The development of new innovative business has long been one of the founding elements of a future-oriented industrial policy. Recently the succeeding Governor of the ECB Mario Draghi highlighted how the creation of employment prospects for the new generation is unquestionably relevant. The theme of the development of venture capital, intended as an engine for the development of innovative entrepreneurial activities, is therefore crucial for determining the future of all those people who want to bet on themselves, putting themselves to the test by creating new businesses, followed by employment and economic development.
The AIF (the association that groups togethr Venture Capital operators in Italy) has just released a white paper on proposals for the development of Venture Capital in Italy. Also, proposals have been discussed and expanded upon by all the operators in the innovation ecosystem within Vedrò (a think tank promoted by Enrico Letta among others).
In both cases a number of ideas and points have surfaced, showing why it is so important and what action must be taken to ensure the correct conditions exist for the development of Venture Capital are also created in Italy. In the United States (where Venture Capital is most widespread), venture backed companies produce 21% of GDP and employ 11% of those employed in the private sector.
According to a study of average to high-growth companies by the Kauffman Foundation, the top 1% of its sample firms created 40% of new jobs. In Europe, according to the European Venture Capital Association, companies supported by venture capital had a composite growth of employed persons equal to 2.4% per year, against 0.7% of other companies between 1997 and 2004.
In Italy, the trend for venture capital investment showed a historical movement partially aligned with the global cycle of the sector, with a final value of €100 million per year, comparatively lower than the value of other European countries.
At EU level, the European Commission has repeatedly underlined how there is a serious and generalized lack of start-up funding for innovative companies in Europe. The situation is even more complicated in Italy, considering that the availability of the funding system is in the ratio of 1:10 compared to France.
In order to develop the investment system for innovative companies, helping create new innovative business initiatives, the creation of a “fund of funds” is proposed. It is proposed that Government resources, through competition, are assigned to Venture Capital fund managers who are in turn required to obtain investments of at least the equivalent amount, from the private market.
This is the model that allowed the EIF European Investment Fund to finance a large part of the European VC funds. It was also the same model employed by the Israeli Yozma Group, which initially capitalized with $100m, then created 10 funds using a mix of public and private capitalization, and went on to finance 200 companies, of which 20 of which were listed.
It is worth mentioning that all the major technology innovation companies that employ thousands of people and whose products are used by millions of people (Google, Apple, Facebook, Amazon, Salesforce, Baidu, EBay, Intel, HP and Cisco) have all been financed by Venture Capital.
We hope that Italian children can be born, grow and prosper into the innovative entrepreneurs of the future.