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Italian Resolve

Jonathan Ortmans

This week, I am on the ground in Italy where startup savvy policymakers are experimenting with new policies as fast as their startups are testing disruptive ideas. Both are racing in tandem to restore sustained economic growth to the Italian economy.

The big startup story here in Italy began in 2012, when, amidst persistent economic woes, Italy surprised the entrepreneurship community by swiftly and unexpectedly implementing a comprehensive legislative package to boost startups and scale-ups. Known as Startup Italy or Decreto Crescito 2.0, the package included reforms in various areas ranging from tax policy to incubator accreditation and labor laws. Despite staff behind the effort telling me today how they had an equally hard time implementing it as Americans did the JOBS Act in the United States, the country plans to be an early adaptor once again by pursuing a pro-startup immigration policy, a feat that the United States and Canada are still trying to champion.

My first exposure to this emerging story was through the leadership of Alessandro Fusacchia, then Advisor for European Affairs, Innovation, and Youth to the Minister of Economic Development. Today I met with him and other startup-savvy policymakers including Stefano Firpo from the Ministry for Economic Development and Alessandro Aresu with the Office of the Prime Minister. This team is doing an impressive job behind the scenes with testing and experimenting what policies have impact – and which, such as the EU Blue Card program, don’t.

Mr. Fusacchia began in April 2012 by putting together a 12-person Task Force made up of entrepreneurs, investors, academics, journalists and civil sector leaders. In October of that year, the group published its “Restart, Italia!” report (see a summary, here), setting the basis for an integrated approach to entrepreneurship promotion. By December, the Startup Italy law decree was enacted.

What the Startup Italy law did was deal for the first time with high-impact young companies as a unique economic phenomenon. The Law Decree starts with a definition of “innovative startups” to make it clear that it is not dealing with any new company but only with innovative companies. In fact, to avoid issues with semantics, the Decree sets out that in order to benefit from support measures, a startup must fulfill a number of requirements, including that it must have been established for no longer than 48 months, and that its core business consists of innovative goods or services. A startup fulfills the latter requirement if it meets one of the following requirements: 30% of its costs are related to research and development (R&D); at least one third of the team is made up of people who either hold a PhD or are PhD candidates at an Italian or foreign university or have conducted research for at least three years; or it is the owner or the licensee of a patent.

Among the many measures included in the law, it introduced tax incentives for investments in startups in 2013, 2014 and 2015. It also offers a “fail fast” procedure intended to avoid the entrepreneur getting “stuck” because of the liquidation procedure, and to allow him or her to start a new business project as soon as possible. In addition, Startup Italy introduced regular evaluation and policy monitoring by means of data collection and analysis of the impact of the new legislation. The Italian National Statistical Institute (ISTAT) was put in charge of leading this evaluation.

Startup Italy also introduced crowdfunding, calling for specific regulation by CONSOB – the equivalent of the American SEC. Since July 2013, the Italian equity crowdfunding platforms are allowed to start their operations and investors are authorized to make investments in innovative startups through them (see more, here).

The world is interested to learn about the impact of such bold, legislative move in favor of startups. I have not seen any comprehensive evaluation done to date, but one thing is already clear. Italy’s policy framework to help startups is not static or unchangeable, but is rather open to speedy revision and integration. For example, the Ministry Council approved a new decree in June 2013 to simplify and amplify the definition of an innovative startup. The minimum spending quota on R&D was reduced from 20% to 15% and benefits were extended to enterprises whose work force is made up of at least two-thirds of employees with a Master’s degree.

In addition, the Ministry of Economic Development and the Ministry of Education, Universities and Research have also adopted a policy aimed at exposing students to innovative entrepreneurial projects through the creation of the Contamination Lab at four Italian universities. These labs will be spaces where students from different disciplines can meet each other. They will be in place for at last 24 months and their evolution will be monitored by the above-mentioned ministries.

Rome also has some impressive private startup hubs to offer. This morning at Telecom Italy’s Working Capital Accelerator I talked with one startup called Pedius that has developed an app offering phone calls for those who are hearing impaired. Then I listened to startup pitches from companies like Qurami at Rome’s other major private sector accelerator, LUISS Enlabs Startup Factory, whose program includes new classes every six months, $30,000 and experience at one of its international partner accelerators.

That entrepreneurial culture is also visible in Milan, which will host the Global Entrepreneurship Congress in March 2015 led by META Group, a Terni-based organization, along with Global Entrepreneurship Week and the Ewing Marion Kauffman Foundation. Milan is not only Italy’s second largest city and financial capital, but it is a city where creative ideas and creative talent collide creating powerful synergies. Milan has become an excellent testing ground for policymakers from Rome to see whether the effort to improve the policy framework and enhance cultural capital is translating into entrepreneurial dynamics.

As is often the case, data is scarce, but the Politecnico di Milano, sponsored by the Ministry of Economic Development, is now developing a mapping tool to take the real-time pulse of Italy’s innovative entrepreneurial ecosystem. Expectations are that the Italian Startup Ecosystem will show an explosion of co-working spaces and incubators in Milan. Some entries on my list this visit include Digital Magics, a Milan-based incubator, which even issued shares for trading in 2013 in the Italian Stock Exchange’s “Alternative Investment Market”, an exchange for small and medium-sized Italian enterprises with high-growth potential.

Others around the city include Impact HUB Milan, which is a co-working space housing the likes of Eppela, a crowdfunding site known as “the kickstarter” of Italy. Impact HUB also has a bunch of creative projects from design, architecture, the environment and journalism. And Impact’s “Creative Mornings Milan” offers a taste of espresso and creativity early in the day, with an inspiring aesthetic design from recycled furniture. There is also StartMiUp, Fablab Milano, FabriQ, and Talent Garden (TAG), which offers 3,000 square meters and more than 250 desks for entrepreneurs, some of which are occupied by the likes of the founders of Cibando, Yoodeal, and Vivocha. It is also the home of many events, like StartuppaMI.

All pretty impressive stuff. If you don’t believe me, come and see for yourself at the GEC in Milan next March. I, for one, am looking forward to seeing how one of the world’s fashion capitals shows off its entrepreneurs.

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