Israel’s model can be of use to Italy. But only if overhauled.
How can a small nation, with a population of about 8.5 million people, become a start-up hub, so much as to design an innovation model of its own? Simple: state-led investment in the most innovative start-ups; focus on the R&D for the reinforcement of technological development; and increasing possibilities for the newly established companies, to help them ascertain their presence on the market. This is, leastways, what can be read anywhere on the Israeli open innovation.
In brief, the Israeli open innovation policy is based on a chief scientists and state’s matching grants programme. The grants are awarded according to the start-ups’ technical and commercial feasibility, as well as the potential of creating expertise, covering between the 66% and the 90% of the necessary costs. Or yet, with Yozma, a plan of tax incentives for foreign companies, promising to double the venture-capital investments with governmental funds. The Israeli tertiary sector witnessed its venture-capital outlays rising 60-fold, from US$58 millions to US$3.3 billions between 1991 and 2000.
This might seem extremely profitable, especially in the moment that the French as well witnessed their own central state immersing them in almost €10 billion, aimed at making Paris the continental benchmark for start-ups and innovation. For sure, such a copious flux of money cannot cause any harm. But the Israeli and French examples let us understand something crucial: the strong presence of the state in the development of the industry. If we tried to implement this kind of model in Italy the outcomes would be much more different.
As unlucky as it may seem, Italy is passing a difficult historico-political period, that’s true. However, we should not forget that Italy has been extremely influent in determining the cultural, the artistical, and even the political landscape of Europe. The Italian people has always been an entrepreneurial one, with an innate sense of gusto and style. Everywhere, and to whoever one may ask, “Italians do it better” it’s the catch phrase of the Italian products abroad. The quality it exports and the positioning of the word “Italy” in the customers’ minds is that of high technical and stylistic standards. Thus, why is it so difficult to construct an organised industry, with sufficient investments and a national entrepreneurial mindset? Perhaps, it is because Italians believe the State should provide the funding necessary to the development of Italian innovation. But the rapid government turnovers cannot help but exacerbate the already-felt State absence.
Rather than a top-down revolution, it is necessary to move towards a revolution from below to ascertain the Italian entrepreneurial mindset. The example of Rome as a centre of many of the Italian start-ups is clear. Alan Advantage, an innovation consulting firm, is promoting and supporting the growth of more than 30 original companies, all gathered in its network. It invests in their shares, supports their development, and commits to furthering R&D of new technologies and the establishment of disruptive businesses, taking active part in the possible revolution in the name of innovation.
Projects such as Re:Humanism are the proof of how a network based on the open innovation is conceivable, through the mobilisation of the Italian and individual entrepreneurship, rather than through a substantial usage of governmental funds. Re:Humanism is an initiative which intends, as a first step, to deepen the practice of contemporary art in relation to the advent of AI technologies. It will also award cash prizes and grant the opportunity to exhibit one’s pieces of art in Rome.
In fact, art is definitely an Italian excellency. It is able to condition other fields to improve the emerging technologies. These fields include AI, which in addition to being a global trend it is also influencing the renovation of a wide range of innovative subjects.
Although the Israeli model proved to be a great success, becoming a leading model of the global innovation, it also true that its state-regulated model needs to go through a thorough revision to be implemented in Italy. Moreover, all that glitters ain’t gold. Mario Cervantes, senior economist at the OECD, points out two of its major flaws:
- the creation of long-term jobs and the growth in profits do not keep up with the compelling investments in the high-tech;
- many Israeli start-ups are sold on the US market, not having the chance to expand on the domestic market, further calling into question the possibility of long-term jobs creation.
Moreover, it is ambiguous whether or not is efficient to have a state-regulated model. As history teaches, when the State invades the entrepreneurial environment of a country, it is the level of competition of the private sector to endure the effects of its presence. The OECD’s Product Market Regulation Database awarded an extremely negative score to Jerusalem’s economic policies. This means that the promotion of a competitive environment among companies is very low. Indeed, the Economic Survey of 2009 suggested the Israeli state to cut down the regulatory barriers and other channels of state influence on the enterprises.
An open innovation model is possible in Italy. But imitating the Israeli model and its strong state presence could be as dangerous as it is difficult in the Italian context. An overhauled version of the model, instead, could benefit the innovative start-up industry, considering the potential which the Italian entrepreneurial mind represents. Instead of waiting, it is already possible to start establishing an environment rich in ideas and young minds. Cities such as Rome and Milan are ascertaining themselves as national centres. Milan is historically renown as a European financial hub and fashion capital. While Rome is a centre of institutions and a thriving technological industry, with the main headquarters of LVenture Group, which involves one of the most efficient start-up accelerating programmes, and Pi Campus, which invests in AI-applied Startups Worldwide and in Eccellenza Italiana. Many initiatives are sprouting in the Capital, with an energy and a passion full of hope.
Think, as a metaphor, about what Italy has done in history with the tomato: a product of American lands, imported into Europe, cultivated with so much love and care in Italy until it becomes a symbol of Italian culinary tradition; in practice, Italy made it better as a quality than the imported one and at the center of so much culinary creativity.
Showing sound initiatives, as the ones Alan Advantage is conducting, Italy could attract the capitals of the countries that are more active in the International Risk Capital in the AI environment. For instance, USA and China.
Chinese start-ups attract ca. the 47% of the global investments. Alibaba alone, invested US$11 billion in his 10 top investments in 2017 and Tencent invested in more than 60 companies this year, becoming benchmarks for the start-ups willing to enter the market. Although the US colossus is witnessing a wearing away of its start-up environment, the investments keep thriving, having reached US$90 billion in 2017. While the overall volume of investments in Italy amounted to €208 million, with an average investment of €2.3 million for an average acquired stake of about 20%.
It possible to improve and the opportunities exist. Catching them is up to us. With courage and determination, it’s time to turn the page starting from Italy.
