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Evaluating impact potential in early-stage impact investing: Investment criteria and cognitive processes of investors

Author

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  • Vandor, Peter
  • Dober, Fabian
  • Meyer, Michael
  • Millner, Reinhard

Abstract

Impact investing has experienced rapid growth in recent years, with a share of capital directed toward social enterprises that aim to generate both financial returns and social impact. For investors, evaluating the anticipated impact of a venture is a critical part of the selection process. Yet, little is known about how impact investors form these ex-ante assessments. Drawing on verbal protocol analysis of 58 real-world selection processes, we identify 18 distinct cognitive processes investors use to assess social impact potential. Our findings show that, rather than relying on structured or theory-based assessment methods, investors frequently use heuristics. This suggests that bounded rationality plays a central role in impact evaluation, raising questions about the assumed rigor of impact investing practices.

Suggested Citation

  • Vandor, Peter & Dober, Fabian & Meyer, Michael & Millner, Reinhard, 2025. "Evaluating impact potential in early-stage impact investing: Investment criteria and cognitive processes of investors," Journal of Business Venturing Insights, Elsevier, vol. 23(C).
    • Handle: RePEc:eee:jobuve:v:23:y:2025:i:c:s2352673425000228
    DOI: 10.1016/j.jbvi.2025.e00535
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