Consumers are becoming more conscious. Should VC change too?

Andrea Annese
Marcau Partners
Published in
6 min readJun 29


In a world where consumer choices shape economies and industries, a silent revolution is underway. The conscious consumer has emerged as a driving force, challenging traditional paradigms and transforming the landscape of both the consumer market and venture capital industry. From sustainable sourcing to ethical practices, this growing wave of individuals is redefining how we spend and invest, with profound implications for businesses and investors alike. Let’s explore the untapped potential of consumer spending and venture capital in a quest for a more sustainable future.

Consumers spend a lot
Over the past century, global consumer consumption has been a central driver of economic prosperity and growth. In US for example, the nation’s economy in 1929 relied on consumer spending for 75% of its output. This rose to 83% in 1932, as business spending declined. Consumer spending later fell to around 50% during World War II because of huge government outlays and shortage of consumer products. After that slowdown, consumer spending never showed such a significant decline again and has since climbed to 71% in 2013. Today that number has not significantly changed in US, while it is around 60% as a global average.

Consumers are becoming more conscious and conscious consumers are becoming more important to businesses.
This positive impact, however, also comes at a cost to the society and the planet, as consumer products require resources, energy, and produce unsustainable waste throughout their life cycle. The growing awareness and concern for environmental sustainability and social responsibility have triggered a change in behavior, creating a new segment of consumers: the conscious consumer.

As showed by a recent Deloitte research, consumers are increasingly inclined to make sustainable and ethical choices when it comes to the products they consider essential and frequently purchase. This trend is particularly noticeable in the food and non-alcoholic beverage category, where consumers opt for seasonal and locally sourced items, reduce their consumption of meat and animal products, recycle and minimize waste, and limit their use of single-use plastics. When buying clothing and footwear, consumers tend to be more socially conscious too. They limit their purchases of new items, engage in clothing repairs, explore second-hand or refurbished options, and choose brands that prioritize sustainability and ethical practices. In the last 12 months

  • 65% of consumers have limited their consumption of single-use plastic
  • 53% repaired an item, rather than replace it
  • 40% have bought second-hand refurbished goods, instead of brand new ones

The continue rise of this awareness and attention to circularity and sustainability is starting to become material to the growth of CPG businesses and the potential costs of not adapting them could be significantly high. Over the course of the last five years, products that made claims related to environmental, social, and governance (ESG) factors experienced an average cumulative growth of 28 percent. In contrast, products that did not make any such claims saw an average growth of 20 percent.

A $12 trillion opportunity for the private market
Over the past few years Environmental, Social and Governance (ESG) investing has grown as investors have recognized that some of the ESG factors are also material to superior financial returns in the long run.

The significance of the private sector in driving sustainable progress cannot be overstated. According to estimates from the Business and Sustainable Development Commission, the pursuit of the United Nations Sustainable Development Goals (SDGs) presents a vast $12 trillion market potential a year across crucial sectors such as food and agriculture, cities, energy and materials, and health and well-being.

This burgeoning landscape offers venture capitalists unprecedented opportunities to invest in companies that actively address climate change through the development of clean and innovative technologies aligned with the SDGs. By investing in ventures that align with these global goals, venture capitalists not only stand to enhance profitability but also contribute to the sustainability of our planet, playing a pivotal role in poverty eradication, environmental protection, and overall human well-being

VCs are not really increasing attention toward “more sustainable” startups, even though companies with sustainability claims seems to be more resilient.

We analyzed a sample of almost ten thousand European early stage rounds ( from pre-seed to Series A ) between January 2022 and June 2023, sourcing them from Crunchbase. As expected, the first half of 2023 presents a reduction in the total amount of funding raised if compared to the same period of the previous year. According to the selected sample, the reduction is around 30%, a less severe reduction of the one reported by Crunchbase reported in April this year at a global level.

We therefore decided to run an experiment looking at how the situation may change if the “sustainability” variable is added to the equation. Conscious of the limitations of this approach and for the sake of mere exemplifications, we labeled as “ sustainability-oriented” those companies whose description included “sustainable keywords”, accurately identified. At the same time we marked as “Not sustainability-oriented” those companies in the sample with a description not including such claims.

Sub-sample of the two groups identified — Sustainability-oriented vs Not-Sustainability-oriented companies, namely companies whose description contains sustainable keywords or not.

At a first glance, the sustainability variable seems to have an impact on the change in the amount raised between the first two halves of 2022 and 2023 and on the variation of the average valuations among round types ( Pre-Seed, Seed and Series-A) in the same time frame.

Sustainability oriented companies are not experiencing funding shortage on average: while rounds of companies whose description do not contain sustainability keywords are down 37% in total funding amount in H1_23 vs H1_22, those whose description that do contain them have increased such amount by 4% on average, with a better situation at Pre-Seed and Series-A stages.

Funding Amount H1_22 vs H1_23 — Sustainability-oriented companies have not faced a reduction on average. Analysis performed on Crunchbase’s data sample

And they are also increasing their valuations.
Similarly, when looking at the variation of the average valuation between H1_22 and H1_23, it can be noticed that sustainability-oriented companies’ are performing better than not sustainability-oriented ones’ . In particular, companies with sustainability keywords in their description are doing rounds with an average valuation 14.44% higher this year with respect to what they did in 2022, across all round types, . On the contrary, not “sustainability-oriented” companies, are raising with a -10% total reduction in H1_23 average valuations with respect to 2022’s ones. Even at Series-A, where both samples showed a reduction, sustainability oriented companies have been more resilient.

Variation of Average Valuations H1_2022 vs H1_2023 — Analysis performed on Crunchbase’s data sample. Valuations have been inferred by assuming an average 17% dilution per round

Moreover, on the overall sample, it is possible to notice a “sustainability premium” of 18.3%, meaning that, considering all the time span ( Jan_22 — June23 ), “sustainable” companies, across all round stages, raised at 18.3% higher averagevaluations. This output is in line with the latest Amazon research on European Startups, that found a slightly different premium, around 15%, but with an analysis performed on a different sample.

Notwithstanding these weak signals of resilience from “sustainable” companies in the VC game, VC investors are still very shy in investing in them. In fact, only 16% of the 2022 part of the sample was labeled as a round in a sustainability oriented company, while this number went up to 17.21% in H1_2023. There is, indeed, a large space for VC investors to re-consider their strategies and to try to allocate more capital in the underserved niche of more sustainable startups. Beyond the necessary acknowledgment of the importance of meeting more conscious stakeholders’ expectations, VCs have the opportunity to invest in what it could be a more resilient and impactful asset class, apparently material to their future performance.
It is of course essential to highlight how research in the field is at the very beginning and so far it is only possible to consider “weak signals” and try to read data at a very high level.