Aiding philanthropic venture capitalists investing in social enterprises: A multi-criteria decision-making approach

Abstract

Social enterprises have emerged as promising solutions for addressing environmental and societal challenges. To enhance their access to financial capital and align their business proposals with the preferences of impact investors, it is crucial to understand how Philanthropic venture capitalists (PhVCs) evaluate potential portfolio companies. This study introduces a framework to assist PhVCs in making more informed investment decisions, fostering successful, long-term partnerships between investors and investees. The proposed approach begins by determining the significance of investment criteria using the Best-Worst Method (BWM). Subsequently, the performance of portfolio companies is evaluated, ultimately identifying the most favorable investment opportunities. We apply this framework to a Dutch philanthropic venture capitalist, and our analysis reveals that ‘Potential’ and the ‘Management team’ rank highest in terms of investment criteria importance, while ‘Assessment of the deal’ and ‘External environment’ carry lower significance. Furthermore, our approach, incorporating the BWM outcomes, considers investors' personal preferences and offers a method for ranking portfolio companies based on their value and performance.