Beyond IRR: A Social Return-on-VC Index built from administrative health, education, and climate data

Gai et al. (2024) find that VC-funded healthcare service startups correlate with improved county health outcomes (lower diabetes, HIV, obesity, binge drinking), even though hospital utilization doesn’t move—an unexpected but promising externality. This study generalizes that approach across sectors to build a Social ROI of VC Index. For climate-tech, we would link VC deals to local emissions and air quality; for edtech, to graduation rates and test scores; for fintech, to financial inclusion metrics. Identification would leverage plausibly exogenous shocks such as grant assignment near SBIR scoring cutoffs (Belz & Zapatero, 2019), state-level policy changes, or staggered openings of sector-specific accelerators. We would explicitly compare the outcomes of social VC (Srivastava et al., 2024) versus traditional VC, and accommodate industry heterogeneity highlighted by Singh et al. (2024). The contribution is a standardized, causal measure of social outcomes attributable to VC—moving evaluation beyond IRR and exits to broader welfare. This could reshape LP mandates, inform government co-investment or specialized funds (Eremchenko, 2021), and highlight sectors/geographies where VC produces outsized social spillovers (or none).

References:

1. Impact of Social Venture Capital on Deal and Post-Funding Financial Outcomes of Social Ventures. Jagriti Srivastava, Sai Chittaranjan Kalubandi, B. Gopalakrishnan, Ludvig Levasseur, Thomas Houston Allison, J. C. Short (2024). Academy of Management Proceedings.
2. Impact of Venture Capital on Startup Success Rates Across Indutry: An Emperical Study. Dr. Dharmendra Singh, Dibyansh Rai, Dr. Anil Kumar Yadav (2024). European Economic Letters.
3. How healthcare entrepreneurship enhances ecosystem outcomes: the relationship between venture capital-funded start-ups and county-level health. Yunwei Gai, Alia Crocker, Candida Brush, W. Glover (2024). International Journal of Entrepreneurial Behavior & Research.
4. Impact of Government Grants on Venture Capital Funding of Deep Technology University Spinoffs. A. Belz, F. Zapatero (2019). Social Science Research Network.
5. Specialized Venture Capital Funds as a Tool for Supporting Investment in Advanced Technologies. О. А. Eremchenko (2021). The Economics of Science.