The Italian Literature Survey
IFISE Meeting
A.I.F.I.Italian Venture Capital and Private Equity Association
Roberto Del Giudice
Milan, 2nd February 2001
The evolution of the Italian Venture Capital & Private Equity Market
1900 1986 1990 1996 today
Informal VC
First Institutional VC movers
The LBO wave attracts more PE players
Back to genuine VC
The VC Market takes off
With 30 PE players the
market starts to grow
Constant growth of the
later stage market
Part of the market moves
back to genuine VC and pure
tech deals Driving forces: Telecom deregulation and Internet
Nu
mb
er o f play er s
0
15
30
38
75
Dri
v in
g fo
rces
A.I.F.I. Members
A.I.F.I.
0
10
20
30
40
50
60
70
80
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Italian Banks and subsidiaries Venture capital funds Industrial/Private Inv. Comp.
Public players Incubators
15
2822 24
30
4938
345730 31 30
58
75
55
1st Sem 2000 - Number of investments by type of investors
45
142
25
76
0 15 30 45 60 75 90 105 120 135 150
Italian banks and subsidiaries
Venture Capital funds
Industrial/Private Inv. Comp.
Public player
A.I.F.I.
1° Sem 2000 - Stage distribution of investments by type of investors
A.I.F.I.
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Seed/Start up
Expansion
Buy out
Replacement
Italian banks and subsidiaries Venture Capital funds
Industrial/Private Inv. Comp. Public players
Seed/start up investments by type of investors
A.I.F.I.
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
I° Sem 2000
1999
1998
1997
Italian banks and subsidiaries Venture Capital funds
Industrial/Private Inv. Comp. Public players
1° Sem 2000 - Italian Venture Capital and Private Equity Industry Concentration
A.I.F.I.
90,6%
96,9%
85,8%79,0%
68,7%
51,3%
94,2%100%
42,0%
56,9%
66,7%
74,0%
86,1%
20,0%
40,0%
60,0%
80,0%
100,0%
5 15 25 35 45 55
Number of Investors
Mar
ket
Shar
e
Invested Amount Number of Investments
1° Sem 2000 - Italian Venture Capital Industry Concentration
A.I.F.I.
97,8%
83,8%
68,1%
53,2%
100,0%
47,6%
63,9%
77,6%
91,8%
20,0%
40,0%
60,0%
80,0%
100,0%
2 4 6 8 10 12 14 16 18 20 22 24 26 28
Number of Investors
Mar
ket
Shar
e
Invested Amount Number of Investments
The convergence to Venture Capital
A.I.F.I.
VENTURE VENTURE
CAPITALCAPITAL
CORPORATEVENTURECAPITAL
Profit oriented incubators
Non profit incubators
University incubators
Corporate Venture Capital: some Italian examples
- Enel;
- Telecom Italia;
- Seat;
- …….
A.I.F.I.
Business Incubators: two different kinds
Incubator
PROFIT ORIENTED• private operators;• fee/equity oriented;• connected to the VC and PE market
NON-PROFIT ORIENTED
• public operators;•purpose of economic development (fill the gap);• use of public resources
A.I.F.I.
Main characteristics of Italian University Incubators
Distinctive features :
• absence of VC funds;
• interest on scientific research projects;
• physical presence in the university building;
• focus on universities subjects;
• incubation of ideas and projects of graduate and undergraduate students;
• strong relationships with industry that usually sponsor university research;
• patent development.
A.I.F.I.
A.I.F.I.
ITALIAN FOR PROFIT INCUBATORS
Percentage distribution of Italian for profit Incubators by Sponsor
26,70%
40,00%
6,67%
26,70%
0%
25%
50%
Corporate Financial Consulting Private Individuals
A.I.F.I.
Leaders background by %
40%
33%
27%
0%
25%
50%
Managerial/Entrepreneurial Financial Consulting
A.I.F.I.
Sources of funds raised on the market by %
47%
33% 33%
0%
33%
0%
10%
20%
30%
40%
50%
60%
VC Singleentrepreneur
Indstrialgroups
Publicoperators
Other
A.I.F.I.
Funds immediately available (Euro mil)
555
0
100
200
300
400
500
600
Funds available
A.I.F.I.
N° players7
Geographical breakdown of total funds raised by %
0%
27%
53%
20%
0%
10%
20%
30%
40%
50%
60%
Regional Italy Europe World
A.I.F.I.
Incubators main characteristics
Italian Incubators average size:
A.I.F.I.
- 307 mq of space to work
- 35 working places for the incubated companies
- 15 full time consultants
The offered services by %
87%
87%
73%
53%
53%
33%
100%
100%
100%
87%
0% 20% 40% 60% 80% 100%
BP assistance
Managerial consulting
Marketing consulting
Legal consulting
PR
Recruiting
Patenting assistance
Accounting
IPO support
Call Centre
A.I.F.I.
Incubators internal competences by %
80%
73%
73%
67%
67%
67%
60%
47%
0% 20% 40% 60% 80% 100%Strate
gy
Busine
ss Ana
lysis
Admini
strat
ionMar
ketin
gFina
nce
Human
reso
urce
sStartu
pper
Other
A.I.F.I.
Average time to start the activity*
13% 13%
50%
13%
0%
10%
20%
30%
40%
50%
60%
< 1 week 7-30 days 1 month - 3 month Places ot available
A.I.F.I.
* Between the approval of the business plan and the entrance of the company inside the incubator.
Average amount invested and average number of companies
2,50
5,20
0,56
1,13
0 2 4 6
Average number ofcompanies
Average amountinvested (Euro mil)
Incubators VC
A.I.F.I.
Number of incubated companies and average time spent inside the incubator
38
11
0
10
20
30
40
Number of italian incubatedcompaniese
Average time spent inside theincubator (months)
A.I.F.I.
Average stake into the company
33%
40%
14% 13%
0%
0%
10%
20%
30%
40%
50%
60%
< 10% 10-30% 31-50% 51-80% more than 80%
A.I.F.I.
Distribution of investment sectors* by %
100%
67%
60%
40%
27%20%
13% 13% 13%
0%
20%
40%
60%
80%
100%
Internet Software Telecom Other ICT Logistic Consumerrelated
Biotech Energy Hardware
A.I.F.I.* Multiple choice
Internet business focus*
100%
67%
47%
33%
7%
0%
20%
40%
60%
80%
100%
B2B B2C Infomediary Other B2G
A.I.F.I. * Multiple choice
Revenue model by %
20%
60%
20%
0%
10%
20%
30%
40%
50%
60%
70%
Fee Equity Mix
A.I.F.I.
Available capital
Fee
Eq
uit
yM
ix
Financial
Corporate
Consulting
Private Individual
Italian incubators: reference model Variables: Incubators sponsor
Referred capitalNo capital
Incubators sponsor
Available capital
Rev
enu
e m
odel
for
sta
rt
up
s
57%
50%
33%
67%
50%
50%100%
50%
43%
A.I.F.I.
Available capital
Fee
Eq
uit
yM
ix
Entrepreneurial/managerial
Financial
Consulting
Italian incubators: reference modelVariables: Leaders Background
Referred capitalNo capital
Leaders Background
Available capitals
Rev
enu
e m
odel
for
sta
rt
up
14 %
50%
33%
67%
50%
50%100%
50%
72%
A.I.F.I.
14 %
Some final issues
…concerning incubators
A.I.F.I.
There are many networking opportunities between incubators,
venture capitalists and other institutions;
cooperation can be based on a structured network;
the incubators industry is still in its start up phase, leaving many
spaces for new entrants;
there are many basic services over which it would be important to
reach scale and scope economies;
incubators are important in the internationalization process of
enterprises;
incubators are deal selection facilitators for VCs.
… concerning the high tech start ups: the main weaknesses
1. lack of a synergic dialog and relationship between the
worlds of research, enterprise and finance;
2. lack of adequate human resources on the enterpreneurial
side;
3. difficulties on technology auditing activities;
4. inadequate legal framework.
1. Lack of a synergic dialog and relationship between the worlds of research, enterprise and finance
Universities, venture capitalists and entrepreneurs just
started to work together, in order to create a creative
entrepreneurial context;
The distance between these fundamental actors has created
a strong gap;
To fulfill this gap, it is necessary to work hard to better link
finance, enterprises and research.
2. Lack of adequate human resources on the entrepreneurial side
It is necessary to push the Italian Universities in mixing
technological knowledge and entrepreneurial capabilities;
In a recent survey conducted by the EVCA and the
University of Antwerp, Italy has been defined “hesitator” in
opening the university context to the business community*.
* ENN – EVCA Network News – No. 1 December 2000, EVCA Zaventem, Belgium
3. Difficulties on technology auditing activities
The absence of an extended network of technology auditing
firms makes it harder for the VCs to make the necessary
evaluations of high tech start ups;
Even if there could be a great potential in terms of
“brains”, these brains too often move to those countries
where technology is considered a strategic resource,
providing added value to their Nations.
4. Inadequate legal framework
In the recent past R&D laws were too old to take the pace
of the great evolution of high technology;
The Italian law is too old in terms of bankruptcy issues:
If an entrepreneur fails with its first venture, the Italian legal system does
not give another chance;
No VC likes to seat in the Start ups’ Board of Directors, due to the risk of
being personally prosecuted in case of failure.