recently has the perception of green start-ups as risky, niche investments changed, and (environmental) sustainability reached the investment mainstream. There is a growing number of green ventures promising attractive investment opportunities, and the number of investors seeking out these green ventures is equally increasing (Bocken 2015). Investors regard green ventures as interesting opportunities to support sustainability motives and secure a strategic positioning. The opportunity to “go green” is taken up by investing in a green start-up through which the investor perceivably positions themselves for the sustainability transition of the economy and their field (Dyllick 1999).

BAs as actors in early-stage entrepreneurial finance

BAs play a critical role in the entrepreneurial pipeline (Landström and Mason 2016). When a BA invests in a venture, it can be a valuable signal of legitimacy and help the start-up attract further investment (de Lange and Valliere 2020). The BA population is very heterogeneous and difficult to classify based on descriptive characteristics (Avdeitchikova, Landström, and Månsson 2008; Sørheim and Botelho 2016; Sørheim and Landström 2001). Still, there are some defensible generalities. The large majority of BAs have years of business and entrepreneurial experience themselves (Aernoudt 2004; De Clercq et al. 2006; Politis and Landström 2002). Sørheim and Landström (2001) describe BAs based on “investor competence” (e.g., professional experience as a manager or company owner, higher education) and “investor activity” (e.g., total investments in 10 projects or more, investment in three projects or more in the last three years). Business angel networks (BANs) aim to “enable entrepreneurs to bring their investment proposals to the attention of a number of private investors simultaneously and to provide investors with a convenient means of identifying and examining a range of investment proposals, while retaining investor anonymity until the negotiation stage” (Mason and Harrison 1997). This way, BAs can enhance their effectiveness in making investments through BAN collaborations (Owen and Mason 2017).

BAs not only play a central role in the development and growth of new ventures by investing financial capital but also, stemming from their own entrepreneurial background and management expertise, offer value-adding services in addition. They often provide human and/or social capital, including as an advisor or member of the board of directors (De Clercq et al. 2006; Kelly 2007; Mason 2006). The heterogeneity of BAs implies that different kinds of BA investors add different kinds of value to the businesses in which they invest. Politis (2008) synthesizes four value-adding roles (see Table 1).

Table 1. Value-adding activities provided by BAs (adapted from Politis 2008).

Value-adding role	Activities
Sounding board/strategic role	The investor provides strategic advice to the entrepreneur based on their extensive business know-how and management expertise. To build and protect the valuable resources of the firm, the investor e.g., helps formulate business strategy, reflecting on ideas, enhancing the general pool of available management resources, and giving advice on the manner and timing for how to realize the value that is created in the firm.
Supervision and monitoring role	The investor shields the investments of the main resource providers of the enterprise from potential managerial misbehavior, e.g., by instituting proper accounting information systems and serving on the board of directors in the portfolio firms.
Resource acquisition role	The investor acquires timely and critical resources through their personal networks, e.g., through interfacing with investor groups, providing important business contacts and raising additional funds.
Mentoring role	The investor is a helpful, open, and trustful partner and contributes by instituting a shared vision, mutual understanding and trust in the relationship between the business angel and the entrepreneur, which in turn has the potential to reduce harmful conflict and promote cohesion and long-term commitment.

BAs investing in green start-ups

With climate change becoming a central topic in society, BAs are becoming interested in environmental entrepreneurship and beginning to re-configure toward green start-ups, aiming to pursue both economic and environmental benefits (Bocken 2015; Ghosh and Nanda 2010; Mason and Botelho 2021). Compared to conventional start-ups, a green venture offers the BA a chance to make a positive difference (de Lange 2019). Despite BAs’ critical role in financing green ventures early on, the literature on green angels is very scarce (Bergset 2018; Marcus, Malen, and Ellis 2013; Owen et al. 2021; Owen, Brennan, and Lyon 2018). BAs are usually addressed as a secondary capital source in the green entrepreneurial finance literature.

Since they invest their own capital and not funds committed by others, BAs are more independent from shareholders’ requests and funds’ investment criteria. This creates opportunities for them to invest in higher-risk projects according to personal passion and gut feeling, rather than focus on the project’s profitability (De Clercq et al. 2006; Maxwell 2016; Simon 1993). Since the early 2000s, BAs have been observed to invest for reasons beyond financial return (Brettel 2003; Kirkwood and Walton 2010; Lipper and Sommer 2002). Botelho et al. (2023) find that BAs invest in green start-ups for a variety of reasons. These reasons can be sorted according to Sullivan and Miller’s (1996) categories of altruistic, hedonistic, and economic motivations. Economic investors believe in the potential for higher returns from one investment compared to another investment at a given level of risk. Hedonistic reasons to invest comprise multiple investment goals (i.a. noneconomic motivation such as “psychic income” or personal interests). Altruistic investors invest to promote societal interests ahead of their own financial interests, which includes impact investing and environmental motives, according to Botelho et al. (2023). These different motivations affect the weight of green start-ups in the BAs’ portfolios and the BAs’ willingness to invest in greenstart-ups.

BAs that are explicitly sustainability-oriented are an attractive finance source for green start-ups because they offer various advantages compared to other BAs. They might be open to invest in ventures that are overlooked by conventional VC (Bergset and Fichter 2015; Marcus, Malen, and Ellis 2013). Their mission-driven motivation and independence can enable green angels to overcome the danger of a mission drift (Bergset and Fichter 2015). Additionally, they can overcome some of the information asymmetries between green entrepreneurs and conventional investors (Bergset 2018). Green angels’ affinity toward and insights into the field of environmental entrepreneurship can make them intermediaries that reduce the disparities between green entrepreneurs and conventional investors (Bergset 2015; Bonnet and Wirtz 2011).

The BAs’ own sustainability characteristics – comprising motivation to invest, sustainability competence, and sustainability investor activity – can lead to the contribution of a significant sustainability-value-added in addition to conventional financial, social, and human capital. This paper understands sustainability-value-added as follows. Value is the relative worth, utility, or importance of a business entity. Value-added refers to a process coming from the hands-on involvement of a BA and resulting in a potential enhancement of value in a business (Politis 2016). Sustainability incorporates the three dimensions of sustainability: economic, environmental, and social (Figge and Hahn 2004). Considering the heterogeneous nature of the BA population, green angels’ sustainability value-added is expected to vary. An initial systematic comparison of BAs investing in green ventures is necessary to illustrate this heterogeneous specificity of green angels and their sustainability-value-adding activities. Based on the literature, such a comparison could thus include a combination of the descriptive information, i.e., motivation to invest, sustainability competence, and sustainability investor activity, as well as the value-adding activities, adapted to identify the inclusion of sustainability into these roles (see Table 2).

Table 2. BAs’ value-added for green start-ups based on Sørheim and Landström (2001) and Politis (2008).

Category	Subcategory
Sustainability characteristics	Motivation to invest
	Sustainability competence
	Sustainability investor activity
Sustainability-value-adding activities	Sustainability strategy advice (sounding board/strategic role)
	Sustainability monitoring/supervision
	Sustainability resource acquisition
	Sustainability mentoring

Overall, the scholarly understanding of the role of green angels as contributors to the sustainability transition as part of the early-stage finance ecosystem around green ventures is underdeveloped. They can be important actors in closing the finance gap in early-stage green start-ups (Bergset 2018). By making the decision to invest in transformative green start-ups, green angels may become change agents (de Lange 2019). The main aim of this study is to contribute to the green entrepreneurial finance literature by investigating the specificity of green angels investing in green start-ups, especially regarding their sustainability-value-adding activities. Our research questions emerge from the literature on BAs’ value-adding activities and environmental entrepreneurship:

1. How do BAs add sustainability value to green ventures?

2. How are these value-adding activities dependent on the BAs’ sustainability characteristics, i.e., motivation to invest, sustainability competence and sustainability investor activity?

Method and data collection

Research design and sample

This study used a comparative case study design (Eisenhardt 1989). A qualitative methodology enabled an exploration of this topic and an assessment of the status quo from a holistic point of view. A case study approach with semi-structured interviews was applied. Researching these cases allows for the creation of theoretical concepts using empirical evidence from multiple cases studied (Eisenhardt 1989; Eisenhardt and Graebner 2007). The units of analysis are BAs that have invested in green start-ups. Relevant individuals were identified through intermediaries in the authors’ networks and through LinkedIn, following a purposeful sampling strategy to yield cases that are information rich (Patton 2002). We identified those 14 BAs through interviews and dialogues with third party actors such as incubator managers, conventional investors, and other green investors to ensure that they met the criteria. The authors screened the BAs’ portfolios a priori to ensure that the BAs have invested in start-ups that can be classified as green following Bergset and Fichter’s (2015) taxonomy, e.g., ventures aiming to reduce greenhouse gas emissions, improve energy efficiency, or adopt a circular economy approach. The participants were identified as relevant for the study, applying the following criteria:

• They have invested as a BA without being related to the founders.

• They are lead investors who are actively involved in their investments.

• Their investment portfolio contains at least one green start-up.

• They are based in Germany or the Nordics (Sweden and Norway).

Initially, 88 relevant BAs were identified, of whom 62 were contacted. Forty-eight were unavailable. After having conducted over ten interviews, the data showed signs of saturation, hence no additional potential interview participants were approached (Eisenhardt 1989). This resulted in a sample size of 14 BAs who participated in this study (see Table 3). As this is an explorative study aiming not to draw generalizable conclusions but to give insights into an emerging phenomenon, a case study design gives sufficient insights for this initial study.

Table 3. Case characteristics.

Participant	Country	Gender	BA since	Main occupation
Individual A	Sweden	Female	2016	Academic
Individual B	Norway	Male	2015	Full-time BA
Individual C	Norway	Female	2016	CEO and serial entrepreneur
Individual D	Norway	Male	2016	CEO and serial entrepreneur
Individual E	Sweden	Male	2016	Investment analyst at an SME
Individual F	Germany	Male	2015	Full-time BA
Individual G	Norway	Male	2017	Full-time BA
Individual H	Germany	Male	2014	Full-time BA
Individual I	Sweden	Female	2014	Full-time BA
Individual J	Germany	Male	2017	CEO and co-founder of an SME
Individual K	Germany	Female	2020	Full-time BA
Individual L	Norway	Female	2014	Top manager at an SME
Individual M	Germany	Male	2019	Full-time BA
Individual N	Germany	Male	2000	Chairman of the board of an investment fund

Data collection

As shown in the classic BA literature, the population of BAs is very heterogeneous, and this sample supports that argument. The diversity of the interview partners counteracted the potential negative effects of sample bias in the findings (Yin 2009).

The main data source were interviews conducted between December 2021 and February 2022. All 14 interview participants met the selection criteria listed above. When necessary, secondary data sources, such as the investor vehicles’ websites, were included to obtain a broad understanding of the participants’ investment portfolio and the details of how they present their activities externally. The primary data was gathered in the form of semi-structured interviews that provided insightful and more in-depth information that documents may not cover. Interviews are one of the most crucial sources in a case study (Yin 2009). Following Miles and Huberman (1994), the data collection ended when the issues raised by the research questions reached the point of saturation. The interviews followed a guide designed by the authors (see Appendix A), which was tested and iterated during initial interviews. It was centered on questions about the BAs’ backgrounds and experience, their motivations for investing in green start-ups, and their involvement in the start-ups after the investment. The questions were open-ended and sought to capture the BAs’ perspectives on green start-up investments.

The interviews were conducted online using a conference tool. The recordings were transcribed by the authors as part of the data analysis process. In this way, the authors became familiar with each case and developed the ability to identify general patterns across interviews (Eisenhardt 1989). The 14 interviews lasted between 30 and 60 minutes. The average interview recording was 51 minutes. Detailed case data were anonymized to ensure the privacy of the participants. These transcripts were coded using NVivo. A coding procedure was applied to facilitate the emergence of novel knowledge while analyzing the data.

Data analysis

For the coding and data analysis, an abductive approach was followed. As shown in Table 2, the frameworks from the literature were combined and modified for the context of green angels. Frequent group discussions within the research team helped to develop a common understanding of both deductive and emerging subcategories (Dubois and Gadde 2002). The codes were scrutinized and modified for clarity and distinctions throughout the categorization process. Abductive research is characterized by a non-linear, iterative process of systematic combinations and inference that matches theory with reality (Dubois and Gadde 2002). The aim of our abductive research is to combine data-gathering with analysis and use evidence from several interventions. The previous literature on BAs served as a useful comparison point to contrast the emerging green angel framework with existing literature-based theory. Table 4 depicts an overview of the coding scheme .

Table 4. Coding scheme.

Category	Subcategory	Code/mother code	Subcode/child code
Descriptive dimensions	Motivation to invest in green start-ups	Motivation for investing in green start-ups	Aim to affect societal transformation Being a part of the shift of talent and capital Bad conscience Personal motives
	Sustainability competence	Sustainability competence through experience or professional background	Background and/or experience in sustainability Nosustainability competence
	Sustainability investor activity	Portfolio composition	Specific focus on green or impact start-ups Mixed portfolio covering green and non-green start-ups
Sustainability-value-adding activities	Sustainability strategy advice (sounding board/strategic role)	Advice includes sustainability strategy	Hold a dedicated sustainability-focused board position Develop a clear sustainability strategy and value proposition Forward industry trends Focus on growing the business No sustainability strategy advice
	Sustainability monitoring and supervision	Monitoring covers sustainability dimensions	Require clear sustainability indicators Request quantifiable indicators that lay the groundwork for later reporting No sustainability monitoring or supervision
	Sustainability resource acquisition	Resource acquisition comprises sustainability resources	Provide access to sustainability-focused network Prepare for future sustainability-focused financing Connect the portfolio start-ups to create synergies Advertise the start-up in own network Connect the start-ups with sustainability experts No sustainability resource acquisition
	Sustainability mentoring	Mentoring includes sustainability issues	Challenge the entrepreneurs’ mindsets No sustainability mentoring

As suggested by Eisenhardt (1989), the process of data analysis iterated between the literature and data. First, the subcodes were analyzed per individual to see what the interviewees stated regarding the role of sustainability in their competence, investor activity, motivation, and value-adding activities. To lay the foundation for grouping the individuals into different groups of green angels that constitute the cases, their answers were categorized in terms of whether they rate sustainability as important in their activities as BAs investing in green ventures. Per subcategory, the interviewee received “full green” if the answer is “yes” and “no green” if the answer is “no”. If the interviewee did not specifically answer “yes” but mentioned activities that move into the direction of providing the investee with that service (e.g., in the future or via intermediaries), they received “light green”. Overall, a BA was categorized as a green angel when they offer light green or fully green activities in all four sustainability-value-adding dimensions. BAs with sustainability-value-adding-activities in three or less dimensions were categorized as “light green” angels. The results per individual are shown in Table 5.

Table 5. Result table per individual.

Following this individual analysis, a cross-case comparison was conducted (Glaser, Strauss, and Strutzel 1968). This enabled the authors to identify what characterizes green angels and what differentiates them from conventional BAs, investigating both their sustainability characteristics and their sustainability-value-adding activities. The results of the data analysis show two groups of BAs investing in green ventures (see Table 6).

Table 6. The heterogeneity of BAs investing in green ventures.

Category	Subcategory	Light green BAs	Green BAs
Descriptive dimensions	Motivation for investing in green start-ups	Purely economic: Being a part of the shift of talent and capital Hedonistic: Bad conscience or personal motives	Altruistic and economic: Aim to affect societal transformation through profitable investments
	Sustainability competence	No sustainability background or experience	Background and experience in sustainability
	Sustainability investor activity	Mixed portfolio covering green and non-green start-ups	Specific focus on green or impact start-ups
Sustainability-value-adding activities	Sustainability strategy advice (sounding board/strategic role)	Focus on growing the business Forward industry trends No sustainability advice	Hold a dedicated sustainability-focused board position Develop a clear sustainability strategy and sustainability value proposition
	Sustainability monitoring and supervision	No sustainability reporting	Require clear sustainability indicators Request quantifiable indicators that lay the groundwork for the later reporting
	Sustainability resource acquisition	Advertise the start-up in own network Connect the start-ups with sustainability experts No specific sustainability resource acquisition support	Provide access to sustainability-focused network Prepare for future sustainability focused financing Connect the portfolio start-ups to create synergies
	Sustainability mentoring	No specific sustainability mentoring	Challenge the entrepreneurs’ mindset

Limitations

This study is one of the first to explicitly focus on green angels and their sustainability-value-adding activities. The methodological research design of this study has its limitations. Several researchers have noted the methodological challenges posed by the BA population (Avdeitchikova, Landström, and Månsson 2008; Landström and Mason 2016; Mason and Botelho 2021). Because of their informal organization, low-key profile, and dispersion, identifying BAs engaging in green ventures can be difficult (Bergset and Fichter 2015). The purposeful sampling conducted enabled us to counter this challenge (Patton 2002). This study was limited to BAs from Germany, Sweden, and Norway. The countries portray similar maturity levels of green venture development and stimulation. Thus, this allows for comparisons.

The study only offers supply-side investor observations and we did not assess how green the investee ventures actually are. Since the data are self-reported through the interviews, there may be a tendency for biased results. We have reduced the risk associated with this one-sided information collection through various approaches. The BAs confirmed that they have invested in at least one green start-up. When possible, we examined the BAs’ portfolios to gain a better understanding of the environmental sustainability of the start-ups they have invested in. As several of the BAs got identified through discussions with actors like incubator managers, we also got third party confirmation that these BAs are involved with sufficiently green start-ups. For this study, we did not assess how the start-ups perceive the green angels’ self-proclaimed sustainability-value-adding activities but focused on making an initial investigation of the heterogeneity of this investor group and their post-investment activities. The validity and robustness of the findings were ensured by the research design. Additionally, the participants were assured anonymity to address potential key informant bias. The case study approach supported the mitigation of the negative effects of observer bias.

Findings and analysis

The purpose of this study was to investigate the specificity of BAs investing in green start-ups. To answer how BAs add value to green ventures, the overall findings on post-investment activities are presented. Based on the interview data, the cases are established as two diverging groups of BAs investing in green ventures, with varying motivations to invest, sustainability competences, and sustainability-value-adding activities. The empirical findings presented shed light on the differences between light green and green angels, toward answering the second research question of how these value-adding activities are dependent on the BAs’ sustainability characteristics, i.e., motivation to invest, sustainability competence, and sustainability investor activity (see Table 6). In this, the phenomenon of “green angels” is explored further and its relevance is highlighted. We argue that the specificity of green angels is not arbitrary but has real consequences for the expected outcome in the form of sustainability-value-added for start-ups.

Motivation for investing in green start-ups

Motivations for investing in green start-ups vary. The interviewed BAs allude to a quest to unite sustainability and profit. Green angels are typically motivated by altruistic factors, predominantly the opportunity to contribute to a profound societal transformation toward sustainability. Often, reducing the effects of climate change is named as one overarching goal. Making a difference – i.e., making the world better and working with genuine people to achieve this goal – are motivations that frequently arise among green angels.

L: “The fight against Big Oil and all the companies that are currently destroying our planet is undoable without as much capital as possible flowing into the solutions that are doing the opposite. (…) It is kind of a very altruistic decision-making. We only have eight years now to turn this huge ship that is currently running straight into disaster, and if my pension money can go into doing that, even if it doesn’t help me, I don’t think I will sit there as a pensioner and regret it. I think I will be happy that I did what I did.”

In contrast, light green angels often argue with economic reasoning, aiming to be a part of the shift of talent and capital, i.e., seizing a strategic opportunity by investing in a green start-up that will be attractive to ongoing investors down the pipeline.

C: “The new companies that have this impact drive or ESG focus will outcompete traditional companies because the most brilliant people want to work at a place with a purpose.”

Some light green angels are also driven by hedonistic motives, such as personal interests or a bad conscience.

E: “I want to be able to look myself in the mirror in ten years and know that I did what I could to avoid this upcoming disaster. For myself and future generations to do the right thing, anything else would be irresponsible.”

Sustainability competence

Not all BAs have the same sustainability knowledge. The interviewed green angels acquired sustainability competences in previous professional roles or through investment experience with green start-ups. Some even have a professional background in sustainability investing (see Table B1).

L: “I have been working with climate and the environment my whole career. (…) I have been the head of sustainability in numerous companies. I advise big companies on their sustainability strategies.”

The light green angels’ experience is often limited to non-green entrepreneurial experiences. Many are professional investors or work with developing start-ups and started investing in green start-ups over time (see Table 3). F: “I have been active as an entrepreneur for the last 15 years. (…) I have been a BA since 2015. And in 2018, I invested in my first green start-up”.

There are also outliers in the dataset. Individual G was an entrepreneur in the field of environmental protection for decades but does not actively add sustainability value as such. Individual K, on the other hand, does not have a sustainability background yet adds sustainability value in all analysis dimensions. This suggests that it is not enough to have the background; a green angel also needs to be willing to contribute with sustainability-value-adding activities.

Sustainability investor activity

These varying motivations and competences accompany different investor activities. In a narrow sense, green angels focus their portfolio composition on environmentally impactful start-ups. These green angels often started their BA journey by investing in green start-ups. The data show that the concept of “impact” is popular among the interviewed BAs. Several BAs want to invest in start-ups that have a positive impact on either people or the planet.

M: “Our investments are exclusively based on the triple bottom line. This means that we exclusively select ecological or social topics. Ideally, both. Must, of course, also have financial success”.

G: “I’m an impact technology investor (…). It’s anything that can create impact, but most importantly anything to reduce CO₂ emissions or address the need to stall global warming.”

C: “[The start-ups I invest in] have to solve a real problem that has an impact on the planet or the people.”

Light green angels have a rather pragmatic portfolio composition in which they invest in both green and conventional start-ups. These angels typically started as BAs by investing in non-green start-ups and became interested in green ventures only later. For some, the reasoning for this is the profitability of green start-ups, which is still perceived to be less than that of conventional ones. Another perspective is that a positive impact is something intangible that all start-ups provide simply through their business ideas. One of the light green angels states:

“More or less all tech investments that you do today have a green impact at the end of the day. If you look at my portfolio of 100 companies, if I spend two hours with you, I could point to the green impact of almost every single one. Because it goes to making workflows more easily, working distantly instead of traveling, reducing mobility, and being smarter. Boom”.

Advice on sustainability strategy

Zooming in on the actual sustainability-value-adding activities, the differences between the BAs become more pronounced. Regarding advice on sustainability strategy, the interviewed green angels take on the role of sustainability experts. They challenge the founders regarding sustainability strategy decisions, often holding a formal board position. There, they address supply chain topics such as supplier selection, team diversity importance, and resource choices. This way, green angels remind entrepreneurs of the holism of sustainability.

L: “I am either an advisor when they ask, or I am a part of an established board. My role then is to be a sustainability or impact expert.”

Another central part of the strategic advice on sustainability is the development of a clear sustainability strategy and value proposition together with the entrepreneurs. The advantage that green angels see here is the potential to implement sustainability early on, even if the start-up is still in the process of building traction.

N: “My task is to work out clearly what their impact and sustainability strategy is. They have to say how they approach it and how they optimize their business model in this respect. In other words, what their strategy is, who they want to work with, how they want to deal with their employees so that they can report on this and give it to the investors.”

Light green angels advise on sustainability-related strategic issues by staying informed on and forwarding industry trends or additional funding opportunities to help establish a competitive position in the green venture ecosystem.

D: “If I notice something on a website or read about a competitor or see an interesting industry trend, I forward it. (…) I follow different energy people on Twitter to get a sense of what the interesting trends and news streams are”.

Other BAs provide no advice on sustainability strategies at all. They are convinced that, especially in the early-stage, start-ups should focus on building their product and business model. Their focus lies on conventional early-stage start-up challenges, e.g., starting the business and gaining traction, and not sustainability-specific issues.

E: “We don’t talk about sustainability that much. We talk about companies and business models and then most of them just happen to be in the sustainability space as well – but the aim is always to build long-term growing, profitable companies.“

Monitoring and supervision of sustainability

Reporting requirements on the ventures’ sustainability progress distinguishes green angels from light green angels. The most advanced green angels anchor sustainability criteria in investment agreements or even tie remuneration to these criteria.

N: “In the investment agreements, I clearly stipulate the sustainability criteria that I expect. And I also tie the remuneration systems for management and executive positions, for example, to the achievement of these sustainability targets.”

Individual N givesan example of how he collaborates with a German software company for this sustainability reporting. His start-ups have access to a toolkit to measure and report their sustainability indicators. These indicators include, for instance, CO₂e emissions from the start-ups’ products and business travel. The tool also covers social aspects, such as income relations between management and employees.

J: “We have to look at where the data comes from, which is very different from start-up to start-up. When someone is outsourced, we must make sure that the production partners can provide reliable data on energy consumption, material consumption, logistics etc. Then at the end go-to-market, the product lifecycle. What do people do with the product? How long does it really last? How often can we repair things? What is the material consumption, the repair costs? I have not yet seen a solution that really works well across different industries”.

Hand in hand with the argument that start-ups are too early-stage to have a clear sustainability strategy, some green angels refrain from insisting on a concrete reporting of sustainability indicators. Nonetheless, they expect a certain awareness of potential indicators that can be quantified in the future.

K: “We don’t [measure the impact now]. We ended up not requiring it from the companies that we want to invest in, because in this very early stage that we’re looking at, there is no point. What we do require, though, is the awareness of what potentially could be measured or awareness of what your impact could be”.

Light green angels usually do not monitor their start-ups’ sustainability performance. Some rely on their gut feelings and experiences, trusting that these are enough at this early stage. For some BAs, the concept of requiring sustainability reporting itself is inconceivable. They trust that a business model connected to sustainability will automatically have a positive impact.

C: “I am not quite sure what exactly you mean. (…) Since ethics related to the business model are integrated in the DNA, I trust that that is enough at this stage.”

G: “In my investment strategy, there is no need to apply tools or methodologies for measuring or assessing impact. I’m entirely driven by intuition, own beliefs and ideas, and imagination.”

Acquisition of sustainability resources

To support their start-ups in the acquisition of sustainability resources, BAs contribute a variety of activities.

Green angels use their more extensive knowledge of the sustainability investment ecosystem to prepare start-ups for future sustainable investors or sustainability-focused follow-up financing through funds. Individual H, for example, encourages his start-ups to prepare pitch-decks that can convince more challenging follow-up investors who might demand more sophisticated sustainability indicators. Facilitating exchange with other start-ups in their portfolio is a low-hanging fruit that any investor can do but is mostly done by the interviewed green angels who have a green-only portfolio.

Light green angels support their start-ups with rather low-threshold activities for sustainability resource acquisition, if they support them at all in this regard. They take the role of an intermediary who also has an open ear for sustainability strategy issues next to the general issues that all early-stage entrepreneurs face. These BAs then connect the start-ups with sustainability experts who can help with more detailed knowledge.

I: “I’m not certified in sustainability as such. I give feedback on everything from their pitch decks on fundraising to strategic decisions (…). But for example, if it’s regarding measuring their climate impact, I would point them to someone in my network who could help them.”

A large network can provide insights when the BA’s knowledge reaches its limits. Many BAs add sustainability value to their start-ups by providing access to their own sustainability-focused networks.

M: “I know people who I can connect with my start-ups to facilitate an experience exchange. I have connections to funds that have knowledge of microfinance projects, providing insights from Africa, Asia, or South America. I try to organize a conversation with the managers from there, if that is necessary, if that is required.”

Being known as a specialized green angel is favorable, and several BAs are aware of the importance of building a personal brand.

B: “If you’re going to do this thing over time, you need to make sure that you’re a big fish in a small pond”.

Offering exposure of the start-ups in the angels’ own network, such as on LinkedIn, increases the start-ups visibility and signals legitimacy to other actors in the ecosystem which might open important doors in the future – if the BAs are reputable in the field of environmental entrepreneurship.

I: “I use LinkedIn quite a lot to share news about the company, to get other people in my network interested, also people who I think would be a good fit as employees in the start-ups.”

Mentoring regarding sustainability issues

In terms of mentoring for sustainability issues, green angels stand out by their focus on challenging the entrepreneurs’ mindset. They attempt to bring in their philosophy and mindset to question decision-making. An often-addressed topic here is the debate of trade-offs between long-term social and environmental sustainability and short-term profit.

M: “What we always bring in is: ‘Guys, you have to think about [the triple bottom line]; you have a purpose, and it could happen that you deviate from this ecological purpose because you want to make more money. Is that really what you want?’ We just ask the questions and bring in these trade-offs, which are always there”.

The BAs who are in the process of becoming greener mention the importance of having the right mindset as investors themselves. For them, trust in the founders and their sustainability aims is central.

H: “One should genuinely have this positive mindset of sustainability. This does not mean that I have to change my own lifestyle, but that my own consciousness has to fit into this direction. (…) More authenticity than usual is needed so that there can be a certain symbiosis between the founders and the investors. We should not have to discuss now whether something like this is necessary if it pays off for sustainability. You can discuss whether the timing is right, but you don’t have to discuss it in principle. Maybe you also need a bit more faith and trust in what the founders are doing”.

In contrast, light green angels typically do not mentor their investees specifically regarding sustainability issues.

The heterogeneity of green angels

In summary, the findings show the distinct specificity of BAs investing in green ventures (see Table 6). We explored how BAs add sustainability value to green ventures and found that green angels contribute a large variety of sustainability-focused value-adding activities. Through a cross-case comparison, we revealed that these activities differed. Green angels want to affect societal change through their investments, motivated by altruistic factors and economic incentives. Their competence and investor activity have sustainability at their core. Light green angels, on the other hand, typically invest in green start-ups for economic or hedonistic motives. In post-investment engagement, they add value similar to conventional BAs. The presented differences among BAs investing in green ventures have implications regarding the investor-entrepreneur relationship and the outcome of the involvement of different green angels.

Discussion

To assess how these sustainability-value-adding activities are dependent on the BAs’ sustainability characteristics, we conducted a cross-case comparison between the BA groups.

BAs investing in green ventures ≠ green angels

As value-added is understood as a process coming from the hands-on involvement of a BA and resulting in a potential enhancement of value in a business (Politis 2016), green angels add sustainability value in addition to financial, social, and human capital through post-investment activities. The revealed heterogeneity of BAs investing in green ventures implies that different green angels add different kinds of sustainability value to their start-ups (Politis 2008).

Previous research has pointed out that sustainability-oriented angels aim to be change agents and contribute to their start-ups in a way that enables them to be both financially successful and sustainable in the long term (de Lange 2019). Our study provides deeper insight into this issue. Green angels want their angel engagement to result in increased sustainability performance as an output. To achieve this, they offer a variety of these sustainability-value-adding activities – either in addition to conventional BA topics or as a designated sustainability expert. Unlike conventional angels, they make use of their sustainability competences. These are applied through sustainability-value-adding activities such as strategic sustainability advice, monitoring, resource acquisition, and mentoring. This specialized competence leads to green angels being more concerned with avoiding greenwashing¹ and measuring sustainability impact. They realize the relevance of minimizing conflicts of interest through formal control mechanisms aimed at sustainability performance, showing high levels of diligence and integrity that gain increasing importance in green entrepreneurial finance (see e.g. Diekel et al. forthcoming).

Light green angels, on the other hand, are very similar to conventional BAs. While they invest in green ventures, their motivation is rather to be a part of a strategically profitable shift of capital and talent toward sustainability and contribute to their start-ups in a more conventional way. Like conventional BAs, they contribute to conventional value-adding activities (Politis 2008). Related to sustainability, they contribute to a limited extent. Regarding sustainability performance, light green angels trust their gut feeling and do not perceive greenwashing as a problem in early-stage start-ups. Instead, they are focused on scaling the business and providing added value specifically for this objective. A central advantage is that these BAs are often very connected in the ecosystem for conventional start-ups, can offer synergies with other portfolio start-ups, and make valuable introductions outside of the green venture ecosystem. From a broader perspective, their established position in the conventional start-up ecosystem allows them to advocate for green ventures and help overcome information asymmetries between their start-ups and other stakeholders (Bergset 2015; Cumming, Henriques, and Sadorsky 2016; Ghosh and Nanda 2010). Some of the light green angels are in the process of evolving into green angels by learning more about sustainability-value-adding activities. It is worth mentioning that this development might also have been initiated by the involvement of the light green angels in green ventures, triggering a reverse causation where the green ventures inspired the BAs to become greener and add sustainability value. Still, most of the majority of the light green angels invest in green ventures and then add value through conventional activities. By accelerating the shift of capital and talent toward green ventures, light green angels address major financing challenges for green ventures and effect change from within.

Green angels ≠ conventional BAs

Green angels are similar to conventional BAs in terms of their entrepreneurial background and the financial capital they provide to their start-ups (Botelho, Mason, and Chalvatzis 2023). Like conventional BAs, green angels invest under the premise of gaining a return on their investment. However, our findings show that there are significant differences regarding the motivation to invest and the value-adding services provided by green angels. When green angels invest in green ventures, they are like-minded investors that value a triple bottom line of economic, environmental and social value creation more than a fast return on investment (Bergset and Fichter 2015). This can reduce the potential conflict between short-term profits and a triple bottom line of economic, environmental, and social value creation that usually creates difficulties in the relationship between a green entrepreneur and a conventional investor (Bergset and Fichter 2015). There is less risk of a potential mission drift of the company toward profit and growing the business away from the triple bottom line. Individual J highlights this by stating that a shared vision is central for achieving the start-up’s financial, social, and environmental milestones. This is important for both the entrepreneurs and him as an angel investor.

Additionally, green angels can overcome a central challenge in green venture financing: the information asymmetries arising from the usual mismatch between the requirements of a green entrepreneur and the skill set of the typical VC-backed investor, who tends to lack an understanding of sustainability-specific aspects (Bergset 2015; Cumming, Henriques, and Sadorsky 2016; Ghosh and Nanda 2010). Green angels are aware that the process of scaling up and commercializing green innovation can be riskier and more capital intensive than other ventures (Cumming, Henriques, and Sadorsky 2016; Gaddy et al. 2017; Ghosh and Nanda 2010; Randjelovic, O’Rourke, and Orsato 2003). They meet this challenge with longer investment horizons and less pressure to grow quickly. This is highlighted both in the literature and in the empirical findings of this study:

L: “We are in for a long time, and we are not VC-like. (…) There is no pressure on either us or the company. We can take our time to do this.”

When a green angel has the reputation of investing in impactful ventures, their endorsement can signal legitimacy to other investors, helping start-ups attract further investment (de Lange and Valliere 2020). The ability of a green start-up to advance from one investor type to the next depends not only on the venture’s capacity to meet the screening criteria of the new investor type but also on the extent to which the prior investor type—i.e., the green angel – confers legitimacy. Hence, if early investors can convincingly assess the investment potential of green ventures, the start-ups will be able to convey legitimacy to later investors (de Lange and Valliere 2020). Individual K supports this argument by explaining that she is constantly trying to tighten relations with investors, especially those with the same mindset. Therefore, a clear position as a green angel is needed.

There are also some ways in which green angels do not necessarily add as much value as conventional BAs. Our findings support the argument of Botelho et al. (2023) that, compared to conventional BAs, green angels are rather new to angel investing. Therefore, they can be less formally organized than conventional BAs. Green angels’ connections and networks are often rather informal and still in the growth phase.

L: “It is not a defined ecosystem. It is rather individuals that you meet or get connected to. Then they have a little network on the side. It is a super organic, unstructured movement that is growing fast. There is a lot of goodwill and people wanting to do the right thing.”

Conclusion

This study aimed to investigate the distinct specificity of green angels. Through a comparative case study based on interviews with 14 BAs from Germany, Norway, and Sweden who have invested in at least one green start-up, we explored the phenomenon of green angels. Specifically, we answered how BAs add sustainability value to green ventures. In addition, we showed how these sustainability-value-adding activities are dependent on the BAs’ sustainability characteristics – i.e., motivation to invest, sustainability competence and sustainability investor activity. Our analysis of the interview data reveals that there are two groups of BAs investing in green ventures: green angels and light green angels. These groups differ regarding their motivation to invest, their sustainability investor activity, their sustainability competences, and the sustainability-value-adding activities they provide. Light green angels behave similarly to conventional BAs, while green angels offer a variety of sustainability-value-adding activities. Thus, we introduce green angels as a term for BAs that not only invest in green ventures but also add a certain sustainability value through post-investment activities. These findings have significant implications for the expected outcome of BA involvement in green ventures, as well as the entrepreneur-investor relationship.

Overall, green angels are important actors in closing the finance gap in early-stage green start-ups (Bergset 2018). By making the decision to invest in impactful green start-ups, green angels may become change agents (de Lange 2019). This study places BAs more distinctly in the ecosystem of early-stage financing for green start-ups by shedding light on the distinct specificity of green angels and their sustainability-value-adding activities. This is one of the first studies on green angels and we thus contribute to the green entrepreneurial finance literature and the emerging literature on green angels (Botelho, Mason, and Chalvatzis 2023; Owen et al. 2023).

Practical implications for green entrepreneurs

In practice, our findings imply that the differences among BAs investing in green ventures are not arbitrary but have real consequences for the expected outcome in the form of sustainability-value-added for start-ups. Since the sustainability-value-adding activities provided by different types of BAs differ greatly, green start-ups are thus advised to carefully select their BAs according to their specific needs as green ventures, depending on the expected outcome of the collaboration with the BA and the pursued entrepreneur – investor relationship. Green entrepreneurs need to be aware of the heterogeneity of BAs investing in green ventures and the distinct specificity of green angels.

Green angels

By involving a green angel, start-ups can meet two needs. Green angels present a novel and unique opportunity for entrepreneurs to close their financing gap and gain access to sustainability-value-adding activities. However, it needs to be considered that not all green angels are able or willing to take this hybrid role and replace or substitute a conventional BA. Instead, a green angel can be an important addition to the BA pool for any start-up active in the spheres of environmental sustainability, adding a valuable mindset and specialized resources on sustainability.

To acquire a green angel, start-ups must convince with the actual positive environmental impact of the presented business idea. Economic sustainability also must be present, but it is a subordinate aspect. When collaborating with a green angel, green ventures should expect an investor with sustainability ambitions who is a sparring partner for developing and implementing a sustainability strategy, and requires frequent reporting on sustainability progress.

Conventional BAs

When seeking out a conventional BA, start-ups should focus their pitch on the economic benefits of their business model and illustrate environmental benefits as a secondary aspect. Since conventional BAs typically do not provide the necessary sustainability-value-adding activities, sustainability knowledge must come from within the founding team or another BA. Nevertheless, a likeminded BA who can close the finance gap and focus on helping the start-up grow the business while sharing the entrepreneur’s green vision may be the right choice.

Practical implications for green angels

Our findings show that green angels see the need to position themselves prominently in the green venture ecosystem and communicate a clear value proposition. Green angels should be aware of the importance of qualifying themselves for the green venture ecosystem by seeking educational opportunities on the topic. One central challenge is to identify the green start-ups that will have a real impact, avoiding those that only pretend to have such an impact (Kuckertz, Berger, and Gaudig 2019). This highlights the importance of BAs learning about sustainability in general and greenwashing in start-ups specifically. It is important to understand that not all start-ups are impactful and that not all green start-ups have the same needs for value-added activities. A clear definition of (environmental) sustainability and an educated approach can help with the verification and validation of potential investments. By seeking out this education, light green angels can learn to contribute with sustainability-value-adding activities and thus evolve into green angels. Our study also indicates that there are competence gaps: BAs with limited experience from green investing lack formal competence related to environmental sustainability and BAs with a clear green profile need to develop more general investment competence. In addition, our empirical findings support previous studies showing that collaborations and co-investments with other investors are especially relevant in the green venture ecosystem (Bergset and Fichter 2015; Bocken 2015). Such collaboration could increase green angels’ ability to fulfil green start-ups’ needs and share the risk of such an investment. Specialized investor syndicates or networks for green angels are needed to achieve larger investment sums and create portfolio effects (Bergset and Fichter 2015).

Policy implications

Different types of governmental measures to support BAs are present in numerous countries. This could for example be tax incentives, support of BANs, and various programs to secure that entrepreneurial teams are investor-ready. Policy makers should consider measures that encourage BA investments in green ventures (Owen et al. 2021). This could be done by strengthening tax incentives for investors investing in green industries. Closing the competence gaps could be supported by policy makers through targeted cooperation with for example incubators, accelerators, and other key actors in the ecosystem.

Future research

Given its nascent nature, the phenomenon of green angels is understudied. Additional research is necessary to further explore the phenomenon of green angel investors. The findings presented in this article do not claim to be a final taxonomy of green angels. Additional research into potential additional categorizations would be of value. It is open to debate whether an individual green angel can or should take this hybrid role of both a conventional BA and a green angel. Furthermore, this study did not attempt to explore the supply-and-demand relationship between the green angels and their investees. Future research could investigate which value-adding activities the green start-ups require from their green investors and how the value-added activities green angels actually provide meet this need. Quantitative studies across several countries could give valuable insights. Additionally, it needs to be explored from a process perspective, if and to what extent a green BAs’ involvement increases the green activities of a venture. One research stream in the business angel research are BANs. How BANs and collaboration among BAs enable green angel activities needs to be investigated (Owen and Mason 2017). Politis (2008) called for processual studies on how BAs evolve, and the same is necessary for green angels. Adopting a longitudinal perspective could be especially relevant for researching how conventional BAs evolve into green angels, which role the green ventures play in this development, and how they acquire the sustainability competences necessary to provide distinct sustainability-value-adding activities.

Acknowledgments

The work presented in this paper is a result of research supported by NTRANS Norwegian Centre for Energy Transition Strategies. The project has received funding from the Research Council of Norway (grant number 296205). We would like to thank all participating business angels.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

The work was supported by the Norges Forskningsråd [296205].

Notes

1. Greenwashing is “the intersection of two firm behaviours: poor environmental performance and positive communication about environmental performance” (Delmas and Cuerel Burbano 2011).

Appendix

A. Interview guide

Table

Topic	Question
Background, motivation BA and green inv	Could you talk me through your journey of becoming an angel investor? How did you find yourself as an investor, what did you do before? When and why did you decide to invest in (a) green startup(s)?
	Can you describe the last green startup you have invested in as an example? What is the most fun when investing as a green angel? What motivates you to invest in green ventures?
	How do you define a green startup for yourself? Can a startup in the oil industry still be considered green?
	How do you perceive the sustainability trend in the early-stage investment sphere?
Involvement after the investment	In what way are you actively involved in the startup after the investment? i.e., strategic advice, acquiring resources, monitoring, or mentoring Does your involvement differ between conventional and green startups? What role do angel networks play during the involvement after the investment and the following up? What kind of support and involvement do the startups ask for from you as their angel investor? What is the time horizon of your investments? Difference green and conventional? What is challenging when investing in green ventures as an angel? What is the main challenge? Any external barriers? Could you identify any skills you have developed as a result of being active as a green angel investor? How do you learn? From whom do you learn to become a green angel?
Involvement in the ecosystem	Do you collaborate with other angels or other actors in the ecosystem? If yes, with whom (background, location, timeline etc.) and in what way? Please give an example. What role do angel networks play in your activity as an angel? Have you perceived any changes in the ecosystem? New mechanisms, new funds, new waves; who is driving this? How does the ecosystem influence the deal flow, the selection and the follow up? To what extent are you influenced by (governmental) incentives? Is money/tax incentives the only aspect or are there others?
Future plans	What are your future investment plans? Will you continue to invest in green ventures, do you plan to increase the share of green startups in your portfolio? How do you expect the sustainability interest to develop in the next 2/5/10 years?

B.

Interview data

Table B1. Sustainability competence.

Light green BAs	Green BAs
No sustainability background or experience I: “There has always been an investment focus in my family and when I did a quite promising exit in a company that was listed a couple years back, I think was 5 years ago and I got some my own money to start investing as well”. F: “I have been active as an entrepreneur for the last 15 years”.	Background and experience in sustainability N: “I have been involved in the topic of sustainable investing for about 20 years now.“ L: “I have been working with climate and the environment my whole career. (…) I have been head of sustainability in numerous companies. I advise big companies on their sustainability strategy”.

Table B2. Portfolio composition.

Light green BAs

Green BAs

Mixed portfolio covering green and non-green start-ups B: “More or less all tech investments did you do today have a green impact at the end of the day. If you look at my portfolio of 100 companies, if I spend 2 hours with you, I could point to the green impact of more less every single one. Because it goes to making workflows more easily, working distantly instead of traveling, reducing mobility, being smarter. Boom”. H: “With my current capabilities, I can’t just focus on green startups. (…) I am then willing to say that there is an emotional return or a sustainability return, which is not manifested in my private assets, but in society’s assets. But I have the principle that the money must increase, because otherwise I would be a benefactor or donor”.

Specific focus on green or impact start-ups M: „Our investments are exclusively based on the triple bottom line. This means that we exclusively select ecological or social topics. Ideally both. Must of course also have financial success”. G: “I’m an impact technology investor (…). It’s anything that can create impact, but most importantly anything to reduce CO2 emissions or address the need to stall global warming”.

Table B3. Motivation to invest in green start-ups.

Light green BAs

Green BAs

Being a part of the shift of talent and capital B: “Our quickest growing startups are the green ones”. C: “The new companies that have this impact drive or ESG focus, will outcompete traditional companies because the most brilliant people want to work at a place with a purpose”. Bad conscience E: “I want to be able to look myself in the mirror in ten years and know that I did what I could to avoid this upcoming disaster. For myself and for future generations to do the right thing, anything else would be irresponsible”. Personal motives D: “I love going to restaurants, I love good food, our family tries buying organic food and I know that preserving ecologic diversity is important for our environment – that is pretty much as far as I went”.

Aim to affect societal transformation L: “It is kind of a very altruistic decision making. We only have 8 years now to turn this huge ship that is currently running straight into disaster, and if my pension money can go into doing that, even if it doesn’t help me. I don’t think I will sit there as a pensioner and regret it, I think I will be happy that I did what I did”. L: “We cannot move this mountain without funneling all the capital that we could possibly get into this. The fight against big oil and all the companies that are currently destroying our planet is undoable without making as much capital as possible flow into the solutions that are doing the opposite”. M: “When you suddenly have children, you also have to look at what is actually happening to the children now? If one of them has a constant earache, then you notice that the air pollution is quite high. One thing led to another, and now we’re at the triple bottom line“.

Table B4. Sustainability strategy advice.

Light green BAs	Green BAs
Focus on growing the business K: “We discuss [sustainability questions] sometimes on investors meetings, but none of them is yet in a stage that they should really focus on that”. D: “Founders ask about their pitch deck or strategy or whatever, if they know that I have specific experience with something. But I don’t feel like they are different than any other startup in that respect”. E: „We don’t talk about sustainability that much. We talk about companies and business models and then most of them just happen to be in the sustainability space as well – but the aim is always to build long-term growing profitable companies.“	Develop a clear sustainability strategy and sustainability value proposition N: “My task is to work out clearly what their impact and sustainability strategy is. They have to say how they approach it and how they optimize their business model in this respect. In other words, what their strategy is, who they want to work with, how they want to deal with their employees, so that they can report on this and give it to the investors”. J: “What’s interesting is to (…) help set up the holistic longer-term strategy”.
Forward industry trends D: “If I notice something on a website, or I read about a competitor or see an interesting industry trend, I might forward it. (…)I follow different energy people on twitter to get a sense of what are the interesting trends and news streams”.	Hold a dedicated sustainability-focused board position M: “These advisory aspects come up in almost every investor call. (…) Most of them are common startup topics. But there are also more often decisions that need to be made, e.g., ‘Should we collaborate with the partner now or not?’ That is our role”. L: “I am either an advisory when they ask, or I am a part of an established board. My role then is to be a sustainability or impact expert”.

Table B5. Sustainability monitoring and supervision.

Light green BAs

Green BAs

No sustainability reporting C: “I am not quite sure what exactly you mean”. G: “In my investment strategy, there is no need to apply tools or methodologies for measuring or assessing impact. I’m entirely driven by intuition, own beliefs and ideas, and imagination”. C: “Since ethics related to the business model are integrated in the DNA, I trust that that is enough at this stage”.

Require clear sustainability indicators N: “In the investment agreements, I clearly stipulate the sustainability criteria that I expect. And I also tie the remuneration systems for management and executive positions, for example, to the achievement of these sustainability targets”. J: “We have to look at where the data comes from, which is very different from start-up to start-up. When someone is outsourced, we must make sure that the production partners can provide reliable data on energy consumption, material consumption, logistics etc. Then at the end go-to-market, the product lifecycle. What do people do with the product, how do they use it, how long does it really last? How often can we repair things, what is the material consumption, the repair costs? That’s the challenge at the end. I have not yet seen a tool that is a solution that really works well across different industries”. Request quantifiable indicators that lay the groundwork for the later reporting K: “We don’t [measure the impact now]. We ended up not requiring it from the companies that we want to invest in, because in this very early stage that we’re looking at, there is no point. What we do require though, is the awareness of what potentially could be measured or awareness of what your impact could be”.

Table B6. Acquisition of sustainability resources.

Light green BAs

Green BAs

Advertise the start-up in own network I: “I use LinkedIn quite a lot to share news about the company, so get other people in my network interested and if people that I think would be a good fit as employees into the startups”. Connect the start-ups with sustainability experts I: “I’m not certified in sustainability as such. I give feedback on everything from their pitch decks on fundraising to strategical decisions, how they should go about all the different challenges that they’re facing in their daily operations, so it’s a huge spectrum of things. But for example, if it’s regarding like measuring your climate impact, I would point them in that direction to someone in my network who could help them”.

Provide access to sustainability-focused network M: “I know people that I can connect with my start-ups to facilitate an experience exchange. I have connections to funds that have knowledge in microfinance projects, providing insights from Africa, Asia, or South America. I try to organize a conversation with the managers from there, if that is necessary, if that is required”. Prepare for future sustainability focused financing H: “In the future there will be other funds, namely sustainability funds, which also make clear performance measurements for the sustainability goal and not in the other area. You actually have to understand whether the founding team is so committed to sustainability that it can convince a sustainability fund that will then have to go through a more dedicated decision-making process than I would as an angel”. Connect the portfolio start-ups to create synergies M: “I like to introduce my start-ups with other start-ups that face similar topics and challenges”. H: “I connect the founders with each other a lot, both in my portfolio and outside of it”.

Table B7. Mentoring regarding sustainability issues.

Light green BAs

Green BAs

No specific sustainability mentoring H: “One should genuinely have this positive mindset of sustainability. This does not mean that I have to change my own lifestyle, but my own consciousness has to fit into this direction. (…) More authenticity than usual is needed, so that there can be a certain symbiosis between the founders and the investors. We should not have to discuss now whether something like this is necessary if it pays in for sustainability. You can discuss whether the timing is right, but you don’t have to discuss it in principle. Maybe you also need a bit more faith and trust in what the founders are doing”.

Challenge the entrepreneurs’ mindset M: “What we always bring in is: ‘Guys, you have to think about [the triple bottom line]; you have a purpose, and it could be that you deviate from this ecological purpose because you want to make more money. Is that really what you want?’ We just ask the questions and bring in these trade-offs, which are always there”. J: “What’s interesting is to be there. To see how I can open doors, how I can challenge things a bit, especially this impact differential is not always so conscious, even among founders who are focused on impact”.