Innocenzo Cipolletta (President, AIFI) and Anna Gervasoni

Anna Gervasoni, managing director of AIFI, the Italian Private Equity and Venture Capital Association (which raises private equity, private debt and venture capital funds) talked to FinBuzz about the current status of the market in Italy and country’s peculiar startup scene.

The Italian Private Equity and Venture Capital Association was set up in 1986 and its main activity is lobbying, and is the main Italian conduit for international lobbying. The association prepares documents for its partners concerning laws and legislations but also coordinates meetings with investors, specific events, and technical courses such as lessons and seminars on the new regulations. Another important activity is to inform companies, managers, and leaders on the meaning of private equity, private debt, and venture capital. Its market research is highly reputable on both a national and international level.

Can you tell me about the history of AIFI?

AIFI was founded in 1986. At that time venture capital funds were much more popular than private equity because the market scenario was different. Over the years, however, the venture capital market did not develop but private equity did. We began with ten partners which grew to one hundred for private equity but for venture capital, there were only seven. Over time, it became fifteen.

How does private equity work in Italy? Is the value higher than venture capital?

Yes, about 30% of the private equity market in Italy is made up of pan-European operators, which may or may not have offices in Italy but work on a European basis. They are the ones that make very few deals but of a significant value.

Let’s say that in Italy for an average four billion yearly investment in equity, one hundred million is done through venture capital and the rest can be attributed to private equity. Therefore, venture capital is important, we need to develop it, but currently the Italian market is mainly made up of private equity.

Is the government interested in the development of this sector?

Compared to other countries the government has made a very small contribution. It could do much more.

What are the main trends at the moment in Italian startups?

Every day in Italy thousands of new companies are launched, we can call them all startups. The innovative startups are all registered, especially the ones that comply with the specific requirements and that could be interesting for venture capital funds. This register was introduced a year ago and since then five thousand innovative startups have been initiated. These types of startups don’t always need a venture capitalist, only the ones that have a certain development plan that need large investments and foresee an upward international growth (at least 1-2 million euros) – this is when the venture capitalist moves in.

Is this influenced by a trend or is it just a fact that investments in technology gain interest?

We in the venture capital world don’t just invest in technology. The problem is that we invest in companies that must have a high growth percentage. With startups nowadays, if you want to have a high development performance (which means growth from zero to ten million euros in a year) then the most likely sector where this kind of return can be enjoyed is high technology.

Is 10 million a realistic figure or is it just a metaphor?

It is a metaphor. A company that today has zero turnover but in a year’s time will have 500,000 this year and then 700,000 next year is not an interesting investment in our opinion. We are interested in investing in companies that grow geometrically.

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If, on the other hand, I identify that a conventional startup (not innovative) may be a fantastic idea in the food sector, these markets are usually quite concentrated, and is like asking an entrepreneur to do a triple somersault – it’s too ambitious. We have seen over time that the most successful startups are those in the so-called technological sector, this is mainly because the market is already enjoying a positive trend or is innovative and can, therefore, give good results. This has not reached consolidation level yet so there is a lot of room for growth.

Another option could be a startup in a conventional market where there is a business plan with an innovative project dedicated to a specific market. For example, a cutting edge project to distribute a new product or to manufacture it.

Yet again technology.

Silicon Valley is wonderful, but far away, here in Italy, a part of the ICT sector, we have industries where technology excels, for example, the biotech, matter physics, nanotechnology and medical equipment sectors, all of which are highly innovative and where we have scientific excellences. These companies are scattered all over Italy, many around Milan, but they are Italy’s new wager.

Italy is a country where there are many talented people, so why are there so few startups compared to other countries?

There are quite a lot of startups, the startups financed by venture capital are few, this is because there are very few venture capital funds.


We have extraordinary teams. We have two fundamental problems: one is our legislative framework, it is very complicated thus making the management of venture capital quite difficult but we are working on it. Then we have high costs and a lot of bureaucracy due to the fact that the Italian brokering system has always been driven by banks. This means that these investments have regularly been seen as annoying or even worse – useless.

The other problem is that a venture capital fund has to collect capital in order to exist so it has to fundraise. If fundraising isn’t done in Italy, it is because the Italian institutional investors don’t make investments because they don’t believe in it. So it is difficult for this type of funding to exist.

Some say ‘so why not bring in international venture capitalists?’

Fine, but the issue is that initial investments are small in Italy, because the average investment in Italy is 800,000 euros, so how can we expect an American fund in San Francisco to invest approximately a billion in Italy? It’s not worth their while, they would have high travelling expenses back and forth, otherwise, they would have to have a base in Italy to better understand our system, which is not easy.

However, let’s imagine I have the first round financing that is 1-2 million, which is the initial investment. If there is a significant growth plan, the second round financing can be difficult in Italy. The Italian venture funds are very small compared to the international standards. If a startup in phase two needs 10 million euros, it will require a larger Italian private equity fund to cover that type of investment. Venture capital funds that have 40 million cannot make investments for 10 million due to a principle of diversification that implies a logic of fifteen by three. In this case, an Italian operator can intervene.

It is unlikely that venture capital will invest 1 million in an unknown Milanese startup in the same way that it is unlikely that venture capital investments can come from Silicon Valley, New York, Cambridge, or Dusseldorf. If on the other hand, I have an Italian startup with an Italian venture capital fund that is already active, the fund has already invested 1 million and now there is a case for further development with another 10 million. If the idea is good, an American fund may intervene and say, “OK, your idea is interesting, we foresee international development. If you consider moving your business to America we will invest 10 million”. For this reason, we are working on the organization of a network in the USA and probably something in Europe.

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So the problem is that the market is quite small?

The market is small, it is still in the starting up phase.

What is the value of the biggest venture capital?

Apart from the Italian funds there are pan-European venture capital funds, for example, a large one is Sofinnova that operates in Italy, but it is a French fund. There is another fund that is Italian-French. There are some European funds that are large which means they have 200-300 million euros to invest. The biggest Italian fund is Innogest and is 80 million euros. The others are approximately 50 million. For example, Sofinnova is a Paris-based fun but invests in Italy.

Sometimes you give the impression that you are jealous of the fact that foreign investors come to Italy…

I firmly believe in Europe and in international investments and in cultivating these affairs, however, I also believe that these things need to be initiated in Italy otherwise it will be impossible to expand in Europe. For an Italian startup, apart from some rare cases, if you cannot find an Italian fund willing to invest because they believe in their country and its potential it will be difficult to gain credibility abroad.

In my opinion, the first step is to create something Italian for the Italians so we can prove that we are structured enough to make the next step.

Unfortunately, Italy is famous worldwide for its high taxation system, almost intolerable. What effect does this have on startups?

There are many interesting incentives for startups, taxes are practically zero for the first years. The last two governments created some strong mechanisms by which there are interesting fiscal incentives not just for startups but also for investors.

Are there problems investing? Let’s say I’m part of a fund that wants to invest, I’ve chosen a company, what do I have to do?

No, the fund can start, the investment can be made and it can be monitored to see if the investment has a good return. Of course, if you listen to all the comments, everyone says that it is impossible to find the investment of a lifetime but in the meantime, some good investments yield positive results. There are many opportunities.

Do the funds take an active part in the company?

Yes, I would say so. They certainly are members of the board and take an active part in helping the founders to lay out the development roadmap. I think that it is a positive approach because, besides the money that has been invested, the expertise and competency are required also to help develop an industrial plan.

Are Italian startups competitive on the international market?

We have some international success stories. For example, EOS, an Italian startup in the medical industry (it is developing an anticancer medicine) that has been remarkably sucessful. In the past we had “Buongiorno Vitaminic” in the ICT sector which was another successful startup, I cannot remember the nationality. Another one is Mosiacoon, which is a small Italian startup in advertising and communications with a very innovative idea which was very successful and is now becoming a multinational company.

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If you were to start a new business, which industry would you choose

My job is quite different so I don’t know if I would be a good businesswoman. In the past I managed three startups; the first was in my family’s business when I was very young, 26 years old. My family’s business was in the automotive industry and we launched the idea of creating a new project and design centre using CAD (computer aided design). I got a lot of help as I was the only one working in Milan at the time, it was in the late 80’s. The centre was a success. We were the first to believe that a good designer could use a computer system, instead of just pen and paper.

Then I managed the AIFI startup and thirdly the establishment of the University Carlo Cattaneo, where I currently am a full professor. These were all startups where the fundraising was different as they were not conventional businesses.

Was AIFI your idea or were you asked to manage the startup?

I was 24 at the time, so I was very young. I was invited by the founders of AIFI who were venture capitalists, to set up this association. The objective was to establish an association with young innovative ideas therefore, they wanted a young person to manage it. At the time I was working at Bocconi University as a young researcher and this project was assigned to me with the aim of ‘trying to create an association that would reflect international standards’. I obviously had the full support of president Marco Vitale and mentorship of the association. So besides having to create the association I had to realise projects together with the president to promote this sector which was unknown in Italy in the late 80’s. We achieved our goal, the association was established and has been successful. For the moment, I’m still enjoying my job because it is very dynamic and there is never a dull moment. There are constantly new challenges.

And your work at the university?

It was a very interesting project. In 1991, we decided to invest a grant received from the Varese Industrial Union in the development of a new university. It had to be built from scratch, there was an old cotton factory on the site which had to be restructured and then we had to create not just the structure but a new university concept. So I travelled and visited many university campuses all over the world to understand how they functioned, such as Stanford, Harvard, MIT… When I came back, I briefed the team on my findings, we created a project and we built the university, in compliance with Italian legislation. It hasn’t been easy as the university concept is completely new, there are three faculties: economics, engineering, and law. The campus is the same as an American university and there are approximately 2,000 students.

What did you graduate in?

I graduated with a degree in Economics from Bocconi University. I was one of the first to do a degree in Corporate Finance.

The average age of Italian startup founders is approximately 40. Are they people with degrees?

No, no. It is not a requirement. There is a good mix. There are people with degrees, some in technical studies and there are people who have no degrees. It is good to see mixed teams with several competencies gained from their professional and cultural backgrounds and also of different ages. In my opinion, a team where young people and middle-aged people work together is an excellent combination, but it is not always easy.

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