Micro-equity for sustainable development: Selection, monitoring and exit strategies of micro-angels

- We use factor analysis to determine the major selection, monitoring and exit strategies used by micro SRIs.
- We then use regression analysis to establish relationships between the choice of strategy in the three stages.
- Micro SRIs look for projects fitting two bottom-lines: social & environmental; social & economic; or environmental & economic.
- Micro SRIs add value by mentoring activities and tightening governance.
- They prefer exit through collaborative or nurturing strategies rather than risk-minimizing or opportunistic strategies.
- Exit seems to counterbalance selection: it is more economically motivated for non-economic selection criteria and vice-versa.

Sustainable development requires balancing environmental, social and financial concerns. This requires investors to select and monitor entrepreneurs who would balance these triple concerns. At the same time, there has been considerable attention to “small is beautiful” and micro-investors have stepped in to look for such eco-entrepreneurs. To the classical institutional logic of economic returns, they add the logic of social returns as well as the logic of environmental and local safeguards.This study looks at investment clubs in France which have been coping with this balance of people, planet and profitability for the last three decades. We study their preferences in the selection process for investment projects, in the entrepreneurs' monitoring process as well as their exit strategies. Using Principal Components Analysis, we find that a large number of selection criteria can be regrouped into underlying factors that take into account two out of the three major dimensions of sustainable development at a time. We find that four factors lie beneath the criteria used by the micro-angels in the monitoring process. We have also been able to establish a one-to-one correspondence between four of the six major exit strategies and four selection factors, suggesting a prior relationship between selection process criteria and preferred exit strategies.