While funding for Italian startups has been increasing, the nation remains eighth in Europe for VC investment, according to Dealroom.
The newly established Italian Founders Fund (IFF) aims to bridge this gap both in terms of quantity and quality. With €50 million allocated for investment in 25 companies, it identifies as a sector-agnostic, founder-friendly fund that comprehends the complexities faced by entrepreneurs.
IFF’s portfolio already features four companies, and a fifth deal is in progress. Two investments have been made public: customer research platform Glaut in April and a 2023 funding round for HR tech startup Jet HR.
“IFF is tackling the challenge early-stage founders in Italy face in finding a high conviction lead investor at pre-seed and seed stages,” IFF founding partner Lorenzo Franzi (third from the right in the picture above) told Truth Voices.
Some might contend this point; Italy is already home to several VC firms including CDP Venture Capital, Exor Ventures, LVenture Group, Milano Investment Partners, Pariter Partners, Primo Ventures, and United Ventures.
Franzi, however, believes there is still a void for early-stage capital. Regardless, IFF emerges as a new funding source in a market where startups receive considerably less finance compared to France, despite both countries having similar population sizes.
IFF also serves as a complement to accelerators like H-FARM and represents a progression from the angel investing activities that Franzi and other entrepreneur-backers were involved in.
Previously the CEO at laundry startup Laundrapp and a partner at Global Founders Capital until late 2022, Franzi stated that the “unstructured” nature of angel investing can cause issues such as limited analysis, complicated cap tables, and insufficient funding rounds. IFF brings the structured approach of a fund to its investment process while remaining hands-on post-investment.
For example, IFF has supported portfolio companies with key hires, commercial expansion, and strategic partnerships, according to Franzi. Jet HR CEO Marco Ogliengo agreed, noting that IFF’s value addition stems from its backing by a network of successful Italian founders.
Although it might sound exaggerated, Franzi claims that roughly 100 of IFF’s backers are Italian entrepreneurs from diverse generations and sectors, united by a common goal: to place Italy on the map as one of the top European destinations for starting a company.
This is an ambitious objective, particularly as some issues lie beyond IFF’s scope. High taxes and bureaucracy are challenges that a private VC firm can’t address. Although there have been recent public initiatives to enhance Italy’s appeal and its tech sector, unlike CDP Capital, which is state-backed, IFF is entirely privately funded.
Without public funding or institutional LPs, IFF has the freedom to invest wherever it deems appropriate. It intends to leverage this geographical flexibility to support Italian founders operating abroad and foreign startups interested in the Italian market.
Foreign connections are reciprocal, with IFF aiming to attract foreign VC funds to co-invest in its portfolio, either initially or in subsequent rounds. This will be aided by the fact that some of its LPs are general partners at foreign funds, and the plan to support Italian founders with global aspirations.
Global Italian startups include Bending Spoons, the owner of popular apps like Evernote and Meetup, valued at $2.55 billion. With serial Italian entrepreneurs returning home for their next ventures, having a founder-led fund to support them seems timely.
IFF will be managed by KOINOS Capital, a private equity fund expanding into VC. KOINOS CEO, Marco Morgese, highlighted other markets’ founder-led funds, such as Founders Fund in the U.S. and more recently, Galion.exe in France.
The adoption of this model by IFF in Italy indicates the ecosystem’s maturation. Although venture capital metrics are improving, more progress is needed. “In Italy, challenging the status quo on processes, speed, and an entrepreneur-focused mindset is essential,” Franzi said.
