While funding for Italian startups is growing, the country still ranks eighth in Europe for VC investment, according to Showroom.
Newly created Italian Founders Fund (IFF) hopes to help catch up, each quantitatively and qualitatively. With EUR 50 million to invest in 25 firms, it also positions itself as a sector-independent, founder-friendly fund that understands the problems of entrepreneurs.
IFF’s portfolio already includes 4 firms, and a fifth transaction is in preparation. Two have been revealed so far: Before Glaut customer research platform in April, IFF led its 2023 funding round HR technology startup Jet HR.
“IFF is taking on the challenge facing early-stage founders in Italy of finding a high-conviction lead investor at the pre-seed and seed stages,” IFF founding partner Lorenzo Franzi (third from right in the photo above) told TechCrunch.
Some may disagree with the diagnosis; VC firms operating in Italy already include: CDP enterprise capital, Exor ventures, LVenture Group, Investment partners from Milan, Pariter Partners, First venturesAND United Ventures.
However, Franzi believes this still leaves a gap for early-stage capital. Either way, IFF appears as a latest source of capital for a market where startups receive significantly less funding in total than, for example, French startups, despite the fact that each countries have a similar population.
IFF is also a complement to accelerators similar to H-FARMand a step up from the angel investing that Franzi and other entrepreneurs-turned-sponsors engaged in.
The former CEO of laundry startup Laundrapp, which became a Global Founders Capital partner by the end of 2022, said the “unstructured” approach inherent in angel investing may lead to several problems, similar to limited evaluation, complex cap tables and undersized rounds financing. IFF can take into account the structure of the fund in the investment process, but also serve a practical function after the investment has been made.
For example, IFF was able to help portfolio firms with key hires, business expansion and strategic partnerships, Franzi said. Jet HR CEO Marco Ogliengo agreed, noting that IFF’s added value comes from the indisputable fact that it is “backed by virtually every successful Italian founder.”
This could also be hyperbole; nonetheless, according to Franzi, about 100 of IFF’s sponsors are actually Italian entrepreneurs. He added that they arrive from different generations and different sectors, but they have a common goal: to put Italy on the map of the best places in Europe to open a business.
That’s an ambitious goal, especially since IFF doesn’t fall under some of the pain points: There’s little a private VC firm can do to offset high taxes and paperwork. There have been recent public efforts to increase the attractiveness of the country and its technology sector; but unlike CDP Capital, which it is supported by state agenciesIFF is entirely privately funded.
In the absence of public funds or institutional partners, IFF may invest where it deems appropriate. It will use this geographical flexibility to also support Italian founders operating abroad, in addition to foreign start-ups interested in entering the Italian market.
Foreign connections work each ways, and IFF’s goal is to attract foreign VC funds to co-invest in its portfolio, each initially and in subsequent rounds. It also helps that some of its LPs are managing directors of foreign funds and that it plans to support Italian founders with global ambitions.
Global Italian startups include Bending spoons, the owner of popular applications and services similar to Evernote and Meetup, which is valued at $2.55 billion. And with serial Italian entrepreneurs coming back home to start more ventures, it seems appropriate that they now have a founder-led fund to support them.
IFF might be managed by The capital of KOINOSa private equity fund that is expanding into VC, whose CEO, Marco Morgese, noted examples of founder-led funds in other markets, similar to Founders Fund in the US and, most recently, Galion.exe in France.
Seeing IFF implement this model in Italy is one other sign that the ecosystem is maturing. When it comes to enterprise capital, the numbers are convalescing, but there is still a lot of labor to be done. “In Italy, challenging the status quo in terms of processes, speed and entrepreneurial mindset is essential,” Franzi said.