Italy is lacking investment in innovation and digitalisation, something that is setting the country behind when it comes to global competitiveness.
According to Gianluca Dettori, chief executive of venture capital firm Primomiglio SGR, this is because few institutional investors are willing to invest in Italian start-ups.
Speaking at the Forum per la Finanza Sostenibile, attended by Expert Investor, Dettori said insitutional investors are the “missing link in the Italian financial sector” when it comes to funding start-ups.
He added that venture capital “is quite a young sector in Italy because, after its explosion between 1998 and 2000, it completely disappeared for 15 years”.
Relying on asset managers
Despite blaming the lack of available capital on institutional investors, Dettori does recognise that innovative start-ups are part of a sector “that doesn’t yet have a track record”, something that puts investors on the fence.
Not only that, but issues surrounding liquidity, risk and returns must be taken into consideration as well.
However, he believes that the covid-19 crisis showed venture capital’s ability to positively diversify portfolios and provide significant yield, given its performance.
Alessandra Festini, tactical asset allocation manager at provident fund Cassa Forense, disagrees that institutional investors are not interested in venture capital and start-ups, but says that directly investing in them may not be the right solutions for provident or pension funds.
That is why she believes that investing via funds or funds of funds could be the best option, as she recognises that private markets, private equity and venture capital are all sectors that bring less volatility to portfolios compared to other asset classes more tied to market movements.
Help from the state?
At the same time, there is a level of due diligence that institutional investors which invest in funds or funds of funds, like Cassa Forsense, must go through when selecting the right asset manager, Festini added.
“New ideas not only need capital, they also need management, which is lacking. That is why big companies enter private markets with majority capital, so that they can control and intervene in the management of the fund and oversee what the asset manager is doing with that fund,” Festini added.
And the situation is even more complicated in Italy, she said, because enterprises are more likely to be family-owned and run, and more averse to allowing money from outside into their companies.
That is why Maurizio Agazzi, general director of pension fund Fondo Cometa, believes that the state could play a role in the Italian venture capital space – not only by offering guarantees “but also tax breaks for those investing in start-ups”.
One thing institutional investors should keep in mind, said Emilio Pastore, head of finance and treasury at HDI Assicurazioni, is that they have the ability to make an impact with their investments through venture capital by introducing best practices into the space.
He also acknowledged that many start-ups may lack in managerial skills, which is why, Pastore suggested, this could open up a pool of opportunities for “synergies”.
Partnerships between institutional investors, venture capitals and start-ups could meet industry players in the middle, as investors could bring their knowledge and skills that venture capitals need and lack and, at the same, time push innovation and digitalisation forward.