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STARTUPS IN ITALY
FACTS AND TRENDS
MIND THE BRIDGE
SURVEY 2012
Startups in Italy – Facts and Trends
Mind the Bridge Survey (2012)
Milan, October 26, 2012
ISBN 9788890678622
1
STARTUPS IN ITALY
FACTS AND TRENDS 2012
MIND THE BRIDGE SURVEY
“Startup Italy”:
At what point we are?
EXECUTIVE SUMMARY
Here we go with the second edition of the “Mind the Bridge Survey”,
which offers its insiders (startuppers, institutional investors,
practitioners, researchers and policy makers) an updated scenario of
the Italian startup ecosystem. Through its privileged observatory,
represented by thousands of companies that in 2012 got in contact
with Mind the Bridge, the foundation, with the scientific support of
CrESIT of the Insubria University of Varese, had the opportunity of
analyzing this emerging section of the productive Italian universe in
detail. The analysis presented in this report is focused mainly on the
segment of companies in the “early stage phase” (seed financing and
Series A).
The main results emerging from the data analysis are summarized
below. Please refer to the Survey for in-depth analysis, details and
comments.
STARTUP: DEFINITION AND SIZE OF THE
PHENOMENON
First of all, what do we mean by startup? For the purposes of the
following survey, we refer to startups as:
- companies recently created or entrepreneurial projects;
- operating in innovative fields;
- with solid plans for growth;
- that need capital during their first stages.
2
Basically, new entrepreneurial initiatives characterized by an
important commitment to innovation and strong ambition of
growth. Since no national statistics census this category of
companies, it is hard to provide an estimate of both this section and
its growth rates. The order of magnitude, valid for a first
approximation, is however identified as 800/1,000 new projects
every year, with an overall consistency that lies between 4 and 8
thousand startups.
The startups are often founded only after the business idea has been
validated and, in some cases, after having collected the capital
needed for its realization. This explains why a good 59% of the
population investigated is represented by entrepreneurial projects
(“wannabe startup”), which have not been “structured” yet. Already
established companies, very young, with an average age of 1-2
years, represent around 36% of the total. Finally, the 5% is
composed by corporate spin-off, new projects started by already
existing companies with the purpose of supporting (through the
creation of a new identity, the spin-off) processes of diversification
and innovation of their own activity.
OPERATING FIELDS
The major operating field is represented by web (49.1%) and ICT
(21.8%), which absorb around 70% of Italian startups, while only
4.8% is concentrated on consumer product and around 3.6% on
electronics & machinery. A minor role is played by companies
operating in clean technologies (1.2%) and by the ones in the
biotech/life sciences field (0.6%). The remaining 19% (approximate)
operates in other sectors, particularly services. Data confirms the
existence of an inverse relationship between the number of firms
in an industry and the level of investment required to start a
project. In the web or software field the investment required at the
early stage is minimal, contrary to what happens to the development
of technologies in the biomedical or biotechnological sector or to
devices and hardware.
THE GEOGRAPHY OF THE STARTUP PHENOMENON
The majority of startups already established as companies, is
localized in the North (52%) and in the Center of Italy (21%),
whereas the presence in the South and in the Isles (16%) is limited
– although it is growing compared to last year. Milan and Rome are
confirmed as the poles of major attraction. It is important to underline
that the most important percentage of Italian startups (11%) have
decided to be incorporated abroad (especially in United States and
3
UK). This phenomenon, defined as “corporate drain”, (which has
been raising in the last years, +20% compared to the previous
year) can be read as a sign of the decreasing competitiveness of
our country for the attraction of investment and specifically of
new companies. Indeed startups - especially in their early stages -
are characterized by very high mobility rates, due to the absence of
operational constraints (personnel, plants, etc.) that link them to a
specific place. Therefore, having a favorable regulatory environment
for their establishment and growth (commonly called "corporate
haven" in Anglo-Saxon countries) is strategic for attracting
companies from abroad, at least to mitigate the escape of our most
promising business realities. Whether and how the package of rules
introduced by the government with “Decreto Sviluppo Bis” will be
effectively able to mitigate this phenomenon that threatens to deprive
our country from potential contributors to innovation and growth,
should be examined.
THE ITALIAN STARTUPPER PROFILE
What is the profile of the Italian startupper? Thirty-three years old on
average, male (female entrepreneurship is still quite limited, only
11% of the total), born and resident in the Center-North of Italy
(however, compared to last year, we saw a slight increase of neo-
entrepreneurs from the South of Italy).
Around 53% of entrepreneurs have a first level degree/bachelor,
around 42% also have a master’s degree. 11% got a Ph.D. or an
MBA. Among them, 87% studied in Italy while the remaining 13%
studied abroad. About 80% of startuppers had an experience as
employees, equal to 8-9 years on average, and a good 23% are not
on their first startup, data which confirms the phenomenon of serial
entrepreneurship, even in Italy. 8% of startups previously founded
were located abroad but only 50% decided to remain overseas. 8%
of these serial entrepreneurs declared an exit, whereas the wide
majority (87% of cases) is still involved in the previous initiative
("parallel entrepreneur").
Data on the average age and education highlights how startups
cannot be improvised but require a high level of knowledge and
experience (this last aspect is confirmed by the fact that one quarter
of founders are on their second startup, confirming that the role of an
entrepreneur is learned on the field).
Another interesting aspect relates to patents. 4% of founders report
having at least one patent (2 per person on average) and it is
4
interesting to notice how two thirds of all patents registered originate
from founders with a Ph.D.
THE ENTREPRENEURIAL TEAM
Italian startups are comprised by a group of 2-3 shareholders and 4-
5 employees, on average. Therefore, we are not talking about a
“one man band” but to entrepreneurial groups who gather different
skills and generate a contribution, in terms of occupation, not
very large but important if considered in perspective. 72% of startups
with a single founder are still at an initial stage (“wannabe company”).
39% reported having known their cofounders from work, 32%
through existing friendships, and 26% met them in college.
THE ORIGIN OF THE BUSINESS IDEA
What inspires entrepreneurs to the point of starting a company?
Research, in 67% of cases, with a major impact for applied
research (27.3%) compared to basic research (7.3%). Such data
indirectly confirms the difficulty and delay the Italian academic
system has with regard to technology transfer. Previous working
experience is another important factor that influences the
genesis of the business idea (50%).
LOCALIZATION DRIVERS
What are the factors that seem to have a major influence on the
location of a startup? In first place is the network of contacts (69%),
followed by the possibility to access highly specialized human
resources (engineers, programmers, managers, etc.) and the
proximity to research centers (40%), which are, by nature, the source
from which to draw on skills and highly qualified personnel (57%).
The fact that the access to capital (43%) qualifies in fifth place,
only highlights how relationships and competences play a
fundamental role in the process of starting up a company; even
better, the same entrepreneurial models are based on network. It is
not a coincidence that knowledge, talent and network are often
indicated as the fundamental factors at the basis of a successful
entrepreneurial ecosystem.
MOTIVATIONAL DRIVER
77% of the respondents are “user entrepreneur”, referring to those
who reported starting a company to solve a problem they personally
faced (an unsatisfactory product/service or an unmet need). Quite
prevalent among the motivational factors (68%), is the desire to
improve an existing market or preside over a slice of the market that
5
is still uncovered. For the remaining 53%, the desire of auto-
determination (being their own “boss”) and that of auto-
realization, win at 51%.
ACCESS TO CAPITAL
The most widespread instrument to raise funds among startups is
bootstrapping (58%). 8% had access to a grant, 6% came from
banks and foundations, while another 6% was financed by other
industrial firms. 16% collected investment in equity from third-party
investment, mainly angels (8%) and seed funds (7%). Only a very
limited number had access to venture capital (1.2%).
By eliminating the extremes in the distribution of funding, it becomes
apparent that the average investment is approximately 65K (euro), a
figure close to the typical amount of seed investment. Investments
are primarily used for product development.
THE NEEDS
What are Italian startups looking for? First of all, capital (69%) at the
seed investment level and 59% at the venture capital level. But more
than 50% are looking for a partner as well, who could help them in
the strategic development of their business idea. After all, data
shows that 69% of companies decide to establish where the network
of contacts is stronger.
Therefore, capital and skills - together with a more startup-friendly
cultural and normative environment - are the ingredients for giving a
further sap to the Italian startup ecosystem, which is confirmed to be
healthy and growing, looking through our observatory.
Alberto Onetti
Chairman Mind the Bridge Foundation
Director, CrESIT - Insubria University of Varese
6
7
STARTUP: WHAT IS IT? HOW MANY
ARE THERE?
Prospectively speaking, Italian startups represent the most dynamic
and relevant component of the Italian productive ecosystem, despite
being a numerical minority compared to other sectors.
National statistics do not conduct a census on startups. They provide
data on new companies, although most of them cannot be
considered startups because they operate as traditional businesses.
This lack of data, prevents us from carrying out structured analysis
on the startup phenomenon in Italy.
Furthermore, the study of the startup universe becomes even more
complex if we consider the diversity and specificity of the factors
related to this category of companies, such as the high mortality
rates (which determines constant changes in the population) or the
“pivoting “ processes (referring to the activities undertaken by the
founders for modifying, often radically, the object of the core activity)
which lead the original project to assume a different shape for better
responding to the market requirements. Finally, we cannot
underestimate the fact that usually startups are founded only after
having reached certain milestones, considered crucial for the product
launch.
As a consequence, in order to understand the phenomenon in its
entirety, it becomes fundamental to conduct a census not only on the
companies already founded, but also on the projects that are not yet
formalized as a legal entity.
Some attempts for identifying/quantifying and mapping the startup
universe have been done in the past, at different levels. A first
attempt tried to estimate the number of Italian startups on the basis
of the funding requests made by the startups to the major funds of
investment, net of any duplication.
It is estimated that the venture capital funds and business angels
networks grouped around the VC Hub, the informal group that
gathers the most important Italian investors, collects around
800/1,000 fund requests every year. We consider that number quite
representative of the size of the annual flow of Italian startups.
Conversely, it is more difficult to appreciate the overall consistency of
the phenomenon, given its high dynamic. A useful proxy, with all the
8
due limitations of the case
1
, can be identified in the dimension
reached by the social communities specialized on these topics. It is
reasonable to estimate the current volume of the startups in Italy in
the order of a few thousands (approximately between three and eight
thousand companies). A world still quite small, but which is certainly
growing fast.
In the following paragraphs we will present the results of the analysis
we conducted both on the companies and on the entrepreneurial
projects participating in the Mind the Bridge Seed Quest 2012.
The survey sample is composed by the startups that applied to Seed
Quest 2012 and filled out the application form with all the information
required.
With the purpose of this survey, specifically, we analyzed data for
166 companies and 369 entrepreneurs
2
.
It is important to point out how the specificity of the Mind the Bridge
Seed Quest program, which is aimed at collecting projects mainly
from companies at the first stages of their life cycle, may influence
the evidence emerging from the data analysis to some extent. In
particular, given the number of participating firms, we believe this
analysis represents the Italian startup population very well, or at least
the segment comprised by the companies in the “early stage” phase,
referring to all the firms recently founded or seeking for a first round
of funding (seed financing or Series A). More structured Companies
(those aiming to complete a round of funding subsequent to Series
A) represent a minor segment, which requires, due to its lower
numerical consistency, to be addressed with methods of investigation
based on a qualitative approach.
Below, we offer some useful definitions to better qualify the data
presented in the following sections.
STARTUP
New entrepreneurial projects with a strong calling to innovation and
solid growth ambitions. This entrepreneurial model is usually
associated to a need for capital exceeding the founders’ ability to
self-fund (the so called “bootstrapping”, defined by the Anglo-Saxon
literature as the well-known model of the 3Fs, “family, friends and
fools”) and the company’s capability to self-sustain (generally, for a
1
Following such approach, the numbers of the members of a particular group can
offer orders of magnitude useful to estimate the phenomenon. However, one has to
consider that the discussion groups involve people differently interested in the
topics covered, and not just individuals active in startups.
2
Such numbers do not include applications partially completed, which are not
included in the analysis.
9
certain period after starting the company, the entrepreneurial activity
does not produce cash flow). Consequently, startups in the early
stages base their development on the resources collected through
external financing, which comes from investors specialized on equity,
such as seed, venture capitalists and business angels. Therefore, for
the purpose of this report, we defined as startups
3
:
? companies recently founded or entrepreneurial projects;
? operating in innovative sectors;
? with important growth plans;
? requiring capital injections in the early stages.
SPIN-OFF
It is a subset of the startups composed by those companies whose
founders come from other companies (the so called “corporate spin-
offs”), universities or research centers (“academic spin-offs).
Generally speaking, the term spin-off is often used to refer to firms
that maintain a formal relation with the company or the university
where the innovation originated: this is possible thanks to the
participation of the organization of origin into the spin-off capital,
and/or a contract of collaboration between the former and the spin-
off.
3
The proposed definition is in line with the one of “young and new technology-
based companies”, adopted by the most widespread literature on entrepreneurship
(see also Onetti A., Zucchella A., Jones M.V., McDougall P., 2010,
Internationalization, Innovation and Entrepreneurship: Business Models for New-
Technology-based Firms, in “Journal of Management and Governance (JMG),
Special Issue: Entrepreneurship and strategic management in Life science.
Business Models for High-Tech Companies”) and with the ones provided by the
recent report “RESTART ITALIA” written by the Ministry of Economic Development.
10
STARTUPS VERSUS WANNABE-
COMPANIES
Startups are often formally founded only after the business idea
has been validated and, in some cases, after having raised the
capital necessary for its development. This evidence has
already emerged from last year’s Survey and it is confirmed by
the data of this year. Hence, the importance, previously pointed
out, to take a census not only on the companies already
founded, but also on the entrepreneurial projects, which have
not been formalized as a legal entity yet.
The majority of the Italian
startups (a good 59% of the
population investigated) are
represented by entrepreneurial
projects (“wannabe startups”),
which are not “structured” nor
built as a legal entity yet.
This phenomenon is extremely
relevant because, despite the
projects that are not
formalized, they are to all
intents and purposes operating
companies, which raise capital
and money. Indeed, we found that all around these entrepreneurial
projects, there are teams of people supporting the activity with
available funds (previously collected as a grant and/or risk capital,
usually coming from family and acquaintances) and thus with
resources to invest.
With regard to already established companies, we are talking about
very young firms, with an average age of 1 to 2 years.
Furthermore, it should be noted that 5% of companies are corporate
spin-off, that is new projects started by already existing firms with the
goal of supporting (through the creation of a new entity, that is the
spin-off) processes of diversification and innovation of their own
activity.
“Startups are often
legally formed only
after having
validated the
business idea (or
after having found
capital)”
11
TECHNOLOGICAL SECTORS ED
BUSINESS AREAS
Most of the startups are active in the web field (49.1%) and in
Information and Communication Technologies (ICT) (21.8%).
In addition to these areas we can count a 4.8% focused on
consumer products and around 3.6% on electronics & machinery.
Numerically less important is the role of companies operating in
clean technologies (1.2%) and in the biotech & life science industry
(0.6%).
Data confirms that a relation (inverse) exists between the number of
companies and the level of investments required to start up an
entrepreneurial project. A project in the web or software field requires
minimum investments in the startup phase, as opposed to the
development of biomedical and biotechnological technologies or
devices and hardware.
The remaining 18.8% of the
companies is focused on
other activities, mainly
services that are
numerically prevalent
(services of various types
that support different
sectors).
“web and ICT
are the
prevalent
businesses”
12
ITALIAN STARTUPS: WHERE?
The majority of the Italian startups are located in the North (52%).
The Center of Italy contributes with 21%, while 16% originates from
the South and the Isles. The percentage of companies based in the
South and in the Isles is to be acknowledged, although still a
minority, it increased sharply (+50%) compared to last year.
Lombardy (25%) and Lazio (18%), which include Milan and Rome as
dominant location poles,
have been confirmed,
even this year, as the
regions with the highest
density of startups,
immediately followed by
Emilia and Veneto (9%). It
is important to highlight
that an important
percentage (11%) decided
to incorporate abroad.
This data, which has kept
rising in the last years
(+20% compared to the
previous year), can be
read as a signal of the
decreasing
competitiveness of our
country in terms of lower
investment attraction and
incapacity to act as a
magnet for new
companies. As a matter of
fact, the startups,
particularly the ones in the
early stage, are companies characterized by high mobility, at least
potentially, since they do not have operational constraints (personnel,
plants, …) that bind them to a specific place. Therefore, having a
favorable regulatory environment to their establishment and growth
(which is called “corporate heaven” in Anglo-Saxon countries) is
strategic, not only for attracting foreign companies in Italy, but above
all for mitigating the “corporate drain” effect.
The set of rules introduced by the Italian Government with the
“Milan and
Rome are the
poles with the
highest density
of startups”
13
“Decreto Sviluppo Bis” to foster the birth and development of
innovative startups, needs to be tested in order to understand if it can
mitigate or invert this trend.
Among the nations that show the highest capacity to attract Italian
startups, United States and United Kingdom emerged.
It should be noted that the choice to locate the company abroad
could be led by specific corporate strategies, such as the research of
specific skills and/or specialized workers and of markets able to
support the startup development and to foster fundraising.
In both cases, the United States, either for the dimension of their
internal market or for the stage of development of the venture capital
industry, represents a very interesting destination for a company
with ambitious development plans.
FOCUS: LOCALIZATION DRIVERS
But what are the factors that can influence the location of a
startup? The answers provided to this question by the founders,
allowed us to identify a “ranking” of the location drivers
considered most important. In the first place, there is the
network of contacts (69%). Followed by the possibility to
access to highly specialized human resources (engineers,
programmers, managers, etc.) and the proximity to a research
center (40%), which are by nature a source from which to
draw expertise and highly specialized personnel (57%).
Access to capital (43%) is another determinant factor in the
choice of location.
From this data, emerges that relations and competences play
a fundamental role in the start up and development of a
company; better yet, the entrepreneurial models themselves
are based on network. It is not a coincidence that knowledge,
talent and network are often identified as the fundamental
factors on the basis of a successful entrepreneurial eco-
system.
“Startups arise
where there
are networks
and
competences”
14
THE ORIGINS OF THE BUSINESS
IDEA
A question that almost all scholars in innovation have tried to answer,
is the one related to the sources of innovation. In an attempt to
provide an answer, we asked the entrepreneurs where and when the
business idea - on which the startup is based - originated.
In this case, the indications that emerge from the data analysis are
quite clear. Research is the basis for innovation. In 67% of cases,
research is the source of the business idea. It should be underlined
that applied research (27.3%), thanks to its proximity to final
application, appears to have a more direct impact on the creation of
companies compared to basic research (7.3%). This data indirectly
confirms the difficulties and the delay of the Italian university system
towards technology transfers. As highlighted in previous studies
4
, the
great potential of the Italian research struggles to become a firm, as
confirmed also by the small number of academic spin-offs we report
yearly.
Another important place for the genesis of the business idea is the
job: in 50% of cases the stimulus for launching a new company has
accrued during previous employment.
4
Onetti A., Vietor R.H.K., Napolitano F., “Italy. Europe’s Investment Opportunity”, White
Paper, New York, May 9, 2011 (http://italianbusiness.org/white-papers/).
15
FOCUS: MOTIVATIONAL DRIVERS
What are the factors that spur an individual to create a startup and to
take up the entrepreneurial adventure?
From the analysis three entrepreneurial profiles emerge, better
defined as “attitudes”:
- “ghepensimi”(Italian expression to state “I´ll do it myself”)
- “voglio un mondo diverso” (I want a different world)
- “qui comando io” (I am the boss)
As stated before, these profiles are not alternatives but we can refer
to them as approaches that coexist in the same person, even if in a
different mix.
The first profile (“ghepensimi”), connoted by the almost totality of the
interviewed startuppers (77%), is exactly what the literature on
entrepreneurship identifies as “user entrepreneurs”, namely
individuals who declare to have started up a company to solve a
problem they faced personally (an unsatisfactory product or a
service, an unsatisfied need…).
Very widespread among the motivational factors (68% of cases) is
also the will to change the market where they have decided to
compete. In this case the driver is the vision, typical the
entrepreneurial vision, of a possibility/opportunity to improve the
existing market or a market segment not yet addressed.
Other engines for the creations of companies (connected to the third
profile identified above) can be described as the will of self-
determination (the wish to be “boss” of oneself, reported in 53% of
cases) and of self-realization (indicated by 51% of entrepreneurs).
Another aspect studied concerns the people (“supporters”) who
sustained the entrepreneur in the finalization of the business idea
and in the early stages of starting up the company. Data confirms a
fundamental role of the 3Fs in the startup phase: among them, family
(48%) and friends (43%) play a role of primary importance.
We will see, in the section devoted to fundraising, how family and
friends support the business idea, both economically and financially.
Moreover, a significant role is played by the colleagues (38%); a
further confirmation of the influence that “strong” ties and “dense”
relationships can have in the initial moments that precede the
creation of an entrepreneurial initiative. The size of the network and
the weak “ties” tend to gain importance later in the company’s life
cycle.
16
THE STARTUPPER’S PROFILE
The Italian startupper is 33 years on average and in most of cases he
is male (89%), he has a quite high education level and has
cumulated previous working and entrepreneurial experiences.
The majority of entrepreneurs were born in the North/Centre (48% in
the North and 23% in the Centre),
whereas only 24% come from the
South or the Isles (the remaining 5%
abroad). If we consider the residence
of entrepreneurs (instead of the place
of birth), the gap between North and
South is widened, since the
percentages related to the latter has
dropped from 24% to 17%.
“Education” as one of the factors that
present a stronger correlation with the
propensity to create a firm, also emerged in last year’s Survey.
By analyzing the startupper’s study path in details, as already
reported, a quite high level of education was revealed: around 52%
of entrepreneurs have a bachelor (in 6% of cases they got it abroad)
and around 42% have a master degree too (9% of cases got it
abroad).
11%
Ph.D.
or
MBA
as
well.
Of
this
perce
ntage
, 87%
studie
d in
Italy,
while
the
“Around 42%
got a master’s
degree”
17
remaining 13% abroad (with United States, United Kingdom, Spain,
France and Switzerland as the most frequent places for studying).
The fact is, that studying abroad is a frequent trait in the startuppers’
profile, which does not concern only high specialization, but also the
university’s study path, although with a less pronounced incidence
(6-9% depending on whether it is bachelor or master degree).
Along with the education, a relevant aspect is represented by the
working and entrepreneurial experiences that entrepreneurs have
before the creation of the current startup. It is not casual that
entrepreneurs in their first working and entrepreneurial experience
are only 19% of the total.
In particular, we have separately categorized and analyzed three
main typologies of experiences that can precede the creation of a
startup and influence its success:
- previous working experiences (as an employee);
- previous entrepreneurial experiences (startup previously
founded by the same entrepreneur);
- previous working/research experiences in the academic field.
With reference to the first aspect, about 80% of startuppers, before
starting their own entrepreneurial activity, had experience as an
employee. The working period is equal to 8 or 9 years on average. It
should be noted that a good 17% of them have spent a working
period abroad.
A good 23% of founders are not at their first startup. This data
confirms even in Italy the phenomenon of serial entrepreneurship,
that is the propensity to start up more than one company in one’s life.
8% of these serial entrepreneurs had an exit, whereas the wide
majority (87% of cases) is at some extent still involved in the
previous initiative (technically defined as “parallel entrepreneur”).
8% of startups previously founded were established abroad. Despite
that, only 50% of them have decided to stay out of border, whereas
the other 50% reentered in Italy or are planning to do so.
Conversely, the contribution to startup creation from university
researchers seems limited. Only around 8% of startuppers have
previous experiences in the academic field (at universities or public
research centers). On the contrary, the correlation between previous
experience in the research field and patent protection is high.
It is not random that 64% of the patent registered by Italian startups
comes from entrepreneurs who have a Ph.D. and spent a research
“The startup’s
success
depends
strongly on
what the
founders
have done
and learned
before”
18
period at the university or in other research centers.
THE TEAM
Startups are built around a group of 2 to 3 founders, of age ranging
between 26 and 35 years, and employ on average from 4 to 5
employees. They are not a “one man band”, but entrepreneurial
groups that aggregate different skills and contribute in terms of
employment (not big numbers, but important in perspective). It is
interesting to point out how the 72% of startups with only one founder
are still in the planning stage (“wannabe company”): therefore, it is
possible that along with the maturation of the idea, it follows a
widening of the
entrepreneurial
team.
Another
interesting
aspect of this
study is related
to the opportunity
for the group of
founders to
aggregate. 39%
of founders get
to know each
other at work. In
32% of cases the entrepreneurial adventure began among the
existing relations of friendship, whereas in 26% in the university
environment (18% during the degree course, while 8% during the
Ph.D.). Only in 10% of cases the entrepreneurial group crosses with
the family.
“Startups are a
team network
and gather
different
competences”
19
ACCESS TO CAPITAL
The sources of financing mapped for the purposes of our analysis
are the following:
Bootstrapping: capitals collected from the group of founders,
namely resources directly possessed or collected inside the family or
from the network of acquaintances (“family, friends and fools”);
Grant: funding generally devoted to the support of research activities
in the university field;
Seed Financing, Super Angels, Micro VCs, Accelerators and
Incubators: funding received by investment funds focused on early
stage companies and generally connected to activities of incubation
or acceleration;
Angels: funding received by individuals that generally make
investments together (in network);
Venture Capital: funding from investment funds specialized in risk
capital;
Corporate Venture Capital: funding received from other non-
financial companies.
It is important to remark that the distinction among different sources
is often not easy, above all in contests, such as the Italian one, in
which the industry of seed/venture capital is still in the consolidation
and growing phase.
Startups that have already raised capital (in any shape or form) are
around 70%.
The most common instrument used to raise funds is bootstrapping
(58% of cases). 8% of startups had access to grants
5
too (mainly
from regions/districts) to cover part of the developing costs from idea
to the initial stages. Another 6% comes from banks and foundations,
while the remaining 6% of the startups were funded by other non-
financial companies.
5
From the data analysis it emerges that 30% of startups that received a grant have
a founder with previous working experience in research and university.
20
16% has collected investments in equity from third parties investors,
mainly angels (8%), and seed funds (7%). Only a very limited portion
had access to venture capitals (1.2%).
This data is consistent with the specificity of the population observed,
which is connoted by early stage firms, as previously stated.
The capital collected by startups - as highlighted in the following
table, which offers a
distribution in classes of
investment – presents a
high variance (it is
noticeable that the
extremes vary from a
few thousands to some
million of euros!).
By eliminating the most
extreme parts of the
distribution, the average
investment is settled at
65 thousands euro, a
value closes to the
typical seed
investments’ size.
Most of these financings are used for the product engineering (in
75% of cases), followed by the investments in marketing & sales
(57%), R&D (38%) and, minimally, for general and administrative
expenses.
21
WHAT ARE THE ITALIAN STARTUPS
LOOKING FOR?
What do the Italian startups ask for?
Most of the Italian startups affirm they are seeking for capital,
specifically 69% for seed investment and 59% for venture capital.
They are not looking only for money. The analysis shows that the
Italian startups are seeking for strategic partners as well who can
help them in their development stages. Indeed, more than 50% are
looking for a partner who can help the founders in the development
of the business idea.
Speaking about targets, 57% aim at achieving an exit through M&A,
whereas 32% are not interested in selling the company. 10% think
about an IPO, goal almost prohibitive in these times but who
knows… Why should we limit ambitious projects? Only those who
cultivate big projects can have the chance to realize them.
22
WHO IS MIND THE BRIDGE
The Mind the Bridge Foundation is a non-profit initiative founded by
Marco Marinucci. A Google manager in his day job, Marco got
inspired while involved in a business plan competition and mentoring
project in Africa. Inspired by the radical impact such an initiative
played, he decided to replicate the model with the hope to have a
similar impact in his own country, Italy.
The Foundation is led by a Board of Directors with Marco as
Executive Director. Alberto Onetti, an Italian university professor
with an in-depth startup experience and knowledge of the Silicon
Valley ecosystem, serves as its Chairman. The Board steers the
direction of the initiative and defines its organizational objectives.
The goal of the Foundation is to foster a sustainable Italian
entrepreneurial ecosystem, spur more innovative ideas, and
reinvigorate the complex new venture economy, providing Italian
entrepreneurs with direct exposure to potential venture capital
investors from the most experienced, entrepreneurial ecosystem in
the world - Silicon Valley. The ultimate goal of Mind the Bridge is to
create a new generation of Italian entrepreneurs and Italian success
stories.
Every year Mind the Bridge organizes a business plan competition -
renamed “Seed Quest” in 2012 - with the purpose of selecting the
best innovative business ideas among all the talented Italian
applicants. Mind the Bridge offers, to selected startups, an intensive
training program (Boot Camp and Coaching sessions) and the
possibility to participate in the MTB events (the Venture Camp in
Milan and different roadshow in the USA).
Thanks to its own investment fund (Mind the Seed) the Foundation
carries out an acceleration program that qualifies entrepreneurial
ideas with the goal to create new Italian success stories. Such
activity is developed in Silicon Valley at the “Mind the Brige Gym”
(One Market Plaza, Steuart Tower 5th Floor, San Francisco).
Through the promotion of an entrepreneurial culture, the support for
policy-making activities and the valorization of successful role
models, the Foundation aims at achieving its ultimate goal, that is to
be relevant for a generational change in the approach to
entrepreneurship, impacting significantly on the production of Italian
technology.
23
24
The report is written by Mind the Bridge Foundation
with the scientific collaboration of CrESIT – Research
Centre for Innovation and Life Science Management
at Insubria University in Varese.
The research has been coordinated by Prof. Alberto Onetti
and Alessia Pisoni, Ph.D., and includes Marco Talaia,
Ph.D., and Simona Bielli.
Photos are courtesy of Michele Criscuolo (Mind the Bridge
Alumni – Startup School).
Mind the Bridge Survey is published annually and it is free
available on line in PDF format at www.mindthebridge.org
The rights of disclosure, use of data and information,
translations, electronic recordings, reproduction and total
or partial adaptation by any means (including
presentations and photocopies) are reserved.
Data and information contained in this Survey can be used
only if reporting the source as follows:
Startups in Italy – Facts and Trends
Mind the Bridge Survey (2012)
Graphs and tables must report the source as indicated in
the document.
Mind the Bridge Foundation | San Francisco (CA) - USA
www.minthebridge.org | [email protected]
Twitter: @MindTheBridge | Blog: siliconvalley.corriere.it/
doc_973273911.pdf
In this such a detailed illustration around startups in italy facts and trends mind the bridge survey 2012.
STARTUPS IN ITALY
FACTS AND TRENDS
MIND THE BRIDGE
SURVEY 2012
Startups in Italy – Facts and Trends
Mind the Bridge Survey (2012)
Milan, October 26, 2012
ISBN 9788890678622
1
STARTUPS IN ITALY
FACTS AND TRENDS 2012
MIND THE BRIDGE SURVEY
“Startup Italy”:
At what point we are?
EXECUTIVE SUMMARY
Here we go with the second edition of the “Mind the Bridge Survey”,
which offers its insiders (startuppers, institutional investors,
practitioners, researchers and policy makers) an updated scenario of
the Italian startup ecosystem. Through its privileged observatory,
represented by thousands of companies that in 2012 got in contact
with Mind the Bridge, the foundation, with the scientific support of
CrESIT of the Insubria University of Varese, had the opportunity of
analyzing this emerging section of the productive Italian universe in
detail. The analysis presented in this report is focused mainly on the
segment of companies in the “early stage phase” (seed financing and
Series A).
The main results emerging from the data analysis are summarized
below. Please refer to the Survey for in-depth analysis, details and
comments.
STARTUP: DEFINITION AND SIZE OF THE
PHENOMENON
First of all, what do we mean by startup? For the purposes of the
following survey, we refer to startups as:
- companies recently created or entrepreneurial projects;
- operating in innovative fields;
- with solid plans for growth;
- that need capital during their first stages.
2
Basically, new entrepreneurial initiatives characterized by an
important commitment to innovation and strong ambition of
growth. Since no national statistics census this category of
companies, it is hard to provide an estimate of both this section and
its growth rates. The order of magnitude, valid for a first
approximation, is however identified as 800/1,000 new projects
every year, with an overall consistency that lies between 4 and 8
thousand startups.
The startups are often founded only after the business idea has been
validated and, in some cases, after having collected the capital
needed for its realization. This explains why a good 59% of the
population investigated is represented by entrepreneurial projects
(“wannabe startup”), which have not been “structured” yet. Already
established companies, very young, with an average age of 1-2
years, represent around 36% of the total. Finally, the 5% is
composed by corporate spin-off, new projects started by already
existing companies with the purpose of supporting (through the
creation of a new identity, the spin-off) processes of diversification
and innovation of their own activity.
OPERATING FIELDS
The major operating field is represented by web (49.1%) and ICT
(21.8%), which absorb around 70% of Italian startups, while only
4.8% is concentrated on consumer product and around 3.6% on
electronics & machinery. A minor role is played by companies
operating in clean technologies (1.2%) and by the ones in the
biotech/life sciences field (0.6%). The remaining 19% (approximate)
operates in other sectors, particularly services. Data confirms the
existence of an inverse relationship between the number of firms
in an industry and the level of investment required to start a
project. In the web or software field the investment required at the
early stage is minimal, contrary to what happens to the development
of technologies in the biomedical or biotechnological sector or to
devices and hardware.
THE GEOGRAPHY OF THE STARTUP PHENOMENON
The majority of startups already established as companies, is
localized in the North (52%) and in the Center of Italy (21%),
whereas the presence in the South and in the Isles (16%) is limited
– although it is growing compared to last year. Milan and Rome are
confirmed as the poles of major attraction. It is important to underline
that the most important percentage of Italian startups (11%) have
decided to be incorporated abroad (especially in United States and
3
UK). This phenomenon, defined as “corporate drain”, (which has
been raising in the last years, +20% compared to the previous
year) can be read as a sign of the decreasing competitiveness of
our country for the attraction of investment and specifically of
new companies. Indeed startups - especially in their early stages -
are characterized by very high mobility rates, due to the absence of
operational constraints (personnel, plants, etc.) that link them to a
specific place. Therefore, having a favorable regulatory environment
for their establishment and growth (commonly called "corporate
haven" in Anglo-Saxon countries) is strategic for attracting
companies from abroad, at least to mitigate the escape of our most
promising business realities. Whether and how the package of rules
introduced by the government with “Decreto Sviluppo Bis” will be
effectively able to mitigate this phenomenon that threatens to deprive
our country from potential contributors to innovation and growth,
should be examined.
THE ITALIAN STARTUPPER PROFILE
What is the profile of the Italian startupper? Thirty-three years old on
average, male (female entrepreneurship is still quite limited, only
11% of the total), born and resident in the Center-North of Italy
(however, compared to last year, we saw a slight increase of neo-
entrepreneurs from the South of Italy).
Around 53% of entrepreneurs have a first level degree/bachelor,
around 42% also have a master’s degree. 11% got a Ph.D. or an
MBA. Among them, 87% studied in Italy while the remaining 13%
studied abroad. About 80% of startuppers had an experience as
employees, equal to 8-9 years on average, and a good 23% are not
on their first startup, data which confirms the phenomenon of serial
entrepreneurship, even in Italy. 8% of startups previously founded
were located abroad but only 50% decided to remain overseas. 8%
of these serial entrepreneurs declared an exit, whereas the wide
majority (87% of cases) is still involved in the previous initiative
("parallel entrepreneur").
Data on the average age and education highlights how startups
cannot be improvised but require a high level of knowledge and
experience (this last aspect is confirmed by the fact that one quarter
of founders are on their second startup, confirming that the role of an
entrepreneur is learned on the field).
Another interesting aspect relates to patents. 4% of founders report
having at least one patent (2 per person on average) and it is
4
interesting to notice how two thirds of all patents registered originate
from founders with a Ph.D.
THE ENTREPRENEURIAL TEAM
Italian startups are comprised by a group of 2-3 shareholders and 4-
5 employees, on average. Therefore, we are not talking about a
“one man band” but to entrepreneurial groups who gather different
skills and generate a contribution, in terms of occupation, not
very large but important if considered in perspective. 72% of startups
with a single founder are still at an initial stage (“wannabe company”).
39% reported having known their cofounders from work, 32%
through existing friendships, and 26% met them in college.
THE ORIGIN OF THE BUSINESS IDEA
What inspires entrepreneurs to the point of starting a company?
Research, in 67% of cases, with a major impact for applied
research (27.3%) compared to basic research (7.3%). Such data
indirectly confirms the difficulty and delay the Italian academic
system has with regard to technology transfer. Previous working
experience is another important factor that influences the
genesis of the business idea (50%).
LOCALIZATION DRIVERS
What are the factors that seem to have a major influence on the
location of a startup? In first place is the network of contacts (69%),
followed by the possibility to access highly specialized human
resources (engineers, programmers, managers, etc.) and the
proximity to research centers (40%), which are, by nature, the source
from which to draw on skills and highly qualified personnel (57%).
The fact that the access to capital (43%) qualifies in fifth place,
only highlights how relationships and competences play a
fundamental role in the process of starting up a company; even
better, the same entrepreneurial models are based on network. It is
not a coincidence that knowledge, talent and network are often
indicated as the fundamental factors at the basis of a successful
entrepreneurial ecosystem.
MOTIVATIONAL DRIVER
77% of the respondents are “user entrepreneur”, referring to those
who reported starting a company to solve a problem they personally
faced (an unsatisfactory product/service or an unmet need). Quite
prevalent among the motivational factors (68%), is the desire to
improve an existing market or preside over a slice of the market that
5
is still uncovered. For the remaining 53%, the desire of auto-
determination (being their own “boss”) and that of auto-
realization, win at 51%.
ACCESS TO CAPITAL
The most widespread instrument to raise funds among startups is
bootstrapping (58%). 8% had access to a grant, 6% came from
banks and foundations, while another 6% was financed by other
industrial firms. 16% collected investment in equity from third-party
investment, mainly angels (8%) and seed funds (7%). Only a very
limited number had access to venture capital (1.2%).
By eliminating the extremes in the distribution of funding, it becomes
apparent that the average investment is approximately 65K (euro), a
figure close to the typical amount of seed investment. Investments
are primarily used for product development.
THE NEEDS
What are Italian startups looking for? First of all, capital (69%) at the
seed investment level and 59% at the venture capital level. But more
than 50% are looking for a partner as well, who could help them in
the strategic development of their business idea. After all, data
shows that 69% of companies decide to establish where the network
of contacts is stronger.
Therefore, capital and skills - together with a more startup-friendly
cultural and normative environment - are the ingredients for giving a
further sap to the Italian startup ecosystem, which is confirmed to be
healthy and growing, looking through our observatory.
Alberto Onetti
Chairman Mind the Bridge Foundation
Director, CrESIT - Insubria University of Varese
6
7
STARTUP: WHAT IS IT? HOW MANY
ARE THERE?
Prospectively speaking, Italian startups represent the most dynamic
and relevant component of the Italian productive ecosystem, despite
being a numerical minority compared to other sectors.
National statistics do not conduct a census on startups. They provide
data on new companies, although most of them cannot be
considered startups because they operate as traditional businesses.
This lack of data, prevents us from carrying out structured analysis
on the startup phenomenon in Italy.
Furthermore, the study of the startup universe becomes even more
complex if we consider the diversity and specificity of the factors
related to this category of companies, such as the high mortality
rates (which determines constant changes in the population) or the
“pivoting “ processes (referring to the activities undertaken by the
founders for modifying, often radically, the object of the core activity)
which lead the original project to assume a different shape for better
responding to the market requirements. Finally, we cannot
underestimate the fact that usually startups are founded only after
having reached certain milestones, considered crucial for the product
launch.
As a consequence, in order to understand the phenomenon in its
entirety, it becomes fundamental to conduct a census not only on the
companies already founded, but also on the projects that are not yet
formalized as a legal entity.
Some attempts for identifying/quantifying and mapping the startup
universe have been done in the past, at different levels. A first
attempt tried to estimate the number of Italian startups on the basis
of the funding requests made by the startups to the major funds of
investment, net of any duplication.
It is estimated that the venture capital funds and business angels
networks grouped around the VC Hub, the informal group that
gathers the most important Italian investors, collects around
800/1,000 fund requests every year. We consider that number quite
representative of the size of the annual flow of Italian startups.
Conversely, it is more difficult to appreciate the overall consistency of
the phenomenon, given its high dynamic. A useful proxy, with all the
8
due limitations of the case
1
, can be identified in the dimension
reached by the social communities specialized on these topics. It is
reasonable to estimate the current volume of the startups in Italy in
the order of a few thousands (approximately between three and eight
thousand companies). A world still quite small, but which is certainly
growing fast.
In the following paragraphs we will present the results of the analysis
we conducted both on the companies and on the entrepreneurial
projects participating in the Mind the Bridge Seed Quest 2012.
The survey sample is composed by the startups that applied to Seed
Quest 2012 and filled out the application form with all the information
required.
With the purpose of this survey, specifically, we analyzed data for
166 companies and 369 entrepreneurs
2
.
It is important to point out how the specificity of the Mind the Bridge
Seed Quest program, which is aimed at collecting projects mainly
from companies at the first stages of their life cycle, may influence
the evidence emerging from the data analysis to some extent. In
particular, given the number of participating firms, we believe this
analysis represents the Italian startup population very well, or at least
the segment comprised by the companies in the “early stage” phase,
referring to all the firms recently founded or seeking for a first round
of funding (seed financing or Series A). More structured Companies
(those aiming to complete a round of funding subsequent to Series
A) represent a minor segment, which requires, due to its lower
numerical consistency, to be addressed with methods of investigation
based on a qualitative approach.
Below, we offer some useful definitions to better qualify the data
presented in the following sections.
STARTUP
New entrepreneurial projects with a strong calling to innovation and
solid growth ambitions. This entrepreneurial model is usually
associated to a need for capital exceeding the founders’ ability to
self-fund (the so called “bootstrapping”, defined by the Anglo-Saxon
literature as the well-known model of the 3Fs, “family, friends and
fools”) and the company’s capability to self-sustain (generally, for a
1
Following such approach, the numbers of the members of a particular group can
offer orders of magnitude useful to estimate the phenomenon. However, one has to
consider that the discussion groups involve people differently interested in the
topics covered, and not just individuals active in startups.
2
Such numbers do not include applications partially completed, which are not
included in the analysis.
9
certain period after starting the company, the entrepreneurial activity
does not produce cash flow). Consequently, startups in the early
stages base their development on the resources collected through
external financing, which comes from investors specialized on equity,
such as seed, venture capitalists and business angels. Therefore, for
the purpose of this report, we defined as startups
3
:
? companies recently founded or entrepreneurial projects;
? operating in innovative sectors;
? with important growth plans;
? requiring capital injections in the early stages.
SPIN-OFF
It is a subset of the startups composed by those companies whose
founders come from other companies (the so called “corporate spin-
offs”), universities or research centers (“academic spin-offs).
Generally speaking, the term spin-off is often used to refer to firms
that maintain a formal relation with the company or the university
where the innovation originated: this is possible thanks to the
participation of the organization of origin into the spin-off capital,
and/or a contract of collaboration between the former and the spin-
off.
3
The proposed definition is in line with the one of “young and new technology-
based companies”, adopted by the most widespread literature on entrepreneurship
(see also Onetti A., Zucchella A., Jones M.V., McDougall P., 2010,
Internationalization, Innovation and Entrepreneurship: Business Models for New-
Technology-based Firms, in “Journal of Management and Governance (JMG),
Special Issue: Entrepreneurship and strategic management in Life science.
Business Models for High-Tech Companies”) and with the ones provided by the
recent report “RESTART ITALIA” written by the Ministry of Economic Development.
10
STARTUPS VERSUS WANNABE-
COMPANIES
Startups are often formally founded only after the business idea
has been validated and, in some cases, after having raised the
capital necessary for its development. This evidence has
already emerged from last year’s Survey and it is confirmed by
the data of this year. Hence, the importance, previously pointed
out, to take a census not only on the companies already
founded, but also on the entrepreneurial projects, which have
not been formalized as a legal entity yet.
The majority of the Italian
startups (a good 59% of the
population investigated) are
represented by entrepreneurial
projects (“wannabe startups”),
which are not “structured” nor
built as a legal entity yet.
This phenomenon is extremely
relevant because, despite the
projects that are not
formalized, they are to all
intents and purposes operating
companies, which raise capital
and money. Indeed, we found that all around these entrepreneurial
projects, there are teams of people supporting the activity with
available funds (previously collected as a grant and/or risk capital,
usually coming from family and acquaintances) and thus with
resources to invest.
With regard to already established companies, we are talking about
very young firms, with an average age of 1 to 2 years.
Furthermore, it should be noted that 5% of companies are corporate
spin-off, that is new projects started by already existing firms with the
goal of supporting (through the creation of a new entity, that is the
spin-off) processes of diversification and innovation of their own
activity.
“Startups are often
legally formed only
after having
validated the
business idea (or
after having found
capital)”
11
TECHNOLOGICAL SECTORS ED
BUSINESS AREAS
Most of the startups are active in the web field (49.1%) and in
Information and Communication Technologies (ICT) (21.8%).
In addition to these areas we can count a 4.8% focused on
consumer products and around 3.6% on electronics & machinery.
Numerically less important is the role of companies operating in
clean technologies (1.2%) and in the biotech & life science industry
(0.6%).
Data confirms that a relation (inverse) exists between the number of
companies and the level of investments required to start up an
entrepreneurial project. A project in the web or software field requires
minimum investments in the startup phase, as opposed to the
development of biomedical and biotechnological technologies or
devices and hardware.
The remaining 18.8% of the
companies is focused on
other activities, mainly
services that are
numerically prevalent
(services of various types
that support different
sectors).
“web and ICT
are the
prevalent
businesses”
12
ITALIAN STARTUPS: WHERE?
The majority of the Italian startups are located in the North (52%).
The Center of Italy contributes with 21%, while 16% originates from
the South and the Isles. The percentage of companies based in the
South and in the Isles is to be acknowledged, although still a
minority, it increased sharply (+50%) compared to last year.
Lombardy (25%) and Lazio (18%), which include Milan and Rome as
dominant location poles,
have been confirmed,
even this year, as the
regions with the highest
density of startups,
immediately followed by
Emilia and Veneto (9%). It
is important to highlight
that an important
percentage (11%) decided
to incorporate abroad.
This data, which has kept
rising in the last years
(+20% compared to the
previous year), can be
read as a signal of the
decreasing
competitiveness of our
country in terms of lower
investment attraction and
incapacity to act as a
magnet for new
companies. As a matter of
fact, the startups,
particularly the ones in the
early stage, are companies characterized by high mobility, at least
potentially, since they do not have operational constraints (personnel,
plants, …) that bind them to a specific place. Therefore, having a
favorable regulatory environment to their establishment and growth
(which is called “corporate heaven” in Anglo-Saxon countries) is
strategic, not only for attracting foreign companies in Italy, but above
all for mitigating the “corporate drain” effect.
The set of rules introduced by the Italian Government with the
“Milan and
Rome are the
poles with the
highest density
of startups”
13
“Decreto Sviluppo Bis” to foster the birth and development of
innovative startups, needs to be tested in order to understand if it can
mitigate or invert this trend.
Among the nations that show the highest capacity to attract Italian
startups, United States and United Kingdom emerged.
It should be noted that the choice to locate the company abroad
could be led by specific corporate strategies, such as the research of
specific skills and/or specialized workers and of markets able to
support the startup development and to foster fundraising.
In both cases, the United States, either for the dimension of their
internal market or for the stage of development of the venture capital
industry, represents a very interesting destination for a company
with ambitious development plans.
FOCUS: LOCALIZATION DRIVERS
But what are the factors that can influence the location of a
startup? The answers provided to this question by the founders,
allowed us to identify a “ranking” of the location drivers
considered most important. In the first place, there is the
network of contacts (69%). Followed by the possibility to
access to highly specialized human resources (engineers,
programmers, managers, etc.) and the proximity to a research
center (40%), which are by nature a source from which to
draw expertise and highly specialized personnel (57%).
Access to capital (43%) is another determinant factor in the
choice of location.
From this data, emerges that relations and competences play
a fundamental role in the start up and development of a
company; better yet, the entrepreneurial models themselves
are based on network. It is not a coincidence that knowledge,
talent and network are often identified as the fundamental
factors on the basis of a successful entrepreneurial eco-
system.
“Startups arise
where there
are networks
and
competences”
14
THE ORIGINS OF THE BUSINESS
IDEA
A question that almost all scholars in innovation have tried to answer,
is the one related to the sources of innovation. In an attempt to
provide an answer, we asked the entrepreneurs where and when the
business idea - on which the startup is based - originated.
In this case, the indications that emerge from the data analysis are
quite clear. Research is the basis for innovation. In 67% of cases,
research is the source of the business idea. It should be underlined
that applied research (27.3%), thanks to its proximity to final
application, appears to have a more direct impact on the creation of
companies compared to basic research (7.3%). This data indirectly
confirms the difficulties and the delay of the Italian university system
towards technology transfers. As highlighted in previous studies
4
, the
great potential of the Italian research struggles to become a firm, as
confirmed also by the small number of academic spin-offs we report
yearly.
Another important place for the genesis of the business idea is the
job: in 50% of cases the stimulus for launching a new company has
accrued during previous employment.
4
Onetti A., Vietor R.H.K., Napolitano F., “Italy. Europe’s Investment Opportunity”, White
Paper, New York, May 9, 2011 (http://italianbusiness.org/white-papers/).
15
FOCUS: MOTIVATIONAL DRIVERS
What are the factors that spur an individual to create a startup and to
take up the entrepreneurial adventure?
From the analysis three entrepreneurial profiles emerge, better
defined as “attitudes”:
- “ghepensimi”(Italian expression to state “I´ll do it myself”)
- “voglio un mondo diverso” (I want a different world)
- “qui comando io” (I am the boss)
As stated before, these profiles are not alternatives but we can refer
to them as approaches that coexist in the same person, even if in a
different mix.
The first profile (“ghepensimi”), connoted by the almost totality of the
interviewed startuppers (77%), is exactly what the literature on
entrepreneurship identifies as “user entrepreneurs”, namely
individuals who declare to have started up a company to solve a
problem they faced personally (an unsatisfactory product or a
service, an unsatisfied need…).
Very widespread among the motivational factors (68% of cases) is
also the will to change the market where they have decided to
compete. In this case the driver is the vision, typical the
entrepreneurial vision, of a possibility/opportunity to improve the
existing market or a market segment not yet addressed.
Other engines for the creations of companies (connected to the third
profile identified above) can be described as the will of self-
determination (the wish to be “boss” of oneself, reported in 53% of
cases) and of self-realization (indicated by 51% of entrepreneurs).
Another aspect studied concerns the people (“supporters”) who
sustained the entrepreneur in the finalization of the business idea
and in the early stages of starting up the company. Data confirms a
fundamental role of the 3Fs in the startup phase: among them, family
(48%) and friends (43%) play a role of primary importance.
We will see, in the section devoted to fundraising, how family and
friends support the business idea, both economically and financially.
Moreover, a significant role is played by the colleagues (38%); a
further confirmation of the influence that “strong” ties and “dense”
relationships can have in the initial moments that precede the
creation of an entrepreneurial initiative. The size of the network and
the weak “ties” tend to gain importance later in the company’s life
cycle.
16
THE STARTUPPER’S PROFILE
The Italian startupper is 33 years on average and in most of cases he
is male (89%), he has a quite high education level and has
cumulated previous working and entrepreneurial experiences.
The majority of entrepreneurs were born in the North/Centre (48% in
the North and 23% in the Centre),
whereas only 24% come from the
South or the Isles (the remaining 5%
abroad). If we consider the residence
of entrepreneurs (instead of the place
of birth), the gap between North and
South is widened, since the
percentages related to the latter has
dropped from 24% to 17%.
“Education” as one of the factors that
present a stronger correlation with the
propensity to create a firm, also emerged in last year’s Survey.
By analyzing the startupper’s study path in details, as already
reported, a quite high level of education was revealed: around 52%
of entrepreneurs have a bachelor (in 6% of cases they got it abroad)
and around 42% have a master degree too (9% of cases got it
abroad).
11%
Ph.D.
or
MBA
as
well.
Of
this
perce
ntage
, 87%
studie
d in
Italy,
while
the
“Around 42%
got a master’s
degree”
17
remaining 13% abroad (with United States, United Kingdom, Spain,
France and Switzerland as the most frequent places for studying).
The fact is, that studying abroad is a frequent trait in the startuppers’
profile, which does not concern only high specialization, but also the
university’s study path, although with a less pronounced incidence
(6-9% depending on whether it is bachelor or master degree).
Along with the education, a relevant aspect is represented by the
working and entrepreneurial experiences that entrepreneurs have
before the creation of the current startup. It is not casual that
entrepreneurs in their first working and entrepreneurial experience
are only 19% of the total.
In particular, we have separately categorized and analyzed three
main typologies of experiences that can precede the creation of a
startup and influence its success:
- previous working experiences (as an employee);
- previous entrepreneurial experiences (startup previously
founded by the same entrepreneur);
- previous working/research experiences in the academic field.
With reference to the first aspect, about 80% of startuppers, before
starting their own entrepreneurial activity, had experience as an
employee. The working period is equal to 8 or 9 years on average. It
should be noted that a good 17% of them have spent a working
period abroad.
A good 23% of founders are not at their first startup. This data
confirms even in Italy the phenomenon of serial entrepreneurship,
that is the propensity to start up more than one company in one’s life.
8% of these serial entrepreneurs had an exit, whereas the wide
majority (87% of cases) is at some extent still involved in the
previous initiative (technically defined as “parallel entrepreneur”).
8% of startups previously founded were established abroad. Despite
that, only 50% of them have decided to stay out of border, whereas
the other 50% reentered in Italy or are planning to do so.
Conversely, the contribution to startup creation from university
researchers seems limited. Only around 8% of startuppers have
previous experiences in the academic field (at universities or public
research centers). On the contrary, the correlation between previous
experience in the research field and patent protection is high.
It is not random that 64% of the patent registered by Italian startups
comes from entrepreneurs who have a Ph.D. and spent a research
“The startup’s
success
depends
strongly on
what the
founders
have done
and learned
before”
18
period at the university or in other research centers.
THE TEAM
Startups are built around a group of 2 to 3 founders, of age ranging
between 26 and 35 years, and employ on average from 4 to 5
employees. They are not a “one man band”, but entrepreneurial
groups that aggregate different skills and contribute in terms of
employment (not big numbers, but important in perspective). It is
interesting to point out how the 72% of startups with only one founder
are still in the planning stage (“wannabe company”): therefore, it is
possible that along with the maturation of the idea, it follows a
widening of the
entrepreneurial
team.
Another
interesting
aspect of this
study is related
to the opportunity
for the group of
founders to
aggregate. 39%
of founders get
to know each
other at work. In
32% of cases the entrepreneurial adventure began among the
existing relations of friendship, whereas in 26% in the university
environment (18% during the degree course, while 8% during the
Ph.D.). Only in 10% of cases the entrepreneurial group crosses with
the family.
“Startups are a
team network
and gather
different
competences”
19
ACCESS TO CAPITAL
The sources of financing mapped for the purposes of our analysis
are the following:
Bootstrapping: capitals collected from the group of founders,
namely resources directly possessed or collected inside the family or
from the network of acquaintances (“family, friends and fools”);
Grant: funding generally devoted to the support of research activities
in the university field;
Seed Financing, Super Angels, Micro VCs, Accelerators and
Incubators: funding received by investment funds focused on early
stage companies and generally connected to activities of incubation
or acceleration;
Angels: funding received by individuals that generally make
investments together (in network);
Venture Capital: funding from investment funds specialized in risk
capital;
Corporate Venture Capital: funding received from other non-
financial companies.
It is important to remark that the distinction among different sources
is often not easy, above all in contests, such as the Italian one, in
which the industry of seed/venture capital is still in the consolidation
and growing phase.
Startups that have already raised capital (in any shape or form) are
around 70%.
The most common instrument used to raise funds is bootstrapping
(58% of cases). 8% of startups had access to grants
5
too (mainly
from regions/districts) to cover part of the developing costs from idea
to the initial stages. Another 6% comes from banks and foundations,
while the remaining 6% of the startups were funded by other non-
financial companies.
5
From the data analysis it emerges that 30% of startups that received a grant have
a founder with previous working experience in research and university.
20
16% has collected investments in equity from third parties investors,
mainly angels (8%), and seed funds (7%). Only a very limited portion
had access to venture capitals (1.2%).
This data is consistent with the specificity of the population observed,
which is connoted by early stage firms, as previously stated.
The capital collected by startups - as highlighted in the following
table, which offers a
distribution in classes of
investment – presents a
high variance (it is
noticeable that the
extremes vary from a
few thousands to some
million of euros!).
By eliminating the most
extreme parts of the
distribution, the average
investment is settled at
65 thousands euro, a
value closes to the
typical seed
investments’ size.
Most of these financings are used for the product engineering (in
75% of cases), followed by the investments in marketing & sales
(57%), R&D (38%) and, minimally, for general and administrative
expenses.
21
WHAT ARE THE ITALIAN STARTUPS
LOOKING FOR?
What do the Italian startups ask for?
Most of the Italian startups affirm they are seeking for capital,
specifically 69% for seed investment and 59% for venture capital.
They are not looking only for money. The analysis shows that the
Italian startups are seeking for strategic partners as well who can
help them in their development stages. Indeed, more than 50% are
looking for a partner who can help the founders in the development
of the business idea.
Speaking about targets, 57% aim at achieving an exit through M&A,
whereas 32% are not interested in selling the company. 10% think
about an IPO, goal almost prohibitive in these times but who
knows… Why should we limit ambitious projects? Only those who
cultivate big projects can have the chance to realize them.
22
WHO IS MIND THE BRIDGE
The Mind the Bridge Foundation is a non-profit initiative founded by
Marco Marinucci. A Google manager in his day job, Marco got
inspired while involved in a business plan competition and mentoring
project in Africa. Inspired by the radical impact such an initiative
played, he decided to replicate the model with the hope to have a
similar impact in his own country, Italy.
The Foundation is led by a Board of Directors with Marco as
Executive Director. Alberto Onetti, an Italian university professor
with an in-depth startup experience and knowledge of the Silicon
Valley ecosystem, serves as its Chairman. The Board steers the
direction of the initiative and defines its organizational objectives.
The goal of the Foundation is to foster a sustainable Italian
entrepreneurial ecosystem, spur more innovative ideas, and
reinvigorate the complex new venture economy, providing Italian
entrepreneurs with direct exposure to potential venture capital
investors from the most experienced, entrepreneurial ecosystem in
the world - Silicon Valley. The ultimate goal of Mind the Bridge is to
create a new generation of Italian entrepreneurs and Italian success
stories.
Every year Mind the Bridge organizes a business plan competition -
renamed “Seed Quest” in 2012 - with the purpose of selecting the
best innovative business ideas among all the talented Italian
applicants. Mind the Bridge offers, to selected startups, an intensive
training program (Boot Camp and Coaching sessions) and the
possibility to participate in the MTB events (the Venture Camp in
Milan and different roadshow in the USA).
Thanks to its own investment fund (Mind the Seed) the Foundation
carries out an acceleration program that qualifies entrepreneurial
ideas with the goal to create new Italian success stories. Such
activity is developed in Silicon Valley at the “Mind the Brige Gym”
(One Market Plaza, Steuart Tower 5th Floor, San Francisco).
Through the promotion of an entrepreneurial culture, the support for
policy-making activities and the valorization of successful role
models, the Foundation aims at achieving its ultimate goal, that is to
be relevant for a generational change in the approach to
entrepreneurship, impacting significantly on the production of Italian
technology.
23
24
The report is written by Mind the Bridge Foundation
with the scientific collaboration of CrESIT – Research
Centre for Innovation and Life Science Management
at Insubria University in Varese.
The research has been coordinated by Prof. Alberto Onetti
and Alessia Pisoni, Ph.D., and includes Marco Talaia,
Ph.D., and Simona Bielli.
Photos are courtesy of Michele Criscuolo (Mind the Bridge
Alumni – Startup School).
Mind the Bridge Survey is published annually and it is free
available on line in PDF format at www.mindthebridge.org
The rights of disclosure, use of data and information,
translations, electronic recordings, reproduction and total
or partial adaptation by any means (including
presentations and photocopies) are reserved.
Data and information contained in this Survey can be used
only if reporting the source as follows:
Startups in Italy – Facts and Trends
Mind the Bridge Survey (2012)
Graphs and tables must report the source as indicated in
the document.
Mind the Bridge Foundation | San Francisco (CA) - USA
www.minthebridge.org | [email protected]
Twitter: @MindTheBridge | Blog: siliconvalley.corriere.it/
doc_973273911.pdf