The Italian Literature Survey IFISE Meeting

1
The Italian Literature SurveyIFISE Meeting
A.I.F.I.Italian Venture Capital and Private
Equity Association
Roberto Del Giudice
Milan, 2nd February 2001
2
The evolution of the Italian Venture Capital
Private Equity Market
Part of the market moves back to genuine VC and
pure tech deals
75
Back to genuine VC
Driving forces Telecom deregulation and Internet
38
The LBO wave attracts more PE players
With 30 PE players the market starts to grow
Driving forces
Number of players
Constant growth of the later stage market
30
The VC Market takes off
First Institutional VC movers
15
Informal VC
0
1900
1986
1990
1996
today
3
A.I.F.I. Members
75
58
55
49
38
34
57
30
30
31
30
28
24
22
15
A.I.F.I.
4
1st Sem 2000 - Number of investments by type of
investors
5
1 Sem 2000 - Stage distribution of investments
by type of investors
6
Seed/start up investments by type of investors
7
1 Sem 2000 - Italian Venture Capital and Private
Equity Industry Concentration
8
1 Sem 2000 - Italian Venture Capital Industry
Concentration
9
The convergence to Venture Capital
Profit oriented incubators
VENTURE CAPITAL
CORPORATE VENTURE CAPITAL
Non profit incubators
University incubators
A.I.F.I.
10
Corporate Venture Capital some Italian examples
- Enel - Telecom Italia - Seat - .
A.I.F.I.
11
Business Incubators two different kinds

• PROFIT ORIENTED
• private operators
• fee/equity oriented
• connected to the VC and PE market

Incubator

• NON-PROFIT ORIENTED
• public operators
• purpose of economic development (fill the gap)
• use of public resources

A.I.F.I.
12
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.
13
ITALIAN FOR PROFIT INCUBATORS
A.I.F.I.
14
Percentage distribution of Italian for profit
Incubators by Sponsor
A.I.F.I.
15
Leaders background by
A.I.F.I.
16
Sources of funds raised on the market by
A.I.F.I.
17
Funds immediately available (Euro mil)
N players 7
A.I.F.I.
18
Geographical breakdown of total funds raised by
A.I.F.I.
19
Incubators main characteristics
Italian Incubators average size
- 307 mq of space to work
- 35 working places for the incubated companies
- 15 full time consultants
A.I.F.I.
20
The offered services by
A.I.F.I.
21
Incubators internal competences by
A.I.F.I.
22
Average time to start the activity
Between the approval of the business plan and
the entrance of the company inside the incubator.
A.I.F.I.
23
Average amount invested and average number of
companies
A.I.F.I.
24
Number of incubated companies and average time
spent inside the incubator
A.I.F.I.
25
Average stake into the company
A.I.F.I.
26
Distribution of investment sectors by
Multiple choice
A.I.F.I.
27
Internet business focus
A.I.F.I.
Multiple choice
28
Revenue model by
A.I.F.I.
29
Italian incubators reference model Variables
Incubators sponsor
57
43
33
Equity
Incubators sponsor
67
Financial
Revenue model for start ups
Corporate
Mix
50
50
Consulting
Private Individual
Fee
50
50
100
Available capital
Referred capital
No capital
Available capital
A.I.F.I.
30
Italian incubators reference modelVariables
Leaders Background
14
72
33
14
Equity
Leaders Background
67
Entrepreneurial/ managerial
Revenue model for start up
Mix
50
50
Financial
Consulting
Fee
50
50
100
Available capital
Referred capital
No capital
Available capitals
A.I.F.I.
31
Some final issues
32
concerning incubators

• 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.

A.I.F.I.
33
concerning the high tech start ups the main
weaknesses

• lack of a synergic dialog and relationship
  between the worlds of research, enterprise and
  finance
• lack of adequate human resources on the
  enterpreneurial side
• difficulties on technology auditing activities
• inadequate legal framework.

34
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.

35
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
36
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.

37
4. Inadequate legal framework

• In the recent past RD 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.