Il Rinascimento Tech Italiano: Why the Italian tech ecosystem might be the next big thing

Alessandro Giovanelli
June 18, 2024

Italy is undergoing a quiet revolution. Driven not by the echoes of the past, but by the hum of technology and innovation.

Until recently, Italy has lagged behind its European counterparts in Germany, France, and Spain regarding technology and startup growth. The lack of venture capital led many founders to move abroad to establish their businesses.

However, Italy’s tech landscape is now undergoing a gradual yet steady transformation, signaling its emergence as a noteworthy player in the European tech arena. 

So, what makes Italy such an exciting place for tech today? There are four key factors to keep in mind when assessing a tech ecosystem.

Italy seems to be thriving in all areas — let’s take a closer look at the impact of each factor:

Investment momentum 

Following the global financial crisis in 2008, Italy’s economy shrank, making it tough for businesses to secure investment. But now, the country appears to be at an inflection point, with investment opportunities on the rise. 

As seen in this study by Italian investment firm P101 and Dealroom, while venture capital funding has targeted early-stage companies, reaching $1.7 billion in 2023, the combined enterprise value of Italian startups soared to $54 billion that same year. Despite being in its early stages compared to other major European economies, Italy’s tech ecosystem shows a growth trajectory on par with that of countries like France and Spain. 

Source: Dealroom

This sense of progress is apparent also to Luca Bocchio, partner at global venture capital firm Accel:

“I’m positive about the future of Italy's tech ecosystem. The country has always had a strong talent pool, and now there’s also a wave of more experienced Italians coming back to the country from bigger tech ecosystems coupled with a growing number of successful scale ups like Bending Spoon, Scalapay and Satispay. Italy has a rich history of craftsmanship and entrepreneurship, which provides a strong foundation for “startup culture", and the availability of VC capital is also increasing.”

This investment momentum has also encouraged more of Italy’s private wealth holders to back technology and innovation. In 2022, Exor Ventures — owned by the Agnelli family, the powerhouse behind Fiat — set up a new investing arm, Vento, to accelerate pre-seed and seed stage startups in the Fintech, Insurtech and Proptech space, a kind of Y Combinator for Italy. At the end of 2023, Alessandro Benetton, heir of the United Colors of Benetton family, made his first move into tech with the launch of a new VC firm — 2100 Ventures — focused on B2B startups in fintech, SaaS and climate tech.

Large VCs are likely taking note to ensure they do not miss out on the next Italian unicorn, as public initiatives and the tech ecosystem continue to evolve.

Government initiatives heading in the right direction

Over a decade ago, in 2012, the Ministry of Economic Development launched the Italian Startup Act. The goal was to create an environment where startups could flourish, with measures such as tax deductions on early-stage investments, research and development credits, and startup visas. 

The latest addition to this act is a draft law approved by the Chamber of Deputies in 2023 that provides further incentives: access to tax breaks and less burdensome procedures in case of bankruptcy. 

Additionally, similar to the French state bank Bpifrance, Italy has its own development bank — Cassa Depositi e Prestiti (CDP). Since its venture arm was created in 2015, it has backed 187 startups. 

The government's commitment to fostering a culture of innovation is also evident in initiatives carried out to favor the “rientro dei cervelli” — the return of skilled professionals who previously migrated abroad to contribute to Italy’s growing tech sector. 

Since the 2008 financial crisis hit Italy, its GDP has shrunk by nearly 7%, sparking a severe unemployment crisis. This economic downturn led to significant “brain drain”, with many of Italy’s brightest talents leaving the country in search of better opportunities abroad. Among these expatriates were innovative entrepreneurs who went on to found successful companies like Depop, King, Pleo, Truelayer, and Northvolt.

To attract skilled workers back to Italy, the government is offering tax incentives, such as reductions in income tax rates or even exemptions, to create a more entrepreneurial environment in the country.

An expanding talent pool

As experienced professionals return home, the talent pool grows larger and more capable. Bending Spoons, an innovative app studio, embodies this trend. Founded by Italian entrepreneur Luca Ferrari in Copenhagen, the company later moved its headquarters and operations to Milan. It was even selected by the government to develop Italy’s COVID track and trace app. 

Thanks to examples like this, Italian momentum is building. There’s a shift in mindset, with a new wave of Italians seeking purpose and opportunity in entrepreneurship, opting for ventures over safer career choices. Italy’s Startup Visa even encourages entrepreneurs worldwide to establish businesses locally.

Likewise, big players in financial services are launching dedicated programs for startup founders. Mastercard for Fintechs, for example, allows fintech entrepreneurs to fast-track their vision and enter the industry backed by a company that already serves over 80% of the top digital payment and neobank fintechs. 

(Fintech) success stories

Italy is at a pivotal moment, with inspiring success stories emerging across the nation. One notable example is Casavo — a digital platform for buying and selling homes. The company has grown rapidly, raising over €100 million in funding and expanding its operations to several European cities. 

Another success story is Fiscozen, a digital platform that simplifies tax management for freelancers and small businesses. Fiscozen recently received a significant investment from Norwegian company Visma.

In the fintech sector, Italy attracted $107 million in investments in 2022 alone. Startups like Satispay and Scalapay are carving out their niche in the global market, offering innovative solutions in payment processing and investment management. 

This was a huge driver in the creation of an active fintech community in the country. Associations like ItaliaFintech have been instrumental in supporting this ever-growing community:

"ItaliaFintech has been working since its foundation on the rapid evolution of the fintech sector in Italy. Over the years, we have brought together different fintechs and observed how the challenges have transformed. Today, our companies focus on innovation, customer-centric solutions, and key drivers for the development of the entire country system, such as the integration of ESG principles and the use of artificial intelligence to offer increasingly efficient and user-friendly products and services. Having a strong fintech community in Italy is crucial to further promote and encourage the development of these technologies, facilitating dialogue with institutions and supporting a favorable environment for growth and innovation".

Young fintech startups like Tundr also testify to the favorable environment in Italy:

"We spent about two months investigating how long it would take to obtain a license, but the process seemed both costly and lengthy to us. By delving into the regulatory requirements, we found that they were quite demanding. Consequently, we compiled a list of banking features we wanted to integrate into our solution and began looking for a suitable partner to collaborate with."

Jules-Arthur Sastre, co-founder and CEO at Tundr

How Swan boosts Italy’s expanding tech scene

Already established in France, Germany, Spain and The Netherlands, Swan is now expanding into Italy, underscoring the market’s potential and Swan’s commitment to supporting local businesses. 

We believe there is tremendous value in situating ourselves on the ground in Italy. In doing so, Swan becomes the first Embedded Finance provider to set up local operations in Italy. This move will enable more personalized service for existing partners, tailored to the Italian market’s needs and provide market expertise to potential partners in the region.

Within the Italian market, three main types of companies could benefit from embedding banking features within their products:

  • Young startups seeking Swan’s technology and expertise from day one.
  • European companies expanding into Italy, valuing localized and personalized services.
  • Enterprise companies aiming to triple their revenue per customer.

The drive for innovation and financial sophistication is not new to Italy. The Italian Renaissance, a period renowned for its remarkable contributions to art, science, and philosophy, also initiated a revolution in banking.

Italy's financial hubs, Florence and Venice, pioneered concepts like double-entry bookkeeping, letters of credit, and banking houses. They laid the groundwork for the modern banking system we know today!

With its rich history of financial innovation and a culture that thrives on creativity, Italy is well-positioned to be at the forefront of embedded banking.

Alessandro Giovanelli
June 18, 2024
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