Sorry, but Italy is no startup paradise

Armando Biondi
Aug 7, 2014 · 6 min read
  1. Italy is the least business-friendly place in Europe. Let’s face it: 68% taxes on businesses — as reported by Der Spiegel — is probably not only the highest in Europe, but worldwide. Plus you can’t really fire anyone because they’ll sue you a minute later. And how can the new incentives compete with U.S. law (in Delaware you pay less than $1k per year until you’re profitable) or the situation in the U.K. (which de-risks up to 100% of the angel investments made in tech startups)?
  2. Italy’s tech ecosystem is not there (yet). While Germany and the U.K. have vibrant tech communities recognized globally, Italy is nowhere near that. You can literally count the Italian success cases on the fingers of your hands (and you have to go back several years to do it). They’re exceptions. They succeeded regardless of the ecosystem, not because of it. How many Italians made 1 million users in one day? Or raised more than $50 million funding? Or exited for more than $250 million cash?
  1. Founders don’t have a specific background. Making a great product is not the same thing as making a great company. And while Italians have coding skills definitely comparable to the ones in the EU or the U.S., they usually lack the knowledge needed to put together a real product solving a real need. And what about customer development? Or user experience? Or fundraising? Ideally, they should be great at least at one of these, but they rarely are.
  2. Founders don’t have enough ‘war scars’. Not only haven’t the founders succeeded enough, they haven’t fail enough either. Or if they did fail, how is their failure predictive of success? While this is kind of the egg-chicken problem (failure is not seen yet as a necessary path to success), from the investor’s perspective the real question is, why should I pay for the education of these guys with my money, increasing instead of decreasing my risk of losing it?
  1. Investors do not have an international network. In a world where money is commoditized and you can raise with the same ease/difficulty in Italy or in Australia, that investor is competing with the rest of the world. And the same dumb money is, well, dumb money. What you’re really interested in is if these guys writing you a check can also help you with specific expertise, finding clients, further funding. Everybody says they can, but usually that’s not the case.
  2. Investors ask for unreasonable terms. It’s relatively common to see a round of $250k taking 40% of equity in the company. Investors will try to do that because, well, they can; founders will accept it because they can’t afford better. But the result is that when the company tries to expand beyond Italy, every potential following investor will look at the cap table and run like hell. And both the investors and the founders will be screwed.
  1. BENCHMARKS: While 20 years ago the industry knowledge was fragmented and not standardized, that’s definitely not the case anymore. Just turn on your laptop and study the best practices of the rest of the world. As they say: In the information age, ignorance is a choice.
  2. ACCESS: It’s not only about talking to the Italians around the world, nowadays everyone is just an email away. With the right hustle, you can accomplish a lot: access to more interesting deals, access to more interesting investors. Go for it, but know the rules of the game.
  3. TALENT: The hard truth is that Italy has talented developers that cost more or less as much as the Eastern-European ones. It’s cheap talent with low turnover. In the hyper-competitive world we live in, that’s actually gold. You can accomplish a lot more with a lot less.
  4. DESIGN: Finally, even if the typical developer costs as little as an Eastern-European one, Italian people do have a design sensibility than can be leveraged to give a personal touch to what’s being built. And design, nowadays, has become an unfair advantage that can make or break any company.
    Armando Biondi

    Written by

    Cofounder @AdEspresso, acquired by @Hootsuite in Feb 2017. Investor in 75 startups +@AngelList Lead. Guest Contributor, former Radio Speaker, proud #500strong

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