Although funding for Italian startups is on the rise, the country still ranks eighth in Europe for venture capital investment, according to Dealroom.
The newly founded Italian Founders Fund (IFF) wants to help catch up, both in terms of quantity and quality: with 50 million euros to invest in 25 companies, it understands the pain points of entrepreneurs and positions itself as a sector-agnostic, founder-friendly fund.
IFF already has four companies in its portfolio, with a fifth deal in the works, and two have been publicly announced so far: Prior to customer survey platform Glaut in April, IFF led a 2023 funding round for HR tech startup Jet HR.
“IFF addresses the challenge for Italian early-stage founders to find high-conviction lead investors at the pre-seed and seed stage,” IFF founding partner Lorenzo Franzi (pictured above, third from the right) told TechCrunch.
Some might dispute this diagnosis: venture capital firms already active in Italy include CDP Venture Capital, Exor Ventures, LVenture Group, Milano Investment Partners, Pariter Partners, Primo Ventures and United Ventures.
But Franzi believes this still leaves a gap for early-stage capital, and either way, IFFs emerge as a new source of capital for a market where startups receive much less funding than, say, France, despite the two countries having similar population sizes.
IFF complements accelerators such as H-FARM and is a step beyond the angel investments that Franzi and other entrepreneurs-turned-backers have made.
The former CEO of laundry startup Laundrapp and partner at Global Founders Capital until late 2022, said the “unstructured” approach inherent to angel investing can lead to several issues, including limited analysis, complex cap tables and under-sizing of funding rounds. IFF can not only bring fund structuring into the investment process, but also be directly involved post-investment.
For example, IFF has been able to help its portfolio companies with key talent recruitment, commercial expansion and strategic partnerships, Franzi said. Jet HR CEO Marco Ogliengo agreed, noting that IFF’s added value comes from the fact that it is “fundamentally backed by all successful Italian founders.”
That may be an exaggeration, but Franzi says about 100 of IFF’s backers are actually Italian entrepreneurs. He adds that they come from a wide range of generations and sectors, but share a common goal: to make Italy one of the best places in Europe to start a company.
It’s an ambitious goal, especially since some of the issues lie outside IFF’s jurisdiction: Private venture capital firms have few means to offset high taxes and red tape. There have been recent public efforts to boost the country’s attractiveness and tech sector, but unlike CDP Capital, which is backed by government agencies, IFF is entirely privately funded.
In the absence of public funding or institutional LPs, the IFF is free to invest wherever it sees fit. It uses this geographic flexibility to support Italian founders operating abroad, as well as foreign startups interested in entering the Italian market.
The foreign connection goes both ways: IFF aims to get foreign VC funds to co-invest in its portfolio, either in the initial or follow-on rounds. It will also help that some of its LPs are GPs of foreign funds and plan to back Italian founders with global ambitions.
Global Italian startups include Bending Spoons, which owns popular apps and services like Evernote and Meetup and is valued at $2.55 billion, and the creation of a founder-led fund to back Italian serial entrepreneurs as they return to their home country to launch their next ventures seems like a perfect fit.
IFF will be managed by KOINOS Capital, a private equity fund with a presence in the venture capital space, whose CEO, Marco Morgese, cited examples of founder-led funds in other markets, such as Founders Fund in the US and, more recently, Galion.exe in France.
IFF’s adoption of this model in Italy is another sign that the ecosystem is maturing. When it comes to venture capital, the numbers are improving, but there’s still work to be done. “In Italy, it’s essential to challenge the status quo in process, speed and entrepreneur-centric thinking,” Franzi said.
