18 months in the Italian (FoodTech) startup ecosystem — Part 1
About one and a half years ago, and after 7 years in foggy London, I followed my partner and moved to Italy, in sunny Rome. While the weather part has drastically improved my vitamin-D levels, the move wasn’t without its challenges.
Indeed, what I heard about Rome before moving there wasn’t always pleasant: the city doesn’t function, traffic is hectic, bureaucracy is high, and trash is everywhere. Well…this is partly true, but the weather and the beauty of the city does balance this out quite well, and as an eternal optimist I would say that things can only get better :) Also, while Rome has its own challenges to deal with, these aren’t applicable to the rest of Italy.
While keeping my role as COO at Forward Fooding, my objective was also to develop our activity in Italy and start creating meaningful connections within the food & foodtech ecosystem over here. But before talking about FoodTech into the second part of this article, what about startups in general?
Understanding the Italian Startup Ecosystem
Back in 2017, I did my research and reached out to Matteo Amerio, Italian ex-startup founder and a summer analyst at European VC firm Earlybird, who had written a very interesting article. In his view, ‘’Italy has been recognized as an excellence for creativity, style, and outstanding entrepreneurship. This creativity, however, hasn’t translated to tech startups. Italy trails behind every other major European country with an abysmal share of the overall startup investment.’’ He adds: ‘’According to PitchBook, from January to October 2016, just $113 million had been committed to startups headquartered in Italy, while in Spain the amount totaled $357 million. The UK led the pack with $4.4 billion in raised capital, followed by Berlin and Paris.’’
I recently followed up with Matteo to ask him if his views have evolved: ‘’My view unfortunately has not changed much. I think things are a bit better: more later stages investments (recently Casavo raised 20M), the government is discussing about an Italian version of the BPI and more foreign VCs are looking at the ecosystem. However the underlying problems have not changed.’’
I was keen to understand the reasons why Italy is lagging behind the rest of Europe? Matteo listed the following: ‘’too much bureaucracy, lack of a startup culture, lack of a Hub (three biggest startup provinces, Milan , Rome, and Turin together represent less than 30% of the total number of startups in the country), the lack of flexibility in labour laws, a strong risk avoidance and the difficulty for startups to raise capital.
To elaborate on this, and to focus on the city of Rome (although this could be applicable to many other regions), I have asked Lorenzo Minio Paluello from Roma Startup what area need to change in order for the Roman startup ecosystem to evolve to claim its rightful place at the European startup scene table. There are mainly 3 in his view:
“1.The public sector: The Municipality of Rome, the Lazio Region and the Ministry for Economic Development should be aligned in proposing a coordinated strategy for startups to grow and scale internationally.
2.Communication: The startup ecosystem should benefit from a specific communication strategy aiming at promoting the culture of innovation and attracts partners from Italy and abroad.
3.Universities: Both public and private academic institutions should propose new programs to train students on entrepreneurship skills independently from the faculty they are enrolled in.’’
Entrepreneurial Mindset
To build on the later point, (at least in Rome), I have the feeling that younger generations, if I compare to the UK or France, seem to value job security as a priority. As a matter of fact, in 2018, the Global Entrepreneurship and Development Institute ranked Italy nb. 42 in their Global Entrepreneurship Index ranking, which basically collects data on the entrepreneurial attitudes, abilities and aspirations of the local population and then weights these against the prevailing social and economic ‘infrastructure’; this includes aspects such as broadband connectivity and the transport links to external markets.
Another common struggle that Italian startups are facing is fundraising. I asked Federico Palmieri from early stage capital advisor firm BizPlace, what are the 3 key skills many startups are missing on that front:
“1. Building business plan and project documentation that raise the right expectations with investors;
2. Knowing which investor and which type of investor to approach;
3. Knowing the right timing to fund raise, when the company is in need and eligible to do so.’’
I also asked Alessio Boceda from the newly created Startup Geeks, who interviews Italian entrepreneurs on a weekly basis, if he could identify some of the most common obstacles that young entrepreneurs are facing: ‘’Especially for B2C startups, a common problem is finding enough funding to boost customer acquisition and therefore growth. Usually acquisition costs are very high and in Italy it’s still difficult to get enough money to heavily spend on advertising. This leads to a frequent case of pivot towards a B2B business or a B2B2C. Another big obstacle for early stage entrepreneurs is finding the right co-founders, especially when a business person needs to look for a tech founder. A third one is finding a market that is big enough and developing a product that is actually well suited for it. There are so many great ideas, but they have small market size and therefore the startup is destined to become a nice small company but not a real startup.’’
Last but not least, something else Matteo Amerio mentioned in his article is that Italian startups sometimes lack market awareness and boldness. From my experience, while they are usually fully aware of who their competitors are inside Italy, they tend not to look enough outside the borders, which could sometimes be a great source of inspiration. I’m not sure about the boldness (becoming an entrepreneur is already bold), but one thing I believe they can do better at, if I compare to the UK market, is to take a more collaborative approach. On a weekly basis, I make introductions between Italian startups that are focusing on the same market so that they can explore potential collaboration. In London, they would tend to know each other already in most cases. That said, I believe this is our role and responsibility, as well as accelerators’ & other organisations’, including the Italian Government, to foster these interactions to build a more collaborative ecosystem, and also bring innovation from outside Italy. This was also highlighted by Davide Dattoli, CEO of Talent Garden: “I think that today in Italy, we are still missing investments and opportunities to scale. We need to broaden our perspectives to be more competitive at a global level.”
Government Support for Startups
Is Italy doing enough? I have asked the question to Alessandro du Bessé, expert of the Italian ecosystem, and Investor relations manager at Impakter, platform connecting startups & investors focusing on sustainability: ‘’ Let’s start by looking at perhaps the most successful country in Europe: UK. The UK’s Venture Capital Trust and SEIS — Seed Enterprise Investment Scheme are both excellent investing tools in startups as they reduce investors’ risks and provide tax relief when investing. It would be fantastic to have the same tools in Italy as they would increase the number of people willing to invest in startups. Italian Government initiatives taken between 2014 and 2017 including the Italian Startup Visa and other economic initiatives to support startups seemed to be a good step in that direction. Then, after the latest elections, there has been a moment of “blackout”: for instance, the number of applicants for the startup visa dropped considerably, and no new initiatives were taken for a while until the budget law 2019.’’ Some of these initiatives include: making the government investment tool Invitalia a private entity, re-investing 15% of the revenues of the Development Office into venture capital, defining a business angel for the first time in Italian legislation, and offering 30–40% tax relief for those investing in startups. Will those be enough? We might need to check back the numbers at the end of the year…’’
In the second part of this article, let’s zoom into what matters to us at Forward Fooding…The Agri-FoodTech sector :)
Want to learn more about Forward Fooding? Visit forwardfooding.com or email us at info@forwardfooding.com.
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