The Italian Literature Survey IFISE Meeting

1. A.I.F.I.Italian Venture Capital and Private Equity Association The Italian Literature SurveyIFISE Meeting Roberto Del Giudice Milan, 2nd February 2001

2. The evolution of the Italian Venture Capital & Private Equity Market Part of the market moves back to genuine VC and pure tech deals 75 Back to genuine VC Driving forces: Telecom deregulation and Internet 38 The LBO wave attracts more PE players With 30 PE players the market starts to grow Driving forces Number of players Constant growth of the later stage market 30 The VC Market takes off First Institutional VC movers 15 Informal VC 0 1900 1986 1990 1996 today

3. A.I.F.I. Members 75 58 55 49 38 34 57 30 30 31 30 28 24 22 15 A.I.F.I.

4. A.I.F.I. 1st Sem 2000 - Number of investments by type of investors

5. A.I.F.I. 1° Sem 2000 - Stage distribution of investments by type of investors

6. A.I.F.I. Seed/start up investments by type of investors

7. A.I.F.I. 1° Sem 2000 - Italian Venture Capital and Private Equity Industry Concentration

8. A.I.F.I. 1° Sem 2000 - Italian Venture Capital Industry Concentration

9. The convergence to Venture Capital Profit oriented incubators VENTURE CAPITAL CORPORATE VENTURE CAPITAL Non profit incubators University incubators A.I.F.I.

10. Corporate Venture Capital: some Italian examples - Enel; - Telecom Italia; - Seat; - ……. A.I.F.I.

11. Business Incubators: two different kinds • PROFIT ORIENTED • private operators; • fee/equity oriented; • connected to the VC and PE market Incubator • NON-PROFIT ORIENTED • public operators; • purpose of economic development (fill the gap); • use of public resources A.I.F.I.

12. Main characteristics of Italian University Incubators • Distinctive features : • absence of VC funds; • interest on scientific research projects; • physical presence in the university building; • focus on universities subjects; • incubation of ideas and projects of graduate and undergraduate students; • strong relationships with industry that usually sponsor university research; • patent development. A.I.F.I.

13. ITALIAN FOR PROFIT INCUBATORS A.I.F.I.

14. Percentage distribution of Italian for profit Incubators by Sponsor A.I.F.I.

15. Leaders background by % A.I.F.I.

16. Sources of funds raised on the market by % A.I.F.I.

17. Funds immediately available (Euro mil) N° players 7 A.I.F.I.

18. Geographical breakdown of total funds raised by % A.I.F.I.

19. Incubators main characteristics Italian Incubators average size: - 307 mq of space to work - 35 working places for the incubated companies - 15 full timeconsultants A.I.F.I.

20. The offered services by % A.I.F.I.

21. Incubators internal competences by % A.I.F.I.

22. Average time to start the activity* * Between the approval of the business plan and the entrance of the company inside the incubator. A.I.F.I.

23. Average amount invested and average number of companies A.I.F.I.

24. Number of incubated companies and average time spent inside the incubator A.I.F.I.

25. Average stake into the company A.I.F.I.

26. Distribution of investment sectors* by % * Multiple choice A.I.F.I.

27. Internet business focus* A.I.F.I. * Multiple choice

28. Revenue model by % A.I.F.I.

29. Italian incubators: reference model Variables: Incubators sponsor 57% 43% 33% Equity Incubators sponsor 67% Financial Revenue model for start ups Corporate Mix 50% 50% Consulting Private Individual Fee 50% 50% 100% No capital Referred capital Available capital A.I.F.I. Available capital

30. Italian incubators: reference modelVariables: Leaders Background 14 % 72% 33% 14 % Equity Leaders Background 67% Entrepreneurial/ managerial Revenue model for start up Mix 50% 50% Financial Consulting Fee 50% 50% 100% No capital Referred capital Available capital A.I.F.I. Available capitals

31. Some final issues

32. …concerning incubators • There are many networking opportunities between incubators, venture capitalists and other institutions; • cooperation can be based on a structured network; • the incubators industry is still in its start up phase, leaving many spaces for new entrants; • there are many basic services over which it would be important to reach scale and scope economies; • incubators are important in the internationalization process of enterprises; • incubators are deal selection facilitators for VCs. A.I.F.I.

33. … concerning the high tech start ups: the main weaknesses • lack of a synergic dialog and relationship between the worlds of research, enterprise and finance; • lack of adequate human resources on the enterpreneurial side; • difficulties on technology auditing activities; • inadequate legal framework.

34. 1. Lack of a synergic dialog and relationship between the worlds of research, enterprise and finance • Universities, venture capitalists and entrepreneurs just started to work together, in order to create a creative entrepreneurial context; • The distance between these fundamental actors has created a strong gap; • To fulfill this gap, it is necessary to work hard to better link finance, enterprises and research.

35. 2. Lack of adequate human resources on the entrepreneurial side • It is necessary to push the Italian Universities in mixing technological knowledge and entrepreneurial capabilities; • In a recent survey conducted by the EVCA and the University of Antwerp, Italy has been defined “hesitator” in opening the university context to the business community*. * ENN – EVCA Network News – No. 1 December 2000, EVCA Zaventem, Belgium

36. 3. Difficulties on technology auditing activities • The absence of an extended network of technology auditing firms makes it harder for the VCs to make the necessary evaluations of high tech start ups; • Even if there could be a great potential in terms of “brains”, these brains too often move to those countries where technology is considered a strategic resource, providing added value to their Nations.

37. 4. Inadequate legal framework • In the recent past R&D laws were too old to take the pace of the great evolution of high technology; • The Italian law is too old in terms of bankruptcy issues: • If an entrepreneur fails with its first venture, the Italian legal system does not give another chance; • No VC likes to seat in the Start ups’ Board of Directors, due to the risk of being personally prosecuted in case of failure.