By Louis Dussart, VP Europe, RTP Global
While the status of today’s leading global tech ecosystems might seem entrenched, the truth is that ecosystems are always in flux. In tech, entrepreneurs have the luxury of launching ventures in whichever market is the best fit tapping into a global pool of labour. The takeaway is that nations need to prioritise carefully and maintain focus to establish a leading tech ecosystem – it doesn’t happen overnight.
The efforts of nations to do just that can be seriously hampered by a lack of national entrepreneurial culture that stifles innovation and discourages the normalisation of risk-taking needed to build a thriving startup ecosystem. In such scenarios, capital is naturally diverted into traditionally ‘safe’, industries and the brightest talent treads a well-worn path to work at large, incumbent enterprises. These conditions aren’t compatible with entrepreneurs and flourishing tech startups.
For the majority of the 21st century, Italy has exhibited these very qualities. Slowly but surely, however, the script is changing. Italy has seen the green shoots of a flourishing tech ecosystem over the past few years. Mega funding raises have minted Italian unicorns including Scalapay and Bending Spoons and Italy now ranks eighth in Europe as a location for VC investment.
With a large domestic market, strong GDP figures and more favourable economic characteristics, there’s no reason why Italy can’t become home to a thriving start-up hub.
Why only now?
As touched on, Italy hasn’t historically exhibited the conditions for an entrepreneurial culture to flourish. A key reason is a reluctance from traditional investment institutions to dabble in the unfamiliar world of tech. Just take a look at the roll call of investors for Scalapay’s 2021 Series A raise. Tiger Global, the prominent American VC fund, leads the raise with just one Italian fund among the five named investors.
With limited domestic VC activity, it’s no surprise that Italian entrepreneurs looked elsewhere to launch amazing tech companies. Video game developer and publisher King.com and share dealing fintech Freetrade both count Italians among their founders. But the catch is that these innovators were operating from London. With its global culture and embrace of tech, London was far more favourable as a startup hub. In Italy, homegrown innovation was difficult to kickstart without the talent.
The case for optimism
That was then. Today, Italy shows a lot of potential. If we’re to draw a comparison – Italy shows a lot of similarities to France, which has been creating waves in European tech with buzzy unicorns like Mistral AI.
Italy has similar primary industries (automotive and luxury) GDP numbers to France – so any tech breakout comes against a similar macro-economic backdrop. Italy, like France, also boasts a large domestic market. This is pivotal. In such markets, tech start-ups can cater to local business pain points and disruption opportunities with the benefit of having lots of room to grow in their home country before being required to enter new markets to scale – which comes with significant regulatory hoops to jump through. This distinguishes the Italian tech ecosystem from the tech ecosystems of smaller nations like Estonia and Israel where global ambitions are a necessity for tech companies.
Another similarity lies in public sector capital availability for start-ups. BPI France has been a key driver of France’s tech ascendancy – playing an increasingly active role in growth capital raises and boasting a great track record of backing French start-ups that go on to be unicorns. Italy’s CDP Venture Capital is Italy’s answer to BPI, serving as a backer of startups across their lifecycle leveraging public money. The €1 billion investment program was launched in 2020 with a remit of developing Italy’s native startup ecosystem. Today, it boasts a range of active funds – from large venture to green transition. This is a step in the right direction and comes alongside increased capital availability from private sources. Angel investors including successful founders like Max Ciociola of music data provider Musixmatch and wealthy families like the Agnelli family operating through their company, Exor, are coming together to drive a shift in Italy’s traditionally cautious approach to tech investment.
Priorities to realise a vision
While indicators are positive, work remains to be done by stakeholders of Italian tech to keep up the momentum.
Firstly, how the Italian government treats and prioritises its tech ecosystem will be pivotal. France demonstrates how integral public funding is for start-ups. Being ambitious in backing and setting the scope of CDP Venture Capital, for example, will be key. Italy’s tech talent ecosystem also needs to be competitive and this likely means extending schemes including the Italia Startup Visa and Startup Hub programme to maintain access to talent.
Finally, all stakeholders in Italy’s tech ecosystem – public, private or otherwise – need to exhibit patience. Any initiatives to develop Italian tech need to be rooted in the long term. With this, Italy will see a growing wave of tech entrepreneurs building companies bringing about the huge improvements that new tech innovation can drive in the economy and society. Momentum will accelerate as second-time Italian or newly minted founders who learnt the ropes in the first wave of Italian start-ups come into play and Italy will be on the right trajectory to boasting a world-beating tech ecosystem.
A clear case for tech prioritisation
Italy’s tech ecosystem is on a great trajectory. The country’s public and private institutions should seize on this. In today’s global economy – it’s technology that’s driving significant growth in national economies. For Italian entrepreneurs, launching a tech start-up is a noble endeavour. Modernisation of the tech stack of Italian society leads to better outcomes for citizens and businesses. Investors should take heed and back Italy’s start-up renaissance.
