While funding for Italian startups has been growing, the country still ranks eighth in Europe by VC investment, according to Dealroom.
Newly created Italian Founders Fund (IFF) hopes to help with the catching up, both in quantity and in quality. With €50 million to invest into 25 companies, it also positions 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 disclosed so far: Before customer research platform Glaut in April, IFF led a 2023 round of funding into HR tech startup Jet HR.
“IFF is addressing the challenge for early stage founders in Italy to find a high conviction lead investor at the pre-seed and seed stages,” IFF founding partner Lorenzo Franzi (third from the right in the picture above) told Madconsole.
Some may disagree with the diagnosis; VC firms that operate in Italy already include CDP Venture Capital, Exor Ventures, LVenture Group, Milano Investment Partners, Pariter Partners, Primo Ventures, and United Ventures.
Franzi, however, thinks that this still leaves a gap for early stage capital. And either way, IFF comes up as a new source of capital for a market whose startups collectively receive far less funding than France’s, for instance, despite the fact that the two countries have a similar population size.
IFF is also a complement to accelerators such as H-FARM, and a step up from the angel investing that Franzi and other entrepreneurs turned backers had been engaging in.
A former CEO at laundry startup Laundrapp turned partner at Global Founders Capital until late 2022, he said that the “unstructured” approach inherent to angel investing can lead to several issues such as limited analysis, complex cap tables, and undersized funding rounds. IFF can bring the structure of a fund to its investment process, but also be hands-on after it invests.
For instance, IFF was able to help portfolio companies with key hires, commercial expansion, and strategic partnerships, Franzi said. Jet HR CEO Marco Ogliengo concurred, noting that IFF’s value-add comes from the fact that it is “backed by basically every successful Italian founder.”
That may be hyperbole; but according to Franzi, around 100 of IFF’s backers are indeed Italian entrepreneurs. He added that they come from a wide range of generations and sectors, but with a shared goal: to put Italy on the map of the best spots in Europe to open a company.
That’s an ambitious goal, especially since some of the pain points are out of IFF’s remit: There’s not much a private VC firm can do to counterbalance high taxes and paperwork. There have been more recent public efforts to boost the country’s attractiveness and its tech sector; but unlike CDP Capital, which is backed by state agencies, IFF is entirely privately funded.
In absence of public funding or institutional LPs, IFF is free to invest wherever it sees fit. It will use this geographical flexibility to also back Italian founders operating abroad, as well as foreign startups interested in entering the Italian market.
Foreign connections go both ways, with IFF aiming to get foreign VC 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, which is valued at $2.55 billion. And with serial Italian entrepreneurs returning home to found their next ventures, it seems fitting that they now have a founder-led fund to back them.
IFF will be managed by KOINOS Capital, a private equity fund that has been expanding into VC, and whose CEO, Marco Morgese, noted examples of founder-led funds in other markets, such as Founders Fund in the U.S. or more recently, Galion.exe in France.
Seeing IFF adopt this model in Italy is one more sign that the ecosystem is maturing. When it comes to venture capital, numbers are improving, but there’s still more to do. “In Italy, challenging the status quo on processes, speed, and an entrepreneur-focused mindset is essential,” Franzi said.
