Doing Well by Doing Good? – Venture Capital Mission Investments by Charitable Nonprofit Foundations and University Endowments

We research the preferences and outcomes of direct venture capital investment of charitable foundations and university endowments in the United States and the United Kingdom. Our analysis provides evidence that foundations' and endowments' venture capital direct investments are clustered in sectors adjacent to their fields of activity, i.e., mission-related investments (MRIs). We also show that these MRIs have a lower likelihood of success and take longer to exit when compared to the same organizations' non-mission-related investments (Non-MRIs). We base our analysis on a sample of VC equity financing rounds from the US and UK markets and a hand-collected dataset of philanthropic fields of activity for every foundation and endowment investor, matching the industries and business models of financed ventures. Moreover, we use coarsened exact matching to demonstrate that whereas there is a performance delta between MRIs and Non-MRIs, there is no evidence that MRIs underperform in terms of success likelihood when compared to financing rounds by other investors