Good at inventing, less so at reaping the fruits of new discoveries. Gelsomina Vigliotti, vice-president of the European Investment Bank since 2021, looks at the evolution of the Italian startup world, analyzing its positive sides and – many – limitations. “We are a country full of discoveries and innovations, but we are missing the crucial step: turning these brilliant ideas into businesses,” says Vigliotti. “There is a fundamental role for the EIB Group in supporting the development of an innovative and competitive ecosystem,” explains its vice-president. With respect to startups and small and medium-sized enterprises, the main difference between the interventions of the European Investment Bank and the EIF lies in the type of operations. The former directly supports already consolidated startups, while the EIF invests in funds that finance businesses. Last year, you observe, “the EIF allocated 1.3 billion euros to Italy. Only Romania, Germany and France received more.”
Vigliotti’s words come a few weeks after the data on investments in Italian startups in the first quarter of 2024, which, as reported by Italian Techare approximately 275 million euros, with a trend growth of almost 100 million over 2023. A year, the one just concluded, in which the resources dedicated to the Italian innovative ecosystem (1.18 billion euros) have undergone a physiological slowdown compared to the significant growth recorded in 2021 and 2022, 1.4 and 2.3 billion respectively.
A setback from several analysts is a sign of a maturation of Italian venture capital. Is that so?
“Fundraising in Italy in 2021 and 2022 reached very high levels, thanks also to the presence of Cdp Venture Capital and a series of large deals. However, EIF analyzes suggest that the global slowdown in 2023 was caused by a more complex macroeconomic context. Rising interest rates have made raising funds more difficult and the prospect of an economic recession has led to falling valuations, making exit strategies less attractive. In the Italian context, venture capital funds with at least one office in Italy seem to have followed the same trend.”
For this year, however, what are the prospects?
“Expectations towards the Italian market remain positive, both for the general evolution of the markets and for the expected trend of interest rates. The expected approval of the changes to the 2012 Startup Act and the new CDP industrial plan should contribute to making the Italian VC market even more competitive”.
Towards which directions?
“In terms of sectors, there is a transition towards deeptech compared to the past, with an increase in the various areas of technology transfer: life scienceenergy, climate-tech and artificial intelligence”.
Looking at Europe, what has been the role of the EIB and the EIF towards its innovation ecosystem so far?
“The EIB Group is made up of the European Investment Bank and its specialized arm, the EIF, which has a driving role for innovation in Europe. And not from today. The EIB has the Member States as shareholders and has invested over one trillion euros since its foundation in 1958, with priority given to sectors such as environmental sustainability, innovation itself, small and medium-sized enterprises, infrastructure and cohesion. The EIF was established in 1996 and since then it has helped mobilize over 98 billion euros in financing, supporting more than 415 thousand SMEs and over two million jobs.”
What differences are there between the investments made by the two institutions?
“The EIB directly supports startups with investments of venture debt from a minimum of 7.5 million euros, therefore it is aimed at consolidated companies with important rounds already behind them. The EIF, however, does not support startups directly, but invests in funds which in turn finance businesses. From 2000 to today, the EIB Group as a whole has invested over 270 billion euros. To date, the EIB Group is one of the main public supporters of innovation on the European continent and has a crucial role in supporting the development of an innovative and competitive ecosystem.”
Any concrete examples?
“Not many people know that the EIF has indirectly financed almost half of the European unicorns that have emerged in the last 15 years, mostly in the early stages of development. Skype, Skyscanner, UiPath, WeTransfer, BlaBlaCar, Spotify, Shazam, Just Eat, Farfetch, Rovio and Zalando, to name a few.”
Not really Italian names. By the way, you were talking about the innovative sectors growing in our country today, what weight does it have in your fund?
“Italy has always been one of the major beneficiaries of EIF investments and will continue to be so also in 2024”.
What numbers are we talking about?
“The fund has invested 1.3 billion euros in Italy in the last year. In 2023, only Romania, Germany and France received more funding. For what concern breakdown, the 2023 investments are divided into 419 million in equity and 912 in guarantees, products that benefit SMEs and mid caps. Of the 419 million in equity, a record for the EIF in Italy and 22% more than 2022, 89 million were allocated to four venture capital funds. Today, the total size of these funds is 220 million, generating a notable leverage effect: for every euro spent by the EIF, 2.5 reach startups.”
What is the EIF’s strategy in Italy for the months to come?
“At the heart of our activity in the equity sector is the partnership with venture capital investors, both institutional and private. We maintain constant contact with important investors with the National Innovation Fund and the Italian Investment Fund. This close collaboration allows us to monitor and examine new opportunities, intervening where necessary. Our priority is to ensure that startups receive the financial and strategic support needed to thrive in the competitive market.”
Not a simple undertaking for a country traditionally reluctant to focus on innovation.
“European data says that our country, despite being a world leader in obtaining patents for advanced technologies, still remains below the European Union average in terms of innovation capacity. We must focus on technology transfer, with particular attention to strategic European technologies such as cleantech, deeptechAi, biotech and cybersecurity. The EIF is moving in this direction: we expect at least three investments in Italian VC funds, concentrated in the sectors deeptech e cleantech”.
In short, excellent ideas that are too often not exploited.
“We are a country full of discoveries and innovations, but we often miss the crucial step: turning these brilliant ideas into businesses. If we look at the financial situation, we realize that we have a limited number of specialized funds. Only 30 funds invest in the initial stages of development in Italy, while in the United Kingdom, Germany and France we can find 280, 200 and 180 respectively. Our goal is to help increase the number of funds in the country to spread the venture culture capital and involve more and more business angels and create a more effective and inclusive ecosystem for emerging companies”.
Is it just a lack of money?
“Not only that, the geographical distribution of venture capital is still too unbalanced to make the country competitive. 27% of the startups are located in the South, but there is only one fund, Vertis Sgr, which focuses on them. It makes no sense to have a technology highway that stops before reaching the South. We must fight against this innovation divide which risks separating Europe, between those who move forward at full speed and those who remain behind”.
Do you see anything changing or are the results only shadows?
“The segment seed – early stage up to the Serie A it is starting to be better served, with different entities, even if of limited size, and some specializations. The most evident gaps are found in the subsequent phases, those of post-series A and series B growth, where companies need support to expand internationally with investments starting from 20 million euros and up and involving more investors”.
From bad to worse.
“However, this is a problem that affects all of Europe, albeit in different proportions. Of the over a thousand unicorns active in the world, only two are Italian startups: Satispay and Scalapay. It is important to incentivize institutional investors to participate more, taking inspiration from what happens in some EU countries. For example, in France the government requires pension funds and insurance companies to invest a minimum share in national VC funds, while in Italy these categories of investors are not sufficiently incentivized to do so. We must then mention other urgent issues to be resolved.”
What would they be?
“Firstly, a lack of important exits that could give impetus to new initiatives, an obstacle present in Italy and also in the rest of Europe. Furthermore, corporate venture capital is very lacking, while it should be fundamental for Italy, which is the second largest manufacturing in Europe, as a means to modernize traditional industry. Finally, there is a big skills gap. The Italian venture capital industry has yet to develop the technological know-how necessary to identify operations with rapid growth potential.”
What tools does the EIF have today to address these and other problems, in Italy and Europe?
“To attract new investors, the EIF has developed the Asset Management Umbrella Fund, within which funds-of-funds focused on venture capital, private equity and private credit have been launched designed to attract private institutional investors, in particular pension funds and insurance companies, a category that until the launch of Amuf was excluded from the activities of the EIF”.
With what results?
“To date, 1.26 billion euros have been raised from 30 investors, of which 27 are European. Over a billion has already been spent in more than 70 European funds, which have in turn supported over two thousand startups and SMEs. Previously, most of these investors did not have the ability to make investments of this type, with Amuf they have acquired the technical knowledge and contacts necessary to start investing directly”.
Last year you also launched the European tech champions initiative.
“Often, European startups with bright prospects for success fail to raise the capital needed to expand and consolidate on the market. They are forced to move abroad, towards very active and liquid capital markets or to be bought by competitors with greater investment capacity. Etci was launched precisely to fill the gap in the scaleup phase that exists between Europe and other markets, together with Italy, Spain, Germany, France and Belgium, with the aim of supporting 10-15 large European VC funds with a size of approximately one billion euros. A category that has so far been almost absent in Europe. These funds in turn will invest tickets worth over 50 million to support the scaleup phase of European startups that would otherwise be destined to be bought by non-European investors”.
Where are we in this plan?
“So far, four investments have been made for almost one billion euros, including the 150 million invested in Fsi II of the Italian Strategic Fund, which in turn has already invested almost one billion in nine European companies. In the next phase of Etci, the aim will be to attract large private investors in addition to member states.”
Even the lack of exits that you mentioned earlier would require specific solutions.
“Last year the EIF created the Ipo initiative, with the aim of financing European investment funds specialized in supporting startups and SMEs that intend to list on European public markets. At this time, Fei has completed two operations in this context, one in the Spanish fund Isetec and the French Revaia. We are then studying new programs and initiatives to launch products dedicated to attracting categories of investors that have so far been missing compared to non-EU markets, in particular retail and corporate”.
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– 2024-04-30 16:28:24
