No-nonsense perspectives on startup growth

This article was published on April 2, 2021


Italy messed up its startup ecosystem this week — here’s how we can fix it

Startup legislation struggles are slowing down Italy's growth.

Italy messed up its startup ecosystem this week — here’s how we can fix it
Gianluca Bellan
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Gianluca Bellan

Strategy and Business Development, TNW

Gianluca is an experienced startupper and ecosystem connector. He loves good wine and good pitch decks. Gianluca lives and works in the Neth Gianluca is an experienced startupper and ecosystem connector. He loves good wine and good pitch decks. Gianluca lives and works in the Netherlands, but observes the Italian startup ecosystem closely.

Earlier this week, Italian startups lost their right to register and incorporate online after the country’s lobby of notaries won its claim to have it removed. The news has understandably left the Italian startup ecosystem in a bit of a shock. 

This decision is literally a step backward, as startups have been able to register online since 2016, so I’m afraid this will be a detriment to the economic development of the country and the development of its startup ecosystem. If Italy wants to step up its innovation game, it has to facilitate entrepreneurs… well… getting started!

As an Italian startup advocate, the news left me deeply worried. Even though I’ve been living abroad for many years, I still keep a close eye on the development of the startup ecosystem back home. And from what I can gather, we really can’t afford to create any more hindrances for founders. 

Don’t get me wrong, there’s a lot of good news coming from innovative startups and cities in Italy that are developing an infrastructure to support innovation. But the fact remains that Italy has yet to produce a diverse startup ecosystem and the amount of investments collected so far by its biggest startups is very far from what we see in other European countries. 

The worst thing about this latest development is that it not only doesn’t help Italy’s startup ecosystem to grow — it does the exact opposite and slows down the establishment of a flourishing startup scene.

But don’t just take my word for it, I’ve asked around in my network to see how people feel about it, and to identify what could be the next steps for Italy to turn this around.

The problem in a nutshell

Nicola Mei, CEO and co-founder of ticketing startup Tocket, finds himself in this limbo, having submitted his registration on March 22, an application that has not yet been approved — and has gotten no clear answers about the future of his application. 

“Evidently the legislation was poor and not well-conceived since its beginning,” says Mei. “But with this latest ruling, many startup founders, including myself, are now paying for other people’s errors. Starting a company in Italy is already a difficult venture, and after the problems the pandemic has brought, this is something I would have preferred to avoid.”

Because of the new ruling, startups will need to get the assistance of a notary when they want to officially register their business. That means unnecessary extra costs and a longer process — depending on how savvy the notary is when it comes to startups — and these are all things that pre-revenue bootstrapping companies don’t have the time or the resources to deal with.

Federico Mattia Dolci, CEO of BOOM — a Tech5 company and one of Italy’s most promising startups — says this decision was a lost opportunity.

“It could have been a step forward for an ecosystem that has been waiting for its country’s support for too long. A ‘NO,’ accompanied by many rigidities contrary to the innovative DNA that our country needs. However, this doesn’t mean that we’re losing confidence in the future and in Italian companies.”

So it’s clear that most people are as disappointed as I am, but also share my hope for the future. But there’s still a big question that remains…

How do we fix it?

Ok, the news was disappointing to hear, but I decided not to be too angry about the situation. So after the first wave of disappointment had settled, I rolled up my sleeves and decided it was time to reflect and look at ways to move forward from this.  

Let’s first look at where Italy is now. According to data from the Ministry for Economic Development (MISE), there are 12,000 startups in Italy at the moment. They employ more than 70,000 people and generate €1.4 billion in revenue. It’s behind other ecosystems in Europe, but still, it’s an impressive number that’s always growing.  

So, how do we go forward from there?

As a start — in my humble opinion — the risk-averse position Italy has taken towards startups needs to change, so what’s needed is a truly disruptive mindset change. 

Even though SMEs and entrepreneurial family businesses are the backbone of the country’s GDP, students and young people are not encouraged to try, learn, and fail — essential steps in the development of tomorrow’s entrepreneurs. This can be done in numerous ways, whether financial incentives to get started, access to a proper network of mentors and experts, or university level programs.

Create safe spaces for failure

During my time at Erasmus University Rotterdam, I saw this first hand when I managed the Get Started Startup Program. It’s a 10-week pressure cooker where professors and serial entrepreneurs try to prepare students for the brave career choice of entrepreneurship, as opposed to the more ‘comfortable’ corporate lifestyle. 

Of course, many students who entered the program dropped their idea halfway through — while others pushed it to the very end, only to see their idea fail. But there were also some who made businesses out of it, and a few even successful ones. The failures were also not for nothing. 

Many students who failed the first time, tried again, and this time managed to set up growing businesses — using the assets and knowledge they had acquired during their first try. 

There’s of course no magic formula, but I believe in the basic principle of growing the pool of possible talent and founders eventually lead to foreign investment — making the ecosystem as a whole more attractive. And to grow the pool, you need to give people the chance to experiment as soon as possible, allowing them to fail and gain experience, and provide founders with connections to experts in the community. 

More people create more opportunities, which can eventually lead to a self-sustained framework for growing the ecosystem. But this only addresses the very first step, if Italy wants to catch up with the rest of Europe, it needs to have a holistic legislative approach that thinks about all the stages of a startup’s journey.

Legislation that works for everyone

Gianmarco Carnovale, tech founder and chairman of Roma Startup, tells me it’s important to find the right balance between lowering the barriers for starting entrepreneurs and creating a control system to avoid abuses of such dispositions. 

“We need to develop a legislative ladder in which starting entrepreneurs can avoid bureaucracy and agency costs up until they have validated their product/market fit, reached a defined amount of revenue, or collected a minimum level of investment,” Carnovale explains.

“This approach would solve the problem at all stages: allowing startups to grow with flexibility, and allocating the right amount of bureaucracy when the company can afford them, and contribute to the country’s growth.”

I couldn’t agree more, but what have the Italian authorities actually said about the new notary ruling? Nothing. Zilch. Niente.

However, I think we can expect something in the coming days, given that the startup founders in the registration limbo are banding together to force a reaction from the Ministry of Economic Development.

I strongly believe that Italy is a country that can give much more to its ambitious entrepreneurs, from creative ghost kitchen startups, automotive-of-the-future enthusiasts, and AI wizards, and that perhaps, in the haste of the moment, tried to provide a platform that had more flaws than perks. 

Even more, I believe that unity and open feedback is Italy’s strength — so I’d like the government to offer the tech ecosystem a seat at the table. The best way forward is for the government, along with the community, to draw up the next steps for startups in Italy. 

That way it’ll be able to create a system that can compete with other countries within Europe — like France, Germany, and the Netherlands — where the legislators have endorsed the growth of startups, and that now see the first unicorns taking off and conquering the world of tech. 

So yeah, the notary ruling is a setback, but I’m confident we’ll be able to turn things around.

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