New Climate of Optimism For High-Tech VC in Italy

Italy’s entire private equity market should receive a welcome boost when the government passes new closed-end fund legislation in January to create more efficient structures for international institutional investors. The new year, however, may also signal the beginning of a long-awaited spring for Italy’s underdeveloped early-stage high-technology investment sector.

The first signs of a thaw came in 1998, which saw three new entrants to the high-tech market – Pino Ventures, headed by Elserino Piol, formerly of Olivetti Ventures; Fintech, promoted by Confindustria; and 3i Italia, which, although a long-established private equity provider in Italy, has for the first time opened its doors to technology investment opportunities as part of the group’s pan-European technology investment programme.

Associazione Italiana degli Investitori Instituzionali nel Capitale di Rischio (AIFI), Italy’s national venture capital association, is working to accelerate the development of a vigorous domestic early-stage technology investment sector.

AIFI general manager Dr Anna Gervasoni said the association is trying to build a network of links between Italy’s traditional later-stage private equity providers and the countries’ universities, in the hope of stimulating flows both of venture funding and research-based investment opportunities.

A 1998 change in the funding provisions for Italy’s universities has opened a window of opportunity for such a rapprochement between academe and the financial community, Dr Gervasoni explained. The level of public funding to universities has been reduced, leaving them to fill the resultant gap with funds raised from private-sector sources. As a result, Dr Gervasoni believes, Italian universities, which have previously conducted pure scientific research programmes without reference to the needs of industry, will be spurred to take into account the commercial and technological potential of research projects.

To fund the wave of spin-out opportunities that AIFI expects will materialise during the next three years, the association hopes to raise a dedicated pilot vehicle from a broad spectrum of Italy’s unquoted investors. AIFI, which is currently engaged on a series of roadshows to gauge investor reactions to its ambitions plan, hopes to finalise the structure of the project during the first half of 1999.

AIFI initially plans to launch a relatively small pilot fund with capital of between L30 billion and L40 billion (ecu 15 million-ecu 20 million), Dr Gervasoni said. The association would ideally like to source modest capital commitments from a broad range of financing sources, thus maximising the number of groups obtaining an initial exposure to early-stage high-technology investment while keeping the risk for individual participants at an acceptable level.

AIFI is currently engaged on another initiative that will prove to be a crucial factor in the long-term development of the country’s venture capital market. The association is working with Borsa Italiana Spa, Italy’s Stock Exchange, in an attempt to establish a market for growth companies that would be linked to EURO.NM. Although this project is still at a relatively early stage, the two groups have held a series of roadshows for Italy’s entrepreneurs and are currently in discussions regarding IPO rules for small-cap stocks.