Does a VC’s Commitment Lead to Improved Investment Outcomes? Evidence From Climate Startups

We assess whether a VC’s intrinsic commitment to a startup affects investment performance. We proxy for climate change commitment using the political contributions to democrats of the lead VC person on a deal. We find investments by democrats in climate-related startups have 8% higher round-to-exit returns and 29% higher round-to-exit multiples than investments by non-democrat investors. Democrat VCs are more likely to sit on the startup’s board. Startups with democrat VCs are more likely to obtain patents following the VC investment. For identification, we use recent local climate-related natural disasters as a proxy for change in commitment by non-democrat investors. Following these disasters, the performance of non-democrats’ investments in climate-related startups becomes similar to that of democrat investors