A mix of history and tech, fashion and the future: Italy's path to becoming a real startup nation

Building a successful startup is nowhere easy, but it's harder than most in Italy. However, thanks to new initiatives and a spirit of mashing up Italy's traditional industries with the latest tech, that could all be about to change.
Written by Federico Guerrini, Contributor
Italy is infusing its traditional industries with technology in what could be the flourishing of a new startup scene. Image: Shutterstock

Startup is the buzzword of the decade and, as someone once said, "nerds are the new rockstars". The idea of launching a startup and becoming the next Zuckerberg or Bezos seemingly fascinates young people all over the world, and Italy is no exception.

But, in Italy, the creativity and enthusiasm of many young entrepreneurs has often been dampened by the inherent limitations of the local environment: lack of investment (venture capital in Italy amounts only to 0.004 percent of GDP, compared to the European average of 0.02 percent), bureaucracy, and difficulties in finding an exit for the startup, either through acquisition or an IPO. 

"In Italy, only a few visionaries are willing to bet on the future of a startup and buy or invest in it. That's why, if startups want to survive, the only possible strategy is trying to innovate in fields like retailing, distribution, customer profiling, and seek partnership with older companies," Bocconi University's assistant professor of Strategy & Entrepreneurship Carmelo Cennamo told ZDNet.

A manufacturing tradition

On paper, the idea of synergies between startups and more established companies is a no-brainer. Italy has a strong tradition of manufacturing, especially in small and mid-sized enterprises which are now struggling to keep up with the pace of innovation.

Wouldn't it make sense for them to partner with startups that would function almost as external R&D departments? Unfortunately, things are not so simple. 

It's true Monti's government introduced (and then Letta's passed) several measures meant to address these issues — simplifying the procedures and reducing the costs of starting a business, introducing new forms of compensation for employees (such as 'work for equity'), even launching some incentives for companies that want to invest in a startup. However, these moves are mainly designed to help startup in their early stages, and fail, for the time being, to address the problems associated with growth and scale.

What's more, according to the head of the technical secretariat of the Ministry of Economic Development Stefano Firpo, "the attitude of Italian companies has been until now, generally speaking, being afraid of innovation, rather than embracing it".

Economic crisis opens new paths

But such the attitude is changing as the economic crisis is forcing entrepreneurs to tread previously unexplored paths and it doesn't hurt that a number of venture capital incentives for businesses — tax cuts for enterprises that invest in young, innovative startups — recently came into force.

Big multinationals are leading the way: Telecom Italia in February announced the launch of its Corporate Venture Capital program, which will distribute €4.5m in seed investments over the next three years.

According to the company, investments will range between €100,000 and €500,000, and are intended "to fund the launch of relevant young technology companies, helping them grow and gain a foothold in the market".

Telecom Italia has also recently signed a three-year deal with Eco4Cloud, a startup that works on datacentre energy-efficiency products. Another industrial giant, the energy provider Enel, is also incubating seven 'clean energy' startups in its EnelLab.

Smaller companies have also begun to understand the importance of getting fresh blood and ideas from younger players. Confindustria (the main association of Italian entrepreneurs) SME group, Piccola Industria, is promoting a programme called AdottUp, which provides tutoring by member companies.

The aim is to encourage businesses to act as incubators, to help the startups develop into sustainable businesses. "For our associates it's an opportunity to accelerate the pace of innovation, while startups can benefit of easier access to credit and commercial channels, hard earned expertise and sometimes even financial support," the president of Piccola Industria Alberto Baban said recently.

The most promising sectors for the partnership are of course the ones that have made the Made in Italy trademark celebrated in the world: fashion, food and wine, and craftsmanship.

H-Farm, one the largest incubators and accelerators in Italy, last winter launched a contest Hack the Industry. "It's similar to a traditional hackaton but tailored to the needs of a specific set of companies, operating in the same field, but not in competition with one another," project head Alessandro D'Annibale told ZDNet.

So far five H-ack industry events have been organized, with businesses belonging to the banking, wine, travel, and fashion sectors. Hundreds of startup staff, divided into small teams, gather in Roncade in Treviso, where H-Farm is based, for the 24-hour hackaton.

Collaborations start to spread

Companies such as Lotto, Diesel, Bottega Veneta, Costa Crociere, or Unicredit choose the team or the solution that best meets their demands and have 60 days, since the end of the contest, to decide whether to buy the proposed idea, hire the team that created it, or establish other kind of collaboration.

"Critics say that for companies this is just a way to outsource their R&D department and have great ideas on a low budget but that's not our experience until now. What we have seen is real commitment by big enterprises to invest in these startup and help them grow," D'Annibale said. "And at H-Farm we're the ones that make sure that the startuppers are respected and not simply exploited."

Even outside an institutional or associative framework, examples of synergies and collaborations between startups and SMEs are starting to spread.

Formabilio, which describes itself as "a participatory design platform and e-shop", is a startup founded in early 2013 in Cison di Valmarino, a small village of 2,553 inhabitants in the province of Treviso. Its founders Maria Grazia Andali and Andrea Carbone had the idea to connect the talent of young Italian designers with the numerous (and hard-hit by the crisis) furniture makers in the area.

Every week, a new contest is launched by the website: designers share their ideas and consumers comment and vote on them. Then, at least two projects are selected to be manufactured by the local companies, and sold online.

"Right now, we have almost 100,000 members of our online community and 2,200 designers that submit their proposals," Andali said. Formabilio is not simply an online platform, she stressed: "We're a real company, taking entrepreneurial risks. We are the ones that pay the designers and commission the furniture to our suppliers."

A startup that successfully succeeded in developing a relationship with big Italian (and foreign) brands is H-umus, a company initially incubated by H-Art, and acquired in 2012 by Teamsystem, a software vendor based in Pesaro. Its main product Nuxie is an iOS application through which customers can present and sell a fashion collection, showcase and sell products, and customers already include names like Armani, Diesel, Benetton, Moncler, Safilo.

Deeply rooted in fashion is also the project from Natural Gentleman, a firm that sells tailored suits and handmade shoes. A web portal leads the customer from taking his own measurements, through the choice of the fabric and personalising the product, up to sharing style advice. The suit is then home-delivered within one month.

Launched online in September last year, it quickly caught the attention of big players in the textile sector. Successori Reda, a prestigious company established in 1865, which produces ultra-fine wool cloth largely for men's formal wear for the most famous Italian labels, decided to invest in the startup and became its main partner, taking a 30 percent stake in the organisation.

Mixing memory and innovation, technology and craftsmanship: for a country with strong, at times perhaps even cumbersome, ties with its past like Italy, this could be the way to go to become a real startup nation.

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