What is the strategy behind the Italia Venture II fund - Fondo Imprese Sud?
''The strategy is in line with CDP Venture Capital's mission", explains Francesca Ottier, Head of the Fund, “and consists of supporting start-up development across all phases of the life cycle”.
The differentiating element of this Fund, however, lies in its focus on the South of Italy, which is still showing a significant gap compared to the other Central-Northern regions.
"Suffice it to say that the amount invested in the 8 Southern regions has always accounted for less than 5% of the total invested in Italy", explains Ottier. "And this happens because finance and investors are mainly concentrated in the North, where talented teams, ironically often coming from the South, converge".
The Fund's mission is certainly challenging, but crucial in order to allow the Italian Venture Capital market to bridge the gap with other countries.
The strategy is to take action both through direct investments, attracting third party co-investors, and through indirect investments, feeding the number of venture capital operators in the area. All of the above whilst working in synergy with the other CDP Venture Capital Funds operating on vertical sectors.
However, the South of Italy has a very active entrepreneurial fabric, both in terms of number of start-ups and innovative SMEs. How are venture capital and the Italia Venture II Fund of CDP Venture Capital exploiting this potential? And what are the plans for the future?
"The South of Italy has strong potential because it boasts the presence of important universities and research centres, industrial districts, accelerators and incubators, which are closely linked to the territory and feed the local ecosystem, including with open innovation and digital training programmes. The role of our Fund'', continues Ottier “is to unleash this potential''.
One need only think of the increase recorded in 2020 thanks to the launch of the Fund: operations grew from 10% to 19% compared to total operations in Italy. But that's still not enough.
“In order to exploit the potential of a market that is still not very mature, specific tools are needed”, says Ottier. "It is not just a question of injecting capital to fuel it, but also of generating an intense networking activity between start-ups and corporates, SMEs and other Funds, thus aiding the development of conditions capable of supporting the growth of the ecosystem".
Fostering the context, creating fertile ground: this is the key to attracting initiatives, talents, and capital.
"Our goal is to give continuity to these activities, offering development opportunities starting from skills training for example in the digital field, up to the creation of concrete job prospects".
What does the South of Italy need the most? Is supporting the establishment of new start-ups or their growth the top priority?
"The South of Italy needs tools capable of supporting start-ups in all phases of the life cycle, from seed to growth/late stage" says Ottier "and this is where the Fund’s cross-cutting approach may come in handy".
“After almost 2 years of operations since the Fund's launch, we have encountered a lively market which includes a high number of start-ups requesting capital especially in the seed phase, i.e. the birth of new businesses. This is a very important but difficult phase, in which apart from the business angels there are few investors, given the high riskiness and the very small round size.
This is why we have dedicated a specific initiative to this start-up seed segment, called Seed al Sud, launched last year in partnership with the Acceleratori Fund and with all the main Accelerators and Incubators present in Southern Italy. The endeavour led to the financing of 42 start-ups in which we invested a total of 7.6 million euro, and thanks to third-party investors the leverage effect was almost double.
In the future, we will continue to monitor this seed segment including through indirect investments", says Ottier, "aiding the creation of new Funds with focused subfunds.
The aim is to increase the number of VC operators active in the South on a poorly managed segment and to encourage the creation of a wealth of operations that can feed the Venture Capital market pipeline also in terms of investments in the subsequent phases.''
But there's more. “We will continue to scout for new opportunities for rounds A, B and following and to support the most deserving start-ups in our portfolio with additional rounds, in order to foster their growth”.
As was the case with Bionit, a start-up based in Puglia that operates in biotechnology and developed the first fully adaptive robotic hand: we supported it in the seed phase and then we reinvested in a new round that saw the entry of an additional investor, in support of a development process that also involved international markets.
Or with Altilia, a company based in Calabria that deals with Robotic Process Automation/AI, which we also supported in completing the management team to accelerate business traction.
Because, as Ottier recalls, “we play an active role: we do not only bring in capital, but also managerial/organisational skills, entering governance with an operational contribution as part of a process aimed at creating value”.
The Italia Venture II Fund has a strong geographical focus, but also looks beyond national borders to multiply its resources and opportunities.
“The Fund has a geographical focus, but the portfolio also includes companies with an international market traction, such as Brandon, an e-commerce company, which have the potential for both cross-border M&A and financing operations by international VCs”'.
“Among other things”, explains Ottier, “we also look at start-ups with business models validated abroad or in other regions and which can be replicated in the South of Italy. For example, we acquired an equity interest in Talent Garden, a company operating in various European countries, to open co-working spaces in the South with the aim of encouraging the birth of digital communities connected with the territory and with the international network.”
Let's talk numbers. What is the maturity level of the innovation ecosystem in the South? What progress has been made, also thanks to the Fund's activities?
The innovation ecosystem in the South is still in an initial phase, but it has great potential and the results we have witnessed in just under 2 years of activity are testament to this.
“Since January 2020, we have approved investments to the tune of 60 million euro, in relation to 55 start-ups”, says Ottier.
These important and encouraging numbers are destined to grow because there is a lot to do, without having to invent anything new, but rather by enhancing the already existing resources in those sectors where know-how and skills are already present, from mechatronics and life science districts to digital platforms and the technological field.
''We adopt a selective approach on sectors with high-growth potential”, continues Ottier. “Digital is the common thread of many start-ups we have invested in, ranging from e-commerce to digital platforms in the healthcare sector such as Restorative Neurotechnologies, or in the education sector such as Develhope, or in the Media/Ad tech sector such as Buzzoole and StartupItalia. Last but not least is the use of cross-cutting technologies such as Artificial Intelligence (Altilia) and VR/AR (Hevolus).
We also keep a keen eye on start-ups operating in advanced technologies such as Sidereus, which is designing microsatellite launchers in the space economy''.