VC in Italy: searching for the next unicorn

In Europe (and Italy specifically), there is a widespread idea that a startup should be a company that seeks immediate profitability, and most business plans (do we really need them?) show EBITDA-positive paths after funding. These are indeed companies, built to grow and remain independent or to be acquired by more established players in their markets. However, they won’t grow fast, they won’t become multi-billion dollar companies, and they do not really deserve VC money. Nor they can command VC-like valuations. VCs are willing to offer you a pre-money of 10x to 20x your revenues (not your profits, but your revenues), because they see a way for you to become a large unicorn in a few years. Otherwise, a “normal” business deserves only a tiny fraction of that valuation.

Talking to Italian entrepreneurs with international experience (and who perhaps invest in Italy with product development, research, etc.) a different idea of startup emerges: a company that quickly looks for a positive contribution margin and invests heavily in growth, to strengthen the position versus potential future competitors. They think about their companies in a global scenario, going after global customers and markets, and looking for managers even better than they are, regardless of passport. They aim to do successive rounds of financing to support growth; the end of the road may be an IPO but more often it can be a sale to some big player or private equity fund. And if the buyers are international, all the better: with a global market horizon, valuations are higher. And then, on to the next entrepreneurial venture: new companies, new investment (thanks in part to the capital from the previous exit), new employment, spread of entrepreneurial skills and stimulus, which in turn results in further new companies and employment.

This is why the entrepreneurs we have invested in so far with Rialto Ventures (our VC fund, based in Italy) are all somewhat related to the Italian diaspora. Mattia, with his international team, founded Medicilio in Italy after experiences with Rocket Internet and two Sequoia-backed companies in Europe and Asia; he has international investors and serves healthcare powerhouses such as San Donato and Humanitas. Guido, after a global experience with McKinsey, has based his company V-Nova in the UK; his almost one thousand patents allowed him to market his solution in Brazil and recently won Meta as a client. Andrea, originally from Italy, with jobs and masters in Singapore, New York and London, has put the Keyless R&D team in Italy and serves clients such as Experian and Intesa with its cybersecurity systems. Alessio left Bari and landed in Houston with his Roboze 3D printers, the most precise industrial printers in the world, serving global clients such as Boeing, Nasa, Airbus, Lockeed Martin and Saudi Aramco. The very young Giovanni comes from experiences in London, with teams in Italy, for his innovative privacy-friendly advertising platform, Aidem, but already sells his solutions to the US and Japan. The more experienced Alberto, after two exits in Switzerland and Spain, returns to invest in made-in-Italy technology and after having brought K-sport to the top of European soccer, he lands in America.

As Rialto we do not interpret Venture Capital only as financial investments hoping that then some invested company will succeed. Every company we invest in must have the potential to return the entire fund; perhaps with binary expectations of success, but the ambitions must be great. That’s why we go to great lengths to help our startups, through our global network, right from choosing the proper co-investors, to market development, to talent spotting, to strategic support, to regulatory advice.

We don’t replace the founders, nor do we act as a mere critical observer, but rather we try to help them fulfill their potential.

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