Moneytalks. the role of (spatial and digital) proximity in the VC financing of green start-ups

Davide Consoli, Francesco Lelli, Sandro Montresor, Francois Perruchas and Francesco Rentocchini

No 2521, Papers in Evolutionary Economic Geography (PEEG) from Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography

Abstract: Given the crucial role of Venture Capital (VC) in financing the green transition, and its uneven geographical distribution, we examine how the proximity of VC investors to green start-ups influences the success of their deals. Considering the intrinsically higher risk profile of start-ups in the greensector, we maintain that their spatial proximity to VC investors will have a larger effect here than in other sectors. Furthermore, considering recent advancements in the digitalization of VC, we also argue that a digital kind of proximity between investors and green investees in accessing digital technologies (platforms) could matter for that, by also reducing the binding effect of spatial proximity on the success of VC green deals. Using data from Dealroom, and combining them with the SpeedTest open dataset by Ookla, we test for these arguments with respect to a large sample of about 12,000 green start-ups, originally identified by combining multiple methods (text scraping, topic modelling, and machine learning), located in 27 EU (+3) countries from 2000 to 2020. Econometric estimates at the level of realised vs. potential VC green deals confirm that spatial proximity is more relevant for green than for non-green start-ups. The new quasi- dyadic indicator of digital proximity that we propose does also significantly and positively correlates with the actual occurrence of green deals, and negatively moderate the effect of spatial proximity, supporting our argument of a substitution relationship between the two. Policy implications are drawn accordingly.

Date: 2025-07, Revised 2025-07
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