Although funding for Italian startups has grown, the country still ranks eighth in Europe in terms of venture capital investments Dealroom.
Newly made Italian Founders Fund (IFF) hopes to help catch up, both quantitatively and qualitatively. With €50 million to invest in 25 companies, it is also positioning itself as a sector-agnostic, founder-friendly fund that understands the pain points of entrepreneurs.
IFF's portfolio already includes four companies, with a fifth deal in the works. Two have been revealed so far: Back in the day customer research platform Glaut in April, IFF led a 2023 funding round HR tech startup Jet HR.
“IFF takes on the challenge for startup founders in Italy to find a high-conviction lead investor at the pre-seed and seed stages,” IFF founder Lorenzo Franzi (third from right in photo above) told JS .
Some may disagree with the diagnosis; VC firms operating in Italy already include this CDP venture capital, Exor Companies, L Venture Group, Milan Investment Partners, Pariter partners, Primo companiesAnd United Enterprises.
However, Franzi thinks this still leaves a gap for start-up capital. And in any case, IFF is emerging as a new source of capital for a market whose startups collectively receive far less funding than those of, say, France, despite the two countries having similar population sizes.
IFF also complements accelerators such as H-FARMand a step forward from the angel investing that Franzi and other entrepreneurs-turned-moneylenders were engaged in.
As the former CEO of laundry startup Laundrapp, he became a partner at Global Founders Capital until the end of 2022. He said the “unstructured” approach inherent in angel investing can lead to several problems, such as limited analytics, complex cap tables and substandard funding rounds. IFF can include the structure of a fund in the investment process, but can also be hands-on after the investment.
For example, IFF could help portfolio companies with key hires, commercial expansion and strategic partnerships, Franzi said. Marco Ogliengo, CEO of Jet HR, agreed, noting that IFF's added value comes from the fact that it is “backed by virtually every successful Italian founder.”
That may be an exaggeration; but according to Franzi, about 100 of IFF's donors are indeed Italian entrepreneurs. He added that they come from a wide range of generations and sectors, but with a common goal: to put Italy on the map of the best places in Europe to open a business.
That's an ambitious goal, especially since some of the pain points are beyond IFF's purview: there's not much a private venture capital firm can do to offset the high taxes and paperwork. There have been more recent public efforts to increase the attractiveness of the country and its technology sector; but unlike CDP Capital, it is supported by government agenciesIFF is completely privately funded.
In the absence of government funding or institutional LPs, IFF is free to invest where it sees fit. It will use this geographical flexibility to also support Italian founders operating abroad, as well as foreign startups interested in entering the Italian market.
Foreign connections work both ways, with IFF aiming to get foreign venture capital funds to co-invest in its portfolio, either initially or in follow-on rounds. It will also help that some of its LPs are GPs of foreign funds, and that it plans to back Italian founders with global ambitions.
Global Italian startups include Bending spoons, the owner of popular apps and services like Evernote and Meetup, valued at $2.55 billion. And with serial Italian entrepreneurs Returning home To establish their next ventures, it seems appropriate that they now have a founder-led fund backing them.
IFF is managed by KOINOS capitala private equity fund that has expanded into VC, and whose CEO, Marco Morgese, cited examples of founder-led funds in other markets, such as the Founders Fund in the US or, more recently, Galion.exe in France.
The fact that IFF is adopting this model in Italy is one more sign that the ecosystem is maturing. When it comes to venture capital, the numbers are improving, but there is still more to do. “In Italy, challenging the status quo in terms of processes, speed and an entrepreneurial mindset is essential,” said Franzi.
