Funding for startups in Italy has been on the rise, but the country still lags behind in terms of VC investments, ranking eighth in Europe according to Dealroom.
However, a new presence on the scene hopes to help close this gap in both quantity and quality. The Italian Founders Fund (IFF), freshly created with €50 million to invest in 25 companies, sets itself apart as a sector-agnostic and entrepreneur-friendly fund that understands the challenges faced by startup founders.
Currently, IFF’s portfolio consists of four companies with a fifth deal in the works. Two investments have been publicly disclosed thus far, including funding for customer research platform Glaut in April and a 2023 round for 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,” shared Lorenzo Franzi, founding partner of IFF (pictured third from the right in the photo above), in an interview with TechCrunch.
While some may argue with this diagnosis, notable VC firms already operating in Italy include CDP Venture Capital, Exor Ventures, LVenture Group, Milano Investment Partners, Pariter Partners, Primo Ventures, and United Ventures.
However, Franzi believes that there is still a gap for early stage capital. Additionally, IFF offers a new source of funding for a market whose startups collectively receive much less funding than France’s, despite the two countries having similar population sizes.
IFF also serves as a complement to accelerators such as H-FARM and acts as a step up from angel investing, a role that Franzi and other entrepreneurs turned investors have previously taken on.
As a former CEO at laundry startup Laundrapp and partner at Global Founders Capital until late 2022, Franzi understands the limitations of angel investing and the potential issues that may arise, such as limited analysis, complex cap tables, and undersized funding rounds. IFF offers the structure of a fund to its investment process, while also remaining hands-on with its portfolio companies after investing.
One example of this hands-on approach is IFF’s ability to assist portfolio companies with important hires, commercial expansion, and strategic partnerships, according to Franzi. Jet HR CEO Marco Ogliengo also agreed, noting that IFF’s value lies in its backing by “every successful Italian founder.”
While this may be a bit of an exaggeration, Franzi shared that around 100 of IFF’s backers are indeed Italian entrepreneurs from a range of generations and sectors, all with a shared goal of putting Italy on the map as one of the top spots in Europe to start a company.
This is an ambitious goal, especially considering that some of the pain points faced by startups are out of IFF’s control, such as high taxes and paperwork. Although there have been recent efforts to boost the country’s attractiveness and tech sector, IFF differs from state-backed firm CDP Capital as it is completely privately funded.
Without public funding or institutional LPs, IFF can invest in companies wherever it sees fit. This geographical flexibility allows IFF to also back Italian founders operating abroad, as well as international startups looking to enter the Italian market.
Additionally, IFF will work towards getting foreign VC funds to co-invest in its portfolio, both initially and in follow-on rounds. This will be facilitated by some of its LPs being GPs of foreign funds, and IFF’s plans to support Italian founders with global ambitions.
Notable global Italian startups include Bending Spoons, owner of popular apps and services like Evernote and Meetup, which is currently valued at $2.55 billion. With serial Italian entrepreneurs returning home to start their next ventures, it only seems fitting that a founder-led fund is now available to support them.
Managed by KOINOS Capital, a private equity fund that has recently expanded into VC, IFF stands as a further indication of the maturing ecosystem in Italy. Founder and CEO of KOINOS Capital, Marco Morgese, has drawn comparisons to similar founder-led funds in other markets, such as Founders Fund in the U.S. and more recently, Galion.exe in France.
Having seen this model adopted successfully in other countries, the introduction of IFF in Italy is another sign of the ecosystem’s growth. While progress is being made in terms of venture capital, there is still more work to be done.
“In Italy, challenging the status quo on processes, speed, and an entrepreneur-focused mindset is essential,” Franzi emphasized.
