832318

Corso di Laurea
In Economics and Management
Tesi di Laurea
Italian IT startup migration
from Italian ecosystem to
the new Berlin startup hub
Relatore
Prof. Paolo Pellizzari
Laureando
Matteo Luca Baiamonte
Matricola 832318
Anno Accademico
2013/2014

Table of contents
INTRODUCTION.............................................................................................................................IV
CHAPTER ONE- The Startup phenomena.....................................................................................5
1.1 DEFINITION OF STARTUP..........................................................................................................5
1.2 THE LIFE-CYCLE AND THE GROWTH MILESTONS OF STARTUPS..................................6
1.2.1 The concept phase …..............................................................................................................8
1.2.2 The seed/early phase................................................................................................................9
1.2.3 The expansion/scale phase.....................................................................................................16
1.3 MORTALITY RATE OF STARTUPS..........................................................................................21
CHAPTER TWO- Italian IT Startup landscape............................................................................ 24
2.1 THE ITALIAN STARTUP LANSCAPE IN THE INTERNET TECHNOLOGY SECTOR.......24
2.2 THE FINANCING CHANNELS IN ITALY................................................................................28
2.2.1 The Public financing..............................................................................................................28
2.2.3 The Private Equity.................................................................................................................30
2.2.4 The Incubators/ Accelerators network...................................................................................36
2.2.5 The crowdfunding platforms.................................................................................................39
2.3 THE HUMAN RESOURCES AVAILABILITY AND THE LABOUR COSTS.........................42
2.3.1 The human resources availability..........................................................................................43
2.3.2 Labour costs..........................................................................................................................46
2.4 BUREOCRACY IN THE CREATION AND DISSOLUTION OF AN INNOVATIVE
STARTUP IN ITALY..........................................................................................................................49
CHAPTER THREE- Berlin startup hub landscape.......................................................................54
3.1 BRIEF HISTORY OF BERLIN STARTUP HUB........................................................................54
3.1.1 Key figures about Berlin startup landscape...........................................................................55
3.2 FINANCING CHANNELS IN BERLIN.....................................................................................60
3.2.1 The supporting projects offered to IT startups .....................................................................60
3.2.2 Incubators and Accelerators network ...................................................................................64
3.2.3 The Private equity..................................................................................................................67
II

3.3 THE PURCHASING POWER, SUPPORTING INFRASTRUCTURES AND CULTURAL
AMENITIES IN BERLIN..................................................................................................................69
3.3.1 Cost of living and purchasing power.....................................................................................70
3.3.2 Coworking spaces..................................................................................................................71
3.3.3 Supporting infrastructures.....................................................................................................72
3.3.4 Cultural amenities..................................................................................................................74
3.4 HUMAN RESOURCES AND LOCAL COMMUNITIES IN BERLIN.....................................75
3.4.1 Universities............................................................................................................................75
3.4.2 Research centres and local communities...............................................................................77
CHAPTER FOUR- Survey on the Italian Digital community of startuppers in Berlin “DigItaly”
............................................................................................................................................................80
4.1 BRIEF DESCRIPTION OF THE SURVEY AND THE SAMPLE..............................................80
4.2 DEMOGRAPHIC INFORMATIONS ABOUT THE ITALIAN ENTREPREENURS IN
BERLIN..............................................................................................................................................81
4.3 MAIN FEATURES OF THE STARTUPS...................................................................................83
4.4 ITALIAN LANDSCAPE OF IT STARTUPS..............................................................................84
4.5 BERLIN IT STARTUP ENVIRONMENT...................................................................................88
CONCLUSIONS...............................................................................................................................94
ANNEX A..........................................................................................................................................97
REFERENCES...............................................................................................................................104
ONLINE REFERENCES..............................................................................................................108
III

INTRODUCTION
“It's not about ideas. It's about making ideas happens”
Scott Belsky, Behance Co-founder
The aim of this paper is to analyse the phenomena of migration of start-ups in the Information
technology sector and of entrepreneurs from Italy to Berlin start-up hub.
Startups have been a subject of many researches and papers, due to their importance in job creation
and innovation progress; this importance is also enhanced by the overall Worldwide economy, in
which jobs creation process is fundamental.
However, the high mortality of startup businesses in IT sectors, mainly for the uncertain and
unverified business model and for the turbulent situation of the economy Worldwide, forces
entrepreneurs to move towards better environments, in which key factors of growth are more
developed.
Keeping in mind that Europe overall is struggling to reach the level of competitiveness of U.S start-
up hubs, leaded by Silicon Valley, I will focus on this paper on startups and startuppers migrating
from Italy to Berlin start-up hub, that in the recent years gained more importance and international
interest, becoming one of the most important startup centres In Europe, with London and Paris.
Using Berlin as benchmark for evaluating the Italian landscape for startups, it will be possible to
answerer questions such as “In which way Italy can improve in order to match Berlin landscape?”
and “In which way Italy and Public Authorities can create clusters of innovation renoned at an
international level?”.
The methodology I used for this paper starts with the comparison of Italian and Berlin landscapes
trough the analysis of some key factors determinant for the growth of the startup in order to get the
first quantitative and qualitative results. The next step of the method is carried out by a survey on
the Italian community of digital entrepreneurs in Berlin “DigItaly”; through the questionnaire, it has
been possible to collect direct feedbacks not only about the key factors of both environments but
also on the main reasons why of their migration.
IV

CHAPTER ONE
The startup phenomena
1.1 Definition of startup
The main purpose of this research is to analyse the issues at the basis of the migration of IT
start-ups from Italy to Germany; in particular, Berlin, location of a high growing startup
environment
The word “startup” has become mainstream and very famous since the dot.com boom in the
end of the 90’s and the beginning of the 2000s with the dot.com bubble1
It is important, first, to give a definition of a start-up since the common knowledge considers a
startup only a business merely related to the high technology sector and at its initial phase only
(examples can be: web platforms or e-commerce businesses or mobile applications). According to
the definition of Eric Ries, a startup is a “a human institution designed to create a new product or
service under conditions of extreme uncertainty”2
. This is a very broad definition, in which no
business model is specified, so that even a new way of serving ice cream, a no-profit organizations
or a project inside well-established companies may fall within the realm of this definition. The
definition of startups of Eric Ries also highlights the fundamental features of a product such as the
values offered to the customers, the novelty and innovation related to the product. Few examples of
successful startups can be:
 Airbnb, a website for people seeking a temporary accommodation all over the world.
Founded by Brian Chesky, Joe Gebbia and Nathan Blecharczyk in 2008, the website
“pioneered the market of community consumption and peer-to-peer accommodation
1 The “dot com bubble” was a phenomenon – occurring at the beginning of the year 2000 – when, due to the increasing
enthusiasm surrounding the web revolution, the stock prices of internet companies publicly traded reached remarkable
peaks also encouraged by the those banks encouraging such investments. Given the fact that many of those companies
did not have any sustainable business model, they ended up in bankruptcy and the burst bubble led the stock prices at
an incredbly lower value. (Zhu Wang, “Technological Innovation and Market Turbulence: The Dot-com Experience”,
2006, pp1-5)
2 Eric Ries, “The lean Startup”, Crown Pub, 2011
5

rentals”3
. Even though the fierce competition that is facing day after day, Airbnb raised a
considerable financial capital of $119.8m, and it has a wide range of active users, more than
10 million people, over 26,000 cities in 192 countries4
.
 Tetrasun, is a startup that promoted a new technology for photovoltaic systems able to save
up until 21% energy at a low cost rate thanks to an innovative silicon architecture. The
startup ended its life in 2013, when it was acquired by First Solar, one of the main
worldwide photovoltaic company.
The leitmotif of a startup is “innovation”; namely, the fact of having a new idea and being able
to develop it. However, innovation also embodies a large set of improvements based on added
values to the final users, while giving the developers an advantage necessary to emerge between
other start-ups and compete within an evolving market. The survival of a startup, is therefore based
on its ability to be flexible and able to adapt to the changing environment of the markets and the
taste of customers.
The pathway of entrepreneurs that want to create a start-up has been described as “the hero’s
journey”5
, an expression that emphasizes the fact that nothing is sure during the initial phase: not
just in terms of surviving, but also in terms of growth. Due to the uncertainty related to the success
of a startup, it is necessary to identify a rational approach towards two main topics:
entrepreneurship and durable growth. With regard to durable growth, in particular, it is necessary to
highlight that, together with variables that are within the startup itself and related to management
techniques, the context where the startup develops plays a fundamental role.
1.2 The life-cycle and growth milestones of the start-up
Increasing opportunities and reduction of costs, mainly due to the possibility to outsource
some key activities, lead the IT sector to be characterized by a huge competition between startups,
Competition is even worse especially for the web and mobile based platforms, in which start-ups
have to compete globally with each other. For this reason, it is important to emerge as a leader in
3 http://www.econ.ucla.edu/sboard/teaching/tech/Airbnb.pdf
4 "Airbnb Fact Sheet, http://assets.airbnb.com/press/press-releases/Airbnb%20Fact%20Sheet_en.pdf
5 Steve G.Blank, “The four steps to epiphany”, K&S Ranch, 2007, iiii
6

the market segment in which the start-up operates.
Due to competition in contending scarce resources, both financial and human capital, start-ups are
forced to use different management techniques than the usually employed by traditional enterprises;
in addition, startups need at each phase of their life-cycle a startup-frendly environment, that gives
the possibility to startups pursue a sustainable growth. For this reason, the entrepreneurs are forced
to reach as soon as possible better environments in order to differentiate their startup business from
the competitors.
The main growth milestones, needed in order to create an innovative product/service able
tosatisfycustomers,are:
Figure 1: Growth phases of a start-up, Source: “The four steps to epiphay”, Steve G. Blank
 Problem solution fit is the “first step to understand if the product is something worth
doing”6
, understanding if the needs that the start-up wants to satisfy are really crucial to
customers.
 Product/market fit means “being in a good market with a product that can satisfy that
market”7
; it is the most important milestone of the growth process, in which the final
product developed by the start-up has found a good position in the market niche with a great
reaction by customers
 Scale phase, In which the start-up is seeking expansion, both in customer pool both trying to
serve new customer segments
In the next paragraphs, I will analyse more precisely each growth phase, highlighting the new
management techniques used as well as the needs of start-ups from the external environment, that
are critical for the overall growth process.
6 “Running lean”, Ash Maruya, pag 21, 2010
7 Marc Andreessen’s blog, Pmarca Guide to Startups
7

1.2.1 The Concept Phase
To reach the first milestone, the Problem/solution fit, it is useful for a start-up to follow a process
called Customer Discovery 8
, aimed at confirm the initial vision about the possible market and
customers for the product; it consists of Interviews and contacts with possible early customers,
focusing only on a small market segment, in order to understand if:
 They are aware of the problem that we want to solve
 The problem is enough important for them in order to set up a business and if they are aware
of the problem
 They would pay for that problem to be solved
 They are looking a solution in the market for that problem
If the result, after those interviews, is that there are enough people with those characteristics, the
start-up has just found the most important source of learning: early visionary or enthusiastic
customers, also called by Steve G. Blank “earlyvangelists” to emphasize their role in developing the
product and in spreading the start-up vision.
However, even in this initial phase, the start-up benefits from a start-up friendly environment; in
fact, it is fundamental, at this phase, to belong to an inclusive start-up community, with a start-up
culture inclusive oriented rather than exclusive, in which:
 Experienced entrepreneurs, also called serial entrepreneurs, share their experience with
others to collaborate through an informal mentoring process, a birth of a new start-up9
 Regardless any background of the entrepreneur, the community of entrepreneurs accepts
incumbents in their networks.10
A necessary condition, not just for achieving the Problem/solution fit, for the creation of a vibrant
start-up community is to operate in a technological lively environment, in which the
implementation of new ideas, successful or not, is incentivized rather than looked with suspect.
This kind of environment, often, can be found near Universities or Research centres; In fact,
universities has always played a key role in fostering start-up communities to take root, and they are
“Feeders that, at minimum, generate a steady steam of new young community into the start-up
8 Steve G. Blank, “the four steps to epiphany”, K&S Ranch, pp 27-33
9 See supra, pag 147
10 Brad Feld, “Startup Communities”.Brad Feld,
8

community” 11
.
Famous examples are Stanford university, which in the end of the 50's, namely, “created” the
Silicon Valley, fostering innovative projects; In fact, two Stanford students, Bill Hewlett and David
Packard, founded Hewlett-Packard company, an important company for the development of the IT
sector. Another example of how universities can contribute in the creation of a fervent startup scene
is New York, where thanks to the building, during these years, of a campus, that is technology and
entrepreneurship oriented called ConellNYC Tech, thanks to a joint venture between the Cornell
University and the Technion-Israel Institute of Technology, has made possible for New York to
become the third startup centre in US and the fifth globally in few years.12
However, at this early phase, called concept phase, no funding are required, being the interview
carried out personally by the entrepreneurs.
1.2.2 The early/seed phase
After the Problem/solution fit has been achieved, the continuous learning principle is now
applied to learn what people wants, that is exactly the aim of the most important growth milestone:
the product/Market fit. This can be achieved by using a tool, called the Build-Measure-Learn loop,
in which a minimum valuable product (MVP)13
, that can be a working prototype with the main basic
feature or just an image of it, is offered, sometimes it can be sold, to the earlyvangelists, getting
feedbacks directly from them.
Figure 2: The “Build-Measure-Learn loop”; source: Eric Ries, “The lean model”
Every time the loop is completed, through the collection and the measurement of feedbacks, we can
learn useful informations about possible features to include that our target customers perceive as
11 “Startup Communities”.Brad Feld,
12 Maria Teresa Cometto, Alessandro Piol, “Tech and the City”, Angelo Guerini e Associati, 2013, pp-66
13 Eric Ries, “The lean Startup”, Crown Pub, 2011, pp 82
9

fundamental.
The aim of this loop process is to understand if our strategy, e.g. our market segment or our
customers profile, is correct, meaning that the entrepreneurs have taken the right path and they can
persevere; if it results to be incorrect, the strategy must be changed or, more precisely, there is the
need of a pivoting.
In this phase of life-cycle, including the seed stage and the startup phase, the presence of a startup-
friendly environment is a greater concern than the previous phase.
In fact, besides the needs of mentoring from other entrepreneur and of a vibrant technological
community, the seed and the startup phases are characterized also by a strong need of fund raising,
especially in computer hardware and computer gaming.
Differently from traditional enterprises, startups, can not depend upon traditional financing, for
example on bank loans, in which the principle called “ belt and suspenders”14
still dominates the
investment decisions. For this reason ,in the seed phase, new informal types of investors play a key
role in the growth process:
 Friends and relatives of the entrepreneurs15
 Business angels investors
The latter type of investor is a peculiar figure of the startup environment, because they are a high
net worth individual, acting alone or in a formal or informal syndicate, “who invests his or her own
money directly in an unquoted business in which there is no family connection and who, after
making the investment, generally takes an active involvement in the business”16
. Very important is
the fact that their time schedule about their exit strategy is very flexible, leaving the pressure of fast
returns on the entrepreneurs.17
They choose in which project to invest following some criteria:
 It must be near their residence, in order to increase the direct contact of the angel with
14 The “belt and suspenders” principle is the necessary condition of repaying the debt trough their operative cash flow
or tangible assets. (Hardymon, F. and A. Leamon, "Silicon Valley Bank.",Boston: Harvard
Business School Publishing,2001)
15 Wilson, K. and F. Silva (2013), “Policies for Seed and Early Stage Finance: Findings from the 2012 OECD
Financing Questionnaire”, OECD Science, Technology and Industry Policy Papers, No. 9, OECD Publishing.
(http://dx.doi.org/10.1787/5k3xqsf00j33-en)
16 Mason and Harrison, “Business angel investment activity in the financial crisis: UK evidence and policy
implications”, Environment and Planning C: Government and Policy, 2008, pag 309
17 Jon Hoyos Iruarrizaga , María Saiz Santos, “The informal investment context: specific issues concerned with
business angels”, 2013,, pp 180-183
10

entrepreneurs
 It belongs to a sector In which the angel investor is experienced, reducing the information
asymmetry between entrepreneurs and angels
Angels investors are crucial not just for the cash that they supply to startups but also for :
 providing knowledge to entrepreneurs, about the know how and the best practices
 creating a network between the startup and possible suppliers or possible strategic partners
 filling the investments gap between the early stage and the later stage in which more formal
investor invest only at a less risk level.18
 Signal the quality of the projects to the market, increasing the probability of getting funding
at later stages.
Even if the number of Business angels (Bas), working independently or in networks (BAN) is
increasing annually at a fast rate, especially in Europe where the BANs increase by 14% in number
annually, and even if the trend of total amount invested shows an increase in volume of investments,
according to the results from the European Business Angels Network (EBAN) survey in 201219
,
only 16 startups out of 100 business angels gets financed.20
For this reason, startups can increase the probability of getting financed by Bas in a context in
which business angels are very active, forcing them to migrate towards more developed seed
financing system environment.
Due to the low probability of getting backed by business angels, a startup can not only depend
upon them as the major funding channel; for this reason, new kinds of investment and institutions
emerged, especially in flourishing technological areas:
Type of investment Features Amount invested and phase of
investment
Crowdfunding
platforms21
Through web platform, crowdfunding
platforms employs users as investor for:
Investments mostly in the early
stage of financing cycles
18 See supra, pp 183
19 European Business Angels Network (EBAN) 2013 survey (http://www.eban.org/e5-1-billion-market-shows-
european-angels-on-the-rise/#.U-aSXPl_vzt)
20 European Busines Angels Network (EBAN) survey, 2013
21 Oliver Gadja and James Walton, “Review of Crowdfunding for Development Initiatives”, Department for
International Development, 2013
(http://www.europecrowdfunding.org/wpcontent/blogs.dir/12/files/2013/10/EoD_HD061_Jul2013_Review_Crowd
11

 Financing the project, using
equity based, loans, reward,
donation or a combination of
them22
 Developing the product, making
them choose between different
products or even allowing them
to develop it by themselves
 Creating open discussion between
investors for what concerns
possible improvements about the
product
Averages for:
 Equity based: 150,000 US $
 Loans based: 5,000 US $
 Reward based: 5,000 US$,
wth great variation between
some small projects and some
huge financed projects
 Combination: it depeds on
the startup project that has to
be financed
Incubators23
Institutions, that can be private or public
owned, aimed at offering to the new
born startup services in exchange of
equity stakes. The services that they
offer are:
 Working spaces in their location
 Seed Funding from the incubator
itself or through their network of
investors
 Mentoring and coaching the
founders
 Human resource and legal
Seed stage and startup stage
Funding.pdf)
22 Equity based crowdfunding is a model of crowdfunding in which the investors receive equity stakes for their
contributions.
Loan based crowdfunding is based upon private loans, where interests will be paid by the startup. Reward based
crowdfunding consists in giving incentives and rewards to the investors ; those rewards can be of different types,
depending also on the amount invested.
The donation crowdfunding model, instead, is used typically by non-profit organizations and social causes, does
not bring any financial reward to the investors
23 Centre for Strategy & Evaluation Services (CSES) for the European Commission’s Enterprise DG, “Benchmarking
of the Business Incubators”, 2002,
12

support
 Contact with other startups,
creating a flow of knowledge and
networks between entrepreneurs
(network incubators)
Accelerators24
Institutions, that can be private or
public, offering a “intensive acceleration
programs” to startup at the seed stage, in
exchange of an equity stake, averaging
between 6% -10%. The accelerator
programs are characterized by:
 A high selections of projects and
teams (max. 3 persons per team)
 A Defined time period in which
the firm can be part of the
program, between 3 and 6 months
 More intense coaching and
mentoring than incubators
 A Final presentation to possible
investors
Usually the possibility to working space
Seed stage
Average investmets: 50,000US $
Table 1: Crowdfunding, Incubators and accelerators characteristics
The importance of those new kinds of financial resources, in order to substitute the lack of
business angel backing, for a startup is clear; in fact, those financial channels showed worldwide a
constant growth, both in numbers of , both in the total amount invested.
In fact, for what concerns crowdfunding platforms, it is observable a sustained growth in the
amount of total investment trough such platforms, reaching 2.7 billion dollars in 2012 globally25
and in the overall number of crowdfunding platforms worldwide:
24 http://www.dutchincubator.nl/uploads/Documents/49.pdf
25 “Crowdfunding industry report”, Massolution,2013
13

Figure 3: Total amount invested through crowdfunding platforms; Source: Crowdfunding industry report”,
Massolution,2013
Figure 4: Percentage growth of crowdfunding platforms worldwide from 2008 to 2012; Source:
source:http://www.statista.com/statistics/251567/growth-r-of-crowdfunding-platforms-worldwide
For what concerns the incubators and accelerators, there have been seen a boom in their
numbers, with 29% annual increase since 2008 as we can see from the data relative to 10 European
countries26
, highlighting their importance for startups:
26 The research was focused on Czech Republic, France, Germany, Ireland, Italy, the Netherlands, Slovakia, Spain,
Sweden and the United Kingdom. (Eduardo Salido, Marc Sabás and Pedro Freixas,“The Accelerator and Incubator
ecosystem in Europe”, Telefonica, 2013)
14

Figure 5:Accumulated number of incubators/accelerators since 2001; Source: Telefònica Global affairs and new
ventures, 2013
In this early phase, beside the funding channels described previously, also the public entities has
proved to be very important in order to foster innovation and in supporting startups with its catalyst
function of investment.
In fact, an evidence of that can be found in America's biotechnology sector, in which right after the
approval of the Bayh-Dole act, permitting publicly funded research to be able to obtain a patent, the
sector saw a boom in pubic andprivate investments in this sector, reaching 30.1 billion dollars in
2011, fostering the following boom of new born startups in the Biotech,27
However, getting financed and supported is not the only factor that helps startups in this early
phases; in fact, because startups, at this stage, have low profits or, more probably, losses, they
need a more flexible tax system.
The building measure loop, in fact, is usually financed by the sells of the first prototypes or trough
the bootstrapping of entrepreneurs; if the tax system is too aggressive, the most important resource
of startups, cash, risks to be burned before getting the market/product fit, forcing the startup to sell
their assets, if any, or to go bankrupt.
It is not a case that London, one of the biggest and most renowned technological hub for startups,
has created several tax incentive to the startups and, at the same time, tax credits up to 50% to
investors, increasing the flow of capital to startups, especially in the IT sector.28
27 “Startup myths and obsessions”, The Economist: http://www.economist.com/blogs/schumpeter/2014/02/invitation-
mariana-mazzucato
28 http://www.entrepreneurial-insights.com/startup-hubs-around-world-london/
15

The flexibility of the tax system not only encourages entrepreneurs to set the operation in that
location, but also helps it growing during the first difficult periods by allowing the startup to retain
more liquidity;a flexible tax system also on investments in risky startups helps to increase the flow
of capital towards start-ups.
However, if the startups must fill the bankruptcy pathway,as it occurs often in those early phases, it
needs to take little time in order for the entrepreneur to be able to create another startup in less time,
instead of carrying the burden of failure for years, undermining the creativity and passions of the
entrepreneurs, reducing dramatically the probability of creating another startup, keeping in mind
that a heavy burden is also carried by investors who invested or lended money into a failed
business.
1.2.3 The expansion/scale phase
After the startup has been able to achieve the most important growth milestone, the
product/market fit, in which the business model has been validated ad the product is able to satisfy
the first customers, the focus can shifts from persevere/pivot to scale, increasing the number of
customers, with the goal to create fans loyal to the startup brand and product, trying to serve also
the largest part of customers, the mainstream customers, rather than only enthusiastic ones.
The startup main objective now is the creation of a strategic selling strategy by building a
sustainable revenue stream rather than depend on sporadic and casual transactions, called “ heroic
selling”.29
The process of creating and acquiring loyal customers and of developing a continuous revenue
stream is well described by the AARR metrics, developed by Dave McClure, and is composed by
five different building blocks30
:
 Acquisition phase, in which people that does not know our product is becoming an interest
possible customer, also called prospect,; the focus in this phase is the way in which
customers can find the startup and to attract initially its interest.
 Activation phase, during which customer makes the fundamental step: use and get a first
approach with the product; in this phase it is important is to offer him an amazing
29 Lorenzo Paoli,“Il coaching per la tua startup”, Antonio Vallardi Editore, 2014, pp 113-115
30 AARR metrics framework was first presented by Dave McClure in his blog
(http://500hats.typepad.com/500blogs/2010/01/startup-metrics-for-pirates-lean-startup-circle-jan-2010.html)
16

experience.
 Retention phase, the most important step at this phase of growth, in which data are collected
about how many times a customer uses or buys our product. It is the main indicator of the
success of our business model, highlighting the overall level of satisfaction with the product
of the start-up.
 Revenue phase, measures the time at which the activity of customers are monetized. It is still
another important indicator of success of the product.
 Referral phase, the last phase, in which the satisfaction of the customers becomes the best
marketing tool for the startup, spreading the name of the startup across their networks,
exploiting the increasing curiosity of interested prospects about the product in order to
transform them into loyal customers through the AARR cycle.
Figure 6: AARR metrics; Source: Dave McClure Blog
Startup have to complete as fast as possible this process of “fans” creation, increasing its pools of
customers, building a strong brand awareness among different kind of consumers. One example of
the power of referral is Facebook, a social network started from a small niche market of Harvard
students in 2004, spread to other college students in US just few months after the first launch. Now
it has become is the most visited page in the web, overtaking also Google.31
Once the success has been obtained by the startup, its successful journey ends with one of those
destinations32
:
31 Facebook timeline, may 3 2006 (https://newsroom.fb.com/news/2006/05/facebook-expands-to-include-work-
networks-2/)
32 David Smith, “Zero-to-IPO & Other fun destinations”, Cambridge Manhattan Group, 2013, pp 19-21
17

Destination Results
Asset Sale The company is sold, even if it is not profitable: the
acquirer buys the intellectual property of the startup33
Cash-flow sale The company is sold as a self-sustaining company
IPO Shares of the company are traded In the public
market: the startup is no more a private independent
entity
Table 2: Possible successful destinations of startups
The best possible destinations for the startup are IPO and Cash flow sale, in which both
entrepreneurs and investors are fully rewarded for their efforts in building and supporting the
business, respectively.
However, the road to one of those final milestones requires some key factors in the external
environment in which startup resides.
In fact, at this later stage, also called expansion phase, the startup needs a more intensive capital
support from more formal investors through the venture capital funding channel.
This kind of funding is characterized by the figure of venture capitalists that, differently from
business angels, are intermediaries between an investment fund, such as pension fund, public fund
or a fund of high net worth individuals,and the growing startup in which they invest.
Given the fact that the fund they manage is much higher than the typical budget of a business
angel, the investment of venture capitalist are much more intense, raging from 2 millions dollar to 5
million dollars or more.34
The importance of venture capital is not limited only to the substantial financial support, but they
are also crucial in:
 Creating a very good reputation for the startup, attracting more skilled employees,
increasing their market power in transactions with suppliers/buyers by signalling the clear
growth opportunities of the startup
 Reducing the risk of moral hazard or opportunistic behaviours from employees and
founders, by providing incentives, specially with larger equity stakes than traditional equity
33 If the intellectual property is valuable only if it is related to the core product team that developed it, the supporting
team is also brought into the acquiring company (David Smith, “Zero-to-IPO & Other fun destinations”, Cambridge
Manhattan Group, 2013, pp 233-235)
34 Jon Hoyos Iruarrizaga , María Saiz Santos, “The informal investment context: specific issues concerned with
business angels”, 2013, pag 183
18

funding35
 Supporting the management of the startup, by participating in the board of directors
membership and by supporting the human resource management.
Recent studies also showed that venture capital increases the innovation activities, also by looking
at the number of patents36
and in the potential of scale activity37
.
The important role of venture capital investments in the IT sectors is clear by looking at the overall
confidence of the investment by venture capitalist, in the survey conducted by Deloitte & Touche
LLP and the National Venture Capital Association including venture partners belonging to the
Americas, Europe, Middle East and Pacific Asia38
, in a scale from 1 (very low confidence) to 5
(high confidence in investment), in which the first six sectors belongs to the IT sphere:
Figure 7: Venture capitalists confidence of investments per industry; Source: 2013 Global venture capital confidence
survey
Even though the main venture capital funding model is based on equity investments, in which
stocks can be sold in order to exit from the investment, there is also a type of venture capital
35 Henry Chen,Paul Gompers,Anna Kovner, Josh Lerner, “Buy local?The geography of successful and unsuccessful
venture capital expansion”, pag 2
36 Samuel Kortum,Josh Lerner, “Assessing the contribution of venture capital to innovation”, Rand Journal of
Economics, 2000, pag 691
37 Manju Puri, Rebcca Zarutskie ,“On the Life Cycle Dynamics of Venture-Capital- and Non-Venture-Capital-
Financed Firms”, 2010, pp 27-29
38 “Global Venture capital confidence survey”, Deloitte & Touche LLP and National Venture Capital Association
(NVCA), 2013, pag 3 (http://www.deloitte.com/assets/Dcom-UnitedStates/Local
%20Assets/Documents/TMT_us_tmt/us_tmt_2013VCSurvey_081313.pdf)
19

funding based on loans.
This kind of venture funding is called venture lending and is aimed at substitute the typical bank
loans by providing loans at growing startups, usually operating with a negative cash flow and with
few physical assets, causing the traditional loans to avoid those kind of investments.
Instead of physical assets, venture loans use intellectual properties as warranty and take as a signal
of quality of the project an already funding backed startup, which increases the probability for the
startup to receive the venture loans. However, venture capital firms distribution shows how they
tend to concentrate into few and vibrant technological environment; in fact, according to the U.S
venture capital firms market, more than one half of the 1000 venture capital firms registered in
“Pratt’s Guide to Private Equity and Venture Capital Sources” set their operations in only three
main areas: San Francisco, Boston, New York.39
Given the fact that the monitoring cost in controlling and coaching the startup increases as the
distance between them increases, implying also a decrease supporting to the management by
venture capitalists, startup are better off moving towards environment in which there is an active
network of venture capital, in order to increase the probability of getting financed and supported.
There is a trend in which, globally, the amount of venture capital invested is increasing year after
year, especially in U.S, a well developed venture capital market, in which a remarkable amount of
29.7 billion dollars have been achieved in 201340
.
Figure 8: Total venture capital invested in U.S between 2010 and the second quarter of 2014; source: MoneyTree
Report by PricewaterhouseCoopers LLP and the National Venture Capital Association
39 Henry Chen , Paul Gompers, Anna Kovner , Josh Lerner,“Buy Local? The Geography of Successful and
Unsuccessful Venture Capital Expansion”, Boston: Harvard Business School Publishing, 2009, pag 2
40 MoneyTree Report by PricewaterhouseCoopers LLP and the National Venture Capital Association (NVCA)
20

Due to the low probability of getting backed by a venture capitalist, where only 1 out of 100
business plans received by a venture capital firm is accepted and eligible for the funding, startup
increases their probability of getting financed in a context in which there are venture capitalists and
in which the international attention, through research and articles by scientific and business
international newspapers, is interested in.
Another needed factor, for a start-up at this phase, is to operate in an environment in which
operating costs, such as the rent for the office and the cost of living, does not hurdle the growth
pathway of the start-up, putting in danger its liquidity by costs that are not finalized to create value
to the final consumer.
It is equally fundamental to offer the start-ups infrastructures that help the growth phase, such as a
fast and reliable internet connection, especially for web based startups; the importance of the
internet connection network is also proved by the fact that offering a broadband as large as possible
is one of the main goal of the European Digital Agenda.41
1.3 Mortality rate of startups
The new management techniques that we have explained previously are aimed to reduce
drastically the major causes of death of startups due to bad practices, such as premature scaling
caused by too low direct contact with final customers or a lack of a strategic selling cycle.42
In fact, the large number of internet companies failed after the bust of the internet bubble in 2001
was due to an attempt to apply the traditional management techniques, based on the creation of a
product without any ex ante feedback from customers, inducing companies to scale a wrong
business model.
The environment, instead, is fundamental to increase the probability to survive for a startup and to
make startups able to grow and compete globally, especially in the fast changing and challenging IT
sector. However, due to the intrinsic characteristics of startups, the mortality rate remains
considerable; in fact, it is remarkable the death rate in 2014, even in a well developed startup
41 Digital Agenda for Europe, by improving the broadband connection, has the goal to exploit the digitalization of the
economy. The program was first launched in 2010, and the progression towards the achievement of these goals are
reported annually in the Digital Agenda Scoreboard. (Digital Agenda for Europe Mainpage:
http://ec.europa.eu/digital-agenda/digital-agenda-europe)
42 “Five Reasons 8 Out Of 10 Businesses Fail”, Forbes, http://www.forbes.com/sites/ericwagner/2013/09/12/five-
reasons-8-out-of-10-businesses-fail/
21

environment as the US one, especially during the first years of activity, during which the 25% of
startups fails in the first year and after 3 years the percentage increases to 44%43
.
Figure 9: Percentage of startups surviving after 4 years by sectors in US; Source: Statistic Brain
It is relevant the data about the startups in the IT sector, in which only 37% of the startups are still
alive after four years, highlighting the dichotomy more opportunities implies more competitions;
the difficulty to survive in this sector exacerbates the phenomena of flow of startups migrating
towards better technological environments.
The characteristics that make an environment “startup-friendly”, embrace more than a
financial, tax and bureaucratic system favourable to startups; it embraces several spheres, not only
in the macroeconomic context but also in political-cultural point of view. In fact, especially for the
IT startups with a desire to grow and become global, the so called “born global startups”44
, there are
as many factors as 33 including:
 Supporting infrastructures, such as a reliable internet connection or transports
 Market features, including the demand characteristics, e.g the rate of growth of internal
demand
43 Entrepreneur Weekly, Small Business Development Centrr, Bradley University and University of Tennessee
Research, http://www.statisticbrain.com/startup-failure-by-industry/
44 Global startups were first described by Gary A. Knight and S. Tamar Cavusgile in the paper “Innovation,
organizational capabilities and the born-global firm”; among all the factors that they identify as determinant to
allow a startup to be immediately part of the global market from the early phase there are:
 The information technology , especially in the communication sectors
 Creation of global networks thanks to the improvement in communication
22

 International reputation of the environment
However in the next chapter, in which I describe the Italian environment for IT startups, for the
purpose of my research I will focus only on few factors that, in my point of view, are critical for the
recent phenomena of migration of entrepreneurs from Italy to Berlin:
 Financial system
 Labour cost and human resource
 Bureaucracy concerning the creation and the cessation of a startup
23

CHAPTER TWO
Italian IT startup landscape
2.1 Italian Startup ecosystem in the Information technology sector
Startups in Italy has become a subject of social interest, both for economic and social point
of view, only in recent times.
The recent economic crises it Italy have moved the attention to innovative startups, as a way to
overcome the innovation gap that was becoming remarkable with respect other nations and as a tool
to promote self-employment, in a period in which unemployment rate is eroding the trust of the
current economic system.
The corporate drain phenomena, namely the migration of one startup to another foreign country,
showed a 20% increase in 201245
, according to the Mind in the Bridge46
2012 survey; in order to
stop this trend, the government was forced to develop a plan with the goal to not only protect them
and retain them from leaving Italy, but also to be more able to compete in a global environment.
In fact, right in the middle of a fierce recession in Italy in 2012, innovative startups for the first time
were “legally” described , in the “Decreto legge crescita 2.0”, as powerful human institutions able
to 47
:
 Decrease unemployment, especially between young people, that in Italy reached nowadays
the peak of 43.7 % with respect to the 20% European average48
 Fostering a sustainable growth of Italian economy, especially after the global financial crisis
of 2008
 Fostering a technological progress exploiting the creativity of entrepreneurs
 Creating an innovative culture in Italy
 Creating an Innovative environment, start-up friendly, encouraging social mobility and the
45 “Startup in Italy: facts and trend”, mind the bridge survey 2012, pag 12.
46 Mind in the bridge foundation, founded by Marco Marinucci, is a San Francisco based incubator that, on an annual
basis, carries out research on italian entrepreneurship with the ultimAte goal to create a “Bridge” betweeen U.S
entrepreneurial ecosystem and the Italian one.
47 Gazzetta Ufficiale, legislation decree n° 179 of 18/10/2012
http://www.gazzettaufficiale.it/atto/serie_generale/caricaDettaglioAtto/originario?
atto.dataPubblicazioneGazzetta=2012-12-18&atto.codiceRedazionale=12A13277
48 European Commission Eurostat website,
http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Unemployment_statistics
24

make more attractive the Italian ecosystem in order to attract foreign investments and
talented people
However, in order to be considered “innovative startups” , following the definition of Decreto legge
crescita 2.0, they have to be in possess those requirements49
:
 The majority of shares and of votes must be held by physical person, not by institutions for
example banks
 Less then 48 months of past activities
 Legal and operational office in Italy
 The value of their production, since the second year of activity, must be lower than 5
millions
 No profits are yielded
 Main social objective is the “development, the production and the commercialization of
innovative products or services with high degree of technology”
 An investment of At least 30% of the value added50
in R&D activities or having at least one
third of the total workforce with a master or PhD; as an alternative, the startup must possess
a patent
Even though the goal of the Decreto legge crescita 2.0 was to foster entrepreneurship by reshaping
the financial system, the bureaucracy and employment procedures , this legislation decree still
needs, after 2 years, more laws in order to become effective. This can be explained by the large
amount of important matters embraced by this legislation decree.
The lack of a well-working and effective legislation of startups in Italy obstacles the creation of a
trustfully ecosystem, needed to attract more entrepreneurs and capital from foreign countries. This
is even worse for the IT sector.
The larger proportion of startups in Italy, in fact, operates in the Information communication
technology (21.8%) and in the web platforms (49.1%)51..
49 Legislation decree n° 179 of 18/10/2012 art 25 comma 1-4
50 Value added is given by revenues of a firm less cost of purchases of material and services, such as labour wages
51 Mind in the bridge survey 2012, “Startup in Italy: facts and trend”, mind the bridge, pag 12
25

Figure 10: Distribution of Italian startups by industry; Source: Mind in the bridge report 2012
For what concerns the geographical distribution across Italy of these startups, there is an
evidence of the poor exploitation of entrepreneurship in the south are clear by looking at the
location of startups in Italy.
Figure 11: Geographical distribution of startups per macro-areas; Source: Mind in the Bridge report 2012
The bad situation concerning the entrepreneurship in the southern regions, mostly due to bad politic
management and waste of public resources, makes it far less attractive for entrepreneurs to set their
businesses in those regions.
Another information we can extrapolate from the geolocation distribution of startups in Italy is that
the main regions are Lombardia, with 25% of startups and Lazio, with 17% of total startups, with
26

their main centres in Milan and Rome, respectively, according to Mind in the Bridge survey 2012.
Those results are also confirmed by looking at the distribution per region of innovative startups
registered in the Chamber of Commerce register, 2508 in August 201452
:
Area Region Number of Innovative
startups
Relative distribution of
startups
North east Trentino Alto Adige 112 4,5%
Friuli-Venezia Giulia 75 3%
Veneto 198 7,9%
Emilia Romagna 274 10,9%
North west Valle d'Aosta 9 0,4%
Piemonte 190 7,6%
Lombardia 553 22%
Liguria 36 1,4%
Center Toscana 173 6,9%
Lazio 227 9%
Umbria 30 1,2%
Marche 100 3,9%
South and Islands Abruzzo 38 1,5%
Basilicata 12 0,5%
Calabria 44 1,7%
Campania 136 5,4%
Molise 11 0,4%
Puglia 105 4,2%
Sardegna 76 3%
Sicilia 99 3,9%
Italy 2508
Table 3: Distribution of innovative startups per region; Source: Chamber of commerce register of innovative startups,
25 august 2014
It is clear how the majority of startups (1447 of 2508, approximately 58%) belongs to the north area
of Italy, with peaks in Lombardia (553), Emilia Romagna (274), Veneto (198) and Piemonte (190).
For what concerns the central Italy, the results are coherent with Mind in the Bridge survey 2012
results, with a total of 530 out of 2508, or approximately 21%, of total startups with Lazio as a
52 Chamber of Commerce, “Registro imprese” http://startup.registroimprese.it/report/startup.pdf, retrieved on 25
August 2014
27

main center (227).
The unexploited entrepreneurial potential of the southern regions and the islands is confirmed by
looking at the total amount of startups in the eight regions composing this area, with 531 total
startups, or 21% of the total, with only two regions exceeding the threshold of 100 startups:
Campania (136) and Puglia (105).53
After this brief introduction to the startup environment in Italy, especially for what concerns the IT
sectors, in which we described the main legislation and some key data about startup, the next
paragraph will be devoted to the analysis of the financing system, from public institutions and
private institutions
2.2 Financing channels in Italy
Italian startups in high technology sectors,like any startup, needs to raise funds in every
stage of its life cycle, in order to foster the growth process.
In the next paragraphs I will focus on the main funding channels for start-ups:
 Public financing
 Private equity investments
 Incubators/accelerator
 Crowdfunding platforms
The focus will be on quantitative data for each funding channel as well as the recent legal regulation
concerning the equity crodwfunding platforms.
2.2.1 The public financing channels
Public financing plays a key role in helping startups at the very early stage and in fostering
innovation as we said in the first chapter.
In Italy, even though historically has been a country in which the public participation in the
economy was very intense, the direct public financing in startups turns out to be not as effective as
it has been for traditional enterprises.
In fact, public funding is considered by startups very difficult to get and not enough effective to rely
53 Data are elaborated from “Registro imprese” http://startup.registroimprese.it/report/startup.pdf
28

entirely on it, and is considered by enterpreneurs only a secondary tool of funding.54
Two of these projects of public funding for startups are:
 SIMEST “start-up fund”, which supply investment in minority stakes, up to 49% of shares,
for new born startups that are going to undertake international projects outside EU. This
investment can be complementary to other financing sources, but not greater than €200.000
for each project, for a duration of 2-4 years, up to a maximum of 6 years. The exit strategy
for the investment is the repurchase by the startup of the equity stakes.55
 “Fondo Italiano d'Investimento”56
is an investment company, specialized in investing in
already established companies, with revenues between 25 millions and 250 millions, with
good assets balances. Only recently it opened a program, “program 101” in cooperation with
another investment company, Azimut; the the “Program 101” makes available a venture
capital fund of €35m dedicated to startups. It will be carried on also in collaboration with H-
farm, the biggest accelerator in Europe in Sile area, in Veneto, in order to enlarge the
discovery process of new innovative startups.
It is clear, however, that public institutions understood the importance of startups, during those
years, as key players in jobs creation and that's why Public entities have set up several projects,
aimed at creating a bridge between startups and traditional businesses. One of the most peculiar
project of this kind is called “AdottUp”, carried out by the employer federation Confindustria with
the support of Intesa San Paolo; it consists in fostering the “adoption” of high technology startups
by SME's traditional businesses, , through the share of services or trough partnership. Thanks to this
project, startups can exploit new financial, technological, distribution and networks channels
opportunities in a consolidated environment and, at the same time, they can use better
infrastructures. The advantages for the SME enterprises, instead, are to enrich the innovation
opportunities of their business as well as a tool to diversify from their core businesses.
It is clear how the startup public funding system, especially at the seed stage, is still growing
in Italy and has not reached yet a maturity necessary to satisfy fully the needs of Italian
entrepreneurs. In the next paragraph I will analyze another important component of the financing
channels used by startups: the private equity.
54 Rocco Frodinzi, Maria Matilde, Elona Guga, “Start-ups in the Cultural and Creative Industries: Main Criticisms in
Italy”, Euro-Mediterranean Dialogue on Public Management (MED), 2013
55 http://www.simest.it/page-en.php?id=25
56 http://www.fondoitaliano.it/
29

2.2.2 Private equity
As the public financing, also the private equity is facing diffculties in reaching a level of
investments able to satisfy completely the needs of IT startups, especially in the early phases of
growth; in fact, by looking at the sources of financial resources that Italian startups use at the seed
stage, according to the mind in the bridge results of the survey in 2012, we get that only 16 % of
startups were able to raise private equity capital; analysing more in deep the private equity
investments, 8% of the startups raised funds from business angels, 6% from seed capital, including
incubators and accelerators programs, and only 1.2% were able to raise venture capital funds.
Another important data that we can get from this research is that Bootstrapping, with 58% of the
startups, is the biggest source of financing at the early stage of startups, especially in the technology
sectors.
In the 6% of the financial institutions investments, for example banks loans, are included also loans
warranted by personal assets belonging to the founders rather than firm assets, and it is considered
an external source of financing, rather than a bootstrapping strategy. For this reason, the data about
financial institutions may be inflated and must be taken carefully.
At the same time, 8% of the startup were able to get a grant, and mostly they belongs to university
grants of research; in fact, 30% of the entrepreneurs obtaining a grant were researchers in
universities.
The results are summarized in the following table:
Financing source Number of startups able to receive the fund (in
%)
Bootstrapping 58%
Private Equity 16%
Grants 8%
Financial institutions 6%
Non-financial institutions 6%
Table 4: Distribution of starups by funding channels used; Source: Mind in the bridge report 2012
The venture capital investments are still at a primordial phase in Italy by looking at the
proportion of investment in business not yet appealing for the revenues.
In fact, by looking at the distribution of private equity investments for different dimensions of the
businesses (using revenues as main indicator) in the second semester in Italy, it turns out that the
30

large majority of venture capital investments belongs to the range of 15-50 million Euros of
revenues, with 50% of the total investments; the recent trend shows how especially venture capital
investors in Italy are switching their investments into larger and more consolidated companies, with
22,5 % of investments in companies with more than €100m of revenues.57
.
Figure 12: Venture capital distribution for revenuees; Source: Deloitte report 2013
Analysing more in deep the seed/startup phase ad expansion phase of venture capital
structure, thanks to the research of the Association of private equity and venture capital (AIFI)58
in
2013, it is possible to look at the trend in the amount of capital invested and in the number of
companies that was able to receive it.
Focusing on the early phase, we can see that in the year 2013, the amount invested has fallen, from
the €135m euro reached in 2012, to €81m in 2013,approximately the amount that was invested in
2011 (81). At the same time, the number of startups that was able to being financed by Vcs
increased to 158, while in 2012 the number of companies was 136.
We can see that the general trend, since 2009, is an increase in the number of startups in which Vcs
invests at the early phase; in fact, the number of startups that received Vcs fund in the early stage
doubled, from 9 in 2009 to 158.
57 Deloitte, “Italy private equity confidence survey: outlook per il secondo semestre 2013”, 2013
(http://www.deloitte.com/assets/Dcom-Italy/Local
%20Assets/Documents/Pubblicazioni/PrivateEquity_2semestre2013.pdf)
58 Italian Association of private equity and venture capital (AIFI),“Il mercato italiano del private equity e venture
capital nel 2013”, AIFI report, 2013
31

Figure13: Venture capital investments in early phase and number of operations in Italy; source: AIFI report 2013
For what concerns venture capital investments in the expansion phase of a startup, it is clear
from the AIFI venture capital research that 2013 followed the same trend of 2012, with a slightly
lower amount invested, €914m in 2013 compared to €926m in 2012. The number of startups able to
receive VC's fund increased slightly from 131 in 2012 to 138 in 2013. The difference between the
amount invested in the early phase (81 millions) and the later-expansion phases (914 millions) is
pronounced, one more evidence of the propensity of VCs to invest in more verified business
models. It is impressing the increase from 2009 of the amount invested in the expansion phase, from
€371m to €914m, an increase of approximately 246% in four years.
Figure 14: Venture capital investments and number of operations in the expansion phase
32
2009 2010 2011 2012 2013
112 109 139 131 138
371
583
674
926 914
Venture capital investments in the expansion phase
Number Amount
2009 2010 2011 2012 2013
79
106 106
136
158
98
89 82
135
81
Venture capital investments in early phase
Number Amount

Following the AIFI analysis, the main operators of VCs funds are:
 Management Investment Company (SGR companies)
 Regional/Public operators
 Investment companies
 Early stage operators
 Italian banks
 International operators
Their distribution of investments are different between the early phase and expansion phase; the dta
are summarized in the following table:
VC operators Early Phase Expansion Phase
SGR companies 36% 41%
Regional/Public operators 23% 22%
Investment companies 7% 18%
Ealy stage operators 34% 10%
Italian banks / 5%
International operators / 4%
Table 5: Source: AIFI, the Italian market of venture capital and private equity in 2013
Another important data that AIFI research produces concerns the geographical distribution of
investments; the data highlights the gap between northern and southern regions. In fact, by looking
at the origin of the venture capital, 89% of the total invested comes from North Italy, while only 7%
from the centre and 3% from the South; 1 %, instead, comes from foreign investments.
Figure 15: Geographical distribution of venture capital investments; Source: AIFI report 2013
It is remarkable also the gap within northern region for what concerns the geographical distribution
33
89%
7%
3%
1%
North Italy
Centre Italy
South Italy
Abroad

of the investments; in fact, Lombardia leads with 106 investments, followed by Emilia Romagna
with only 41, Campania (46), Sardegna (30), Lazio (24) and Veneto (18).
For what concerns the business angel industry in Italy, the main source of information are
the data collected from the research of IBAN, the Italian Business Angels Network, in 2013 about
246 business angels59
. The Business angels Italian market showed a counter trend with respect the
global trend in the total amount invested; in fact, in Italy the amount invested by Bas diminished
since 2011, from the peak reached in 2011 with €34,8m to €31,8m in 2013, back to the 2009 level
of investments.. It is also important to notice how the number of startups able to get the BAs
support decreased, from 366 in 2012 to 324 in 2013, implying a decrease in the average amount
invested per project in 2013, an evidence of contraction In the Italian business angel market.
Figure 16: Business angels investments and number of operations in Italy; Source: Iban suvey 2014
Even though the negative trend of the last year, business angels investment saw a remarkable
development since 2007, from €19.5m to €31.86m in 2013, an increase of 63%.
The probability of getting financed increased from 2012, with 767 evaluated projects and 324
accepted (42%) while in 2012 there has been a much higher degree of selection at this stage: funds
were granted to only 366 projects out of 1963, with a probability of 19% approximately.
However, there has been a much higher selection at the first stage, as shows the data from the
projects seriously evaluated, with a decrease since 2012 from 1963 examined projects to 767 in
59 Vincenzo Capizzi, Iban board member, “I risultati della survey 2013 e della ricerca scientifica di IBAN”, XV
convention IBAN, 16/06/2013 (http://www.iban.it/frontend/iban/public/file/Vincenzo%20Capizzi_Survey
%202013.pdf)
34
2009 2010 2011 2012 2013
31.46 33.33 34.85 33.82 31.86
179
229
281
366
324
Business angels investments
Number Amount

2013. For what concerns the average amount invested, the data shows that 68% of the investments
were below €100,000, while 24% of investments were under €15,000
Figure 17: Distribution of Business angel investments amounts in 2013; Source: Iban survey 2013
It is Interesting also how the number of investments by Business angels are distributed among
different sectors; from the IBAN survey 2013, the sector that has received most of the investments,
in terms of number, is the ICT sector, with 30% of investments in this particular segment, followed
by Media and entertainment (14%) and medical technology (11%). This confirms the global trend
of BAs investing, mostly, in the IT sector.
Figure 18: Business angel investments per industry in 2013,Source:IBAN survey 2014
35
<15,000
15,000-30,000
30,000-50,000
50,000-75,000
75,000-100,000
100,000-200,000
200,000-300,000
300,000-500,000
>500,000
0 0.05 0.1 0.15 0.2 0.25
Distribution of Business Angel investments amounts

According to IBAN survey 2014 results, the typical Italian Business angel:
 Is a man of 40-50 years old
 Has a disposable income of less than €2m, 10% of that finalized for angel investments;
 46% of them invested alone, while 31% has invested with more than 8 Business angels
 35% of the Business angels has invested in a startup with no revenues.
Both the VC and BA investments are in a clear growth trend in Italy, both in the number of
investments and in the total amount invested; it is also true that there still exists an investment gap
with other European countries, like UK, but this can be filled, in my opinion, exploiting more the
southern regions and increasing the awareness of entrepreneurs about possible private equity
funding channels.
The next funding channel analysed will be the Incubator/accelerator networks.
2.2.3 Incubators/Accelerators networks
For what concerns incubators/accelerators and technological-scientific parks, that carry out
incubators activities, there are 61 institutes60
in Italy.
It is interesting to look at the data about their distribution across Italy and the proportion of them
that are public owned by the government or local entities to have a snapshot of the current Italian
situation. From the survey on Incubators and on businesses being incubated carried out by Banca
d'Italia in 2012, the results shows that the number of incubators, as we mentioned before, is higher
in the north, especially at the north-east where Emilia Romagna region shows the maximum amount
of incubators (9).
It is also important to notice the high percentage of public owned incubators/accelerators,
averaging overall 63.6%; in my own opinion, this participation of the State in the
incubators/accelerators programs may compensate the lack of an efficient and effective direct
public financing system. Moreover, the high number of public owned incubators/accelerators in the
Southern regions is a proof of the efforts by the public institutions to foster entrepreneurial activities
In the South Italy.
60 Marta Auricchio, Marco Cantamessa, Alessandra Colombelli, Roberto Cullino, Andrea Orame, Emilio Paolucci,
“Gli Incubatori d'Impresa d'Italia”, Banca d'Italia, 2012, pag 10
36

Geographical area Number of operating
incubators/accelerators
Public owned
(percentage)
Private owned
(Percentage)
North-east 18 58,8% 41,2%
North-west 10 50% 50%
Center 17 58.8% 41.2%
South Italy and Islands 13 90.9% 9.1%
Italy 58 63.6% 36.4%
Table 6: Distribution and Ownership of incubators and accelerators in Italy; Source: Indagine
Banca d’Italia sugli incubatori e sulle imprese incubate 2012
Another important data collected by the survey on incubators in 2012 carried out by Banca
d'Italia is the level of relationship with university or research institutes; according to the research,
74% of incubators of the survey have some relationship with universities and research centres but
only 48% of them has a tight relation with them with them.61
Figure 19: Level of relationship beetween incubators/acceleators and unviersities-research centres; Source: Indagine
Banca d’Italia sugli incubatori e sulle imprese incubate 2012
One of the main incubator/accelerator operating in Italy is H-farm, in the province of Treviso,
specialized in digital startup with the goal to foster the process of technological and digitalization of
Italian companies62
. It's importance is due both for its huge dimension, with offices also in Seattle
(US), London (UK) and in Mumbai (India) and for the relevance it has on the entrepreneurship on
the region area in which it started their operations, the North- east.
62 H-farm homepage, http://www.h-farmventures.com/en/who-we-are-2/
37

In fact, H-farm organizes many events in collaborations with universities, aimed at fostering an
entrepreneurial culture in the young people; they are called Hackatons, in which in only one day,
teams, composed by developers, marketers and designers, have to find solutions to problems of the
enterprises participating in the event.
Successful teams are given the possibility to:
 Being incubated in the H-camp, in its incubator program of a duration of 2 months
 Being incubated or getting a mentoring from other partner Incubator and Accelerators, as
happened to me and my team (EXITE) during the H-wine hackathon, where we were hosted
by “33entrepreneurs” in Bordeaux.
In this way not only the young people can be attracted by the world of entrepreneurship, especially
in internet oriented sectors, but also, at the same time, H-farm is able to get the attention of foreign
investors or “startup hunters”, namely business angels. The need to develop a tight relation with
schools, public institutions, research centres or financial institutions, that carry on projects related to
innovative startups, is one of the requirement for incubators, included in “Decreto crescita 2.0”, in
order to be certificated.63
Other requirements are:
 Infrastructures sufficient to host in an efficient way the startup
 The incubator have to posses facilities, such as broadband internet connection, meeting
rooms
 The incubator has to be managed by people with a high degree of knowledge about the
startup ecosystem and about innovation matters; at the same time, they have to be supported
by a permanent managerial advisory entity
 The incubator has a proven experience in supporting startups, attested by a legal document,
taking into account indicators such as:
 number of applications received and evaluated by the incubator in an annual time frame
 number of startup and annual percentage change of startups hosted and came out in a
year
 average rate of growth of the production value of incubated startups
 number of patents submitted by startups
 total amount of risk capital obtained by the incubators from
Even if Italy has a famous incubator/accelerator like H-farm, in general their number is smaller than
63 Gazzetta Ufficiale, legislation decree n° 179 of 18/10/2012, art 25 comma 5
http://www.gazzettaufficiale.it/atto/serie_generale/caricaDettaglioAtto/originario?
38

in the European counterparts, for example France and Germany, with 130 and 150 incubators
respectively.64
Due to the low probability of getting incubated from Italian incubators, averaging to 11,3% with
3820 business ideas and 430 accepted65
2.2.4 Crowdfunding platforms
Italian government understood the growing importance of getting financed trough crowdfunding
web platforms, regulating the equity based model, in the article 30 of “Decreto Legge Crescita 2.0”,
then implemented by the Consob, the Controller of the Public market exchanges, in 2013, with its
regulation n°1853266
; the regulation is limited to the equity crowdfunding model platforms.
This regulation put rules and limitations to a world, the web 2.0, that “usually auto-regulates,
auto-validate and with unlimited possibilities”67
.
Italy has been the fist country in Europe to regulate the equity based crowdfunding internet
platform68
, trying to overcome the intrinsic difference between formal financing, characterized by
bureaucracy and a top-down selection of projects, and the freedom and dynamism of
crownfudning. The main goal of the Consob Regulation n° 18592 in 2013 was to control and
guarantee the reliability of the equity internet platforms and to check the quality of the projects.
The new regulations developed by Consob in 2013 starts with the distinction of two categories of
equity based platforms trough the creation of two distinct registers:
 “Registro ordinario”, in which subjects and entities, authorized by Consob, register
themselves after the necessary requirements have been checked69
64 Marta Auricchio, Marco Cantamessa, Alessandra Colombelli, Roberto Cullino, Andrea Orame, Emilio Paolucci,
“Gli incubatori d'impresa in Italia”, Banca d'Italia, 2014, pag 12
(http://www.bancaditalia.it/pubblicazioni/econo/quest_ecofin_2/qef216/QEF_216.pdf pag 12
66 Consob regulation n°18592/2013 (http://www.consob.it/main/documenti/bollettino2013/d18592.htm?
symblink=/main/trasversale/risparmiatori/investor/crowdfunding/link_reg18592.html)
67 Umberto Piattelli,“Il crowdfunding in Italia: una regolamentazione all'avanguardia o un'occasione mancata”, Linea
Professionale, 2013, pag XV
68 Italia startup, “Equity crowdfunding, pag 2 (http://www.italiastartup.it/wp-
content/uploads/2013/08/equity_crowdfunding_1.pdf)
69 The necessary conditions in order to be accepted in the registro ordinario are:
 The company juridical form
 Shareholdersr and management people have to be persons of good standing
 For the management team, every member has to be of proved competence
 A relation has to be presented to Consob about the organizational structure and the activities carried out by the
platform
39

 “Registro speciale”70
, in which “gestori di diritto”, such as banks and investment
companies, are authorized to operate in investment activities and have to signal their
intention to carry on equity crowdfunding activities
Trough the control and vigilance activities of Consob, only the most reliable equity crowdfunding
portal may operate.
Thanks to the requirements of complete disclosure of information about the web platform, about the
high risks of the investments and about every single project , the “Decreto legge Crescita 2.0” was
able to foster not only the transparency in the equity based crowdfunding model, but also the public
awareness to the overall crowdfunding industry.
In fact, the recent trend, by looking at the results of the analysis carried by the Italian Crowdfunding
Network on of the italian crowdfunding platforms in 201471
, showed a boom in the number of
crowdfunding platforms in Italy of all types, with an increase of 42 platforms since 2011;
furthermore, the total amount invested through crowdfunding platforms increased by,
approximately, 33% from 2012 to 2013.
Figure 20: Number of all crowdfunding platforms since 2011; Source: “Analisi delle piattaforme di crowdfunding in
Italia”, Italian crowdfunding network, 2014
70 Consob regulation n°18592/2013, art 4 comma 2
(http://www.consob.it/main/documenti/bollettino2013/d18592.htm?
symblink=/main/trasversale/risparmiatori/investor/crowdfunding/link_reg18592.html)
71 Daniela Castrataro, Ivana Pais, “analisi delle piattaforme italiane di crowdfunding”, Italian Crowdfunding network,
2014
40
2011 2012 2013 2014
12
21
41
54
Number of crowdfunding platforms

Figure 21: Total value of the investments trought crowdfudning platforms since 2012; Source: “Analisi delle
piattaforme di crowdfunding in Italia”, Italian crowdfunding network, 2014
Even thought the trend shows an increase both in the number and in the total amount invested
trough crowdfunding platforms, the equity based crowdfunding showed difficulties and a slower
growth with respect to other crowdfudning models in 2014, with only the 0.52% of the total
investments, compared with the 76.6% of lending based crowdfunding and the 13.3% of the reward
plus donation based crowdfunding.72
Another data, still obtained from the “Analysis of italian crowdfunding platforms”, that remarks
how the goal to foster startups funding raising trough equity crowdfunding has not been reached
yet, is the low percentage of total investments in entrepreneurial projects, with only 14%, compared
with the 63% of social projects and 23% of the creative projects.
Among the possible explanations of the failure in improving the flow of equity crowdfunding to
startups are73
:
 Lack of detailed regulations for the reward/donation based crowdfunding
 Lack of a culture of crowdfunding, which requires a higher promotion of its characteristics,
especially to new born startups in order to increase its usage.
 Immaturity of equity crowdfunding, where the pursue of the reduction of possible frauds
trough legislation brought to a bureaucratization of the process
72 Daniela Castrataro and Ivana Pais, “Analisi delle piattaforme italiane di crowdfunding”, Italian Crowdfunding network, 2014
41
2012 2013 2014
13,274,205.00
22,947,578.00
30,621,050.00
Total amount invested

 Strong opposition carried on by traditional institution, such as banks, in collaborating and in
assisting web platforms
 International competitions from foreign crodwfunding internet platforms
It is clear how the Italian financing system for startups, especially in the IT sector, is still
developing nowadays and have not yet reached the level of other European countries, such as U.K
and France. However, the first necessary milestones, such as the attention by the government and
public institutions on the financing system of startups trough legislation and regulations and a
developed network of infrastructures, have been reached and a better situation, from my point of
view, can be achieved in the next years.
In the next chapter I will analyse two crucial factors for the entrepreneurship activity,
especially in specialized sectors of IT, that is the human resource availability and the labour costs in
Italy.
2.3 Human resources and Labour cost
One of the biggest problem for startups, from the early phase towards the different growth
milestones, is to be able to employ and find the right people with the right skill.
In my paper I will describe labour costs faced by Italian IT startups by focusing on three important
components:
 Searching cost for the right employee with the right skills
 Motivating employee to undertake the dangerous journey of the startup
 Flexibility in hiring/firing employee
Before analysing in detail each of the components of labor costs, it is useful to give an
insight about the team composition of the startups in specialized IT sector.
The team composition of “digital” startups in Italy, basing on both on data available from the “Mind
on the bridge survey 2013”74
on 108 startups and 254 entrepreneurs and on the research of Niccolò
Meroni, starting from the data available from “Startupbusiness”, on 185 “digital” entrepreneurs, is:
74 Mind in the Bridge, “Sorry, not everyone is born to be a startupper “, Mind in the Bridge Foundation, 2013
(http://mindthebridge.org/wp-content/uploads/2013/12/MIND-THE-BRIDGE-REPORT-2013_ENG.pdf)
42

 Raging from 2-4 members, averaging 30 years old
 composed by entrepreneurs having established friendship networks in the work environment
(39%), during university studies (26.1%) or other channels (31.5%); less probable is family
entrepreneurship (9.67%)
 30% of entrepreneurs are identified by Mind in the bridge as “Proven Entrepreneur”, with
past experience in the entrepreneurial activity, with 38% of co-founders belonging to this
type
The data about the proven entrepreneurs is particularly relevant for the ability of startup to attract
better human resource; in fact, proven entrepreneurs, due to their management skills and previous
entrepreneurship activities, are able to obtain considerable amount of funding (30% of them succeed
in raising more than €200,000, 50% of them more than €100000) and are more able to attract a
higher degree of human capital skills (22% of the startups of proven entrepreneurs have more than 4
founders).
2.3.1 Human resource availability
A recent trend in Italy is the boom in the technological parks and incubators in Italy, as we
have explained in the previous paragraph. The proliferation of an active and vibrant ecosystems of
infrastructures, especially in collaboration with universities, provides an useful human capital pool
from which choose the employee with the right skills needed for the startups and a tool for making
the young to come into know about the startups.
Although the recent trend of reduction of public financing to the Italian university system,
universities managed to develop a network of different infrastructures, such as:
 Offering co-working spaces for startuppers-students
 Incubators financed by the universities itself.
Peculiar examples can be found in different geographical areas of Italy, highlighting the fact that
this trend is spread at a national level, rather than constrained to already well-developed regions:
43

Geographical
area
University Project name Description Sectors
North-east University of
Padova
“Start Cube”75
Incubator program in
partnership with
“Fondazione Cassa di
Risparmio di Padova e
Rovigo”
Hightechnology
North-west Politecnico di
Torino
“I3P”76
Incubator program; since
2011 I3P launched the
program“Tetrabit”, focusing
on projects related to
consumer services in the IT
sector, such as e-commerce,
web and mobile app
High technology, with
Tetrabit focused on IT
Center LUISS “Guido
Carli” business
school
LUISS Enlab77
Accelerator program, in
collaboration with
Lventuregroup
IT sector, especially:
 Gaming
 Social
 Mobile apps
 Consumer
services, e.g
daily life
 web platforms
South and
regions
University of
Calabria
Technest78
Incubator, financed also by
the Minister of economic of
growth as part of the
C.R.E.S.C.I.T.A project
(development project to
promote the creation of
hightech startups in
Calabria)
Hightech, for what
concerns the IT sector
it is specialized on
open source software
Table 7: Examples of University incubators and accelerators
Incubators and accelerators, in light of what we have analysed before, help in creating clusters of
innovation which are beneficial to IT startups in two different ways:
 They can be directly supported by those infrastructures
 They can exploit the larger flow of skilled people in the surrounding area, increasing the
probability to find an employee with the right skills while and reducing the searching costs
The increase in number of incubators in universities goes pairwise with the increase in attention by
75 “Start cube website- http://www.startcube.it/?page_id=128
76 I3P Homepage, http://www.i3p.it/
77 LUISS Enlabs homepage, http://www.luissenlabs.com/program.html
78 http://www.unical.it/portale/portaltemplates/view/view.cfm?20700
44

Italian universities, as it is happening globally, to offer courses of studies oriented to offer a
background in start-up management and foundation ; at the same time there is an increase of
projects offered by Universities in which students can better understand how to develop a business
idea in the startup context.
Some examples are the the PhD “MasterLab in Digital Economics & Entrepreneurship”, offered
by University of Ca' Foscari in partnership with the incubator/accelerator H-Farm and the
laboratory of “Strategy, Entrepreneurship and Innovation (STEIN)”79
in University of Trento.
The efforts, both from the public government both from universities, in order to give the startups the
opportunity to choose among a larger human resource pool have more human capital to employ,
however, still need more time to become effective.
This is proven by the data and opinions gained in 2014 by the “Osservatorio Startupper's voice” on
200 Italian startups, the majority belonging to the digital sector.80
Analysing the results, obtain that:
 40% of startups, at the moment, are looking for employees in the labor market
 38% of the startups are willing to employ in the next six months
 65% of the startups has found lack in competences among the candidates
 Only 15% admit to have found the right match employee/startup
 The most researched professional figures in IT startups are expert programmers, social
media marketers, namely experts in promoting trough the web the product and the brand,
and financial and business administrators
The results can be explained by two different causes:
 Early phase of a process of spreading the entrepreneurial culture and skills among young
people
 People with the required skills are already employed by other institutions or well
established companies81
The two causes are accountable also for the high costs in motivating skilled employee for the Italian
startups, which is one of the main components of the labour cost faced by Italian IT startups; the
next paragraph will be devoted to describe also labour flexibility concerning temporary contracts of
workers, highlighting also the main regulations surrounding this important matter.
79 Strategy, Entrepreneurship, Innovation (STEAN) home page- University of Trento: http://events.unitn.it/en/stein-
lab
80 http://www.ilsole24ore.com/art/tecnologie/2014-05-26/le-startup-italiane-vorrebbero-assumere-ma-non-trovano-
competenze-153103.shtml?uuid=ABK51LLB
81 See supra
45

4.3.2 Labour costs
The cost of motivating skilled employs to join a startup businesses may be very heavy; this is due to
all the risks that the worker must bear in working in an uncertain business. This cost is particularly
pronounced especially for skilled IT employees, such as IT engineers; in order to convince them, it
is needed a higher monetary incentive trough monetary compensation, for the startup that wants to
get hands on the best talented employee.
However, monetary and non-monetary incentives, such as s public recognition or possible growth
in the career pathway, sometimes may not be sufficient for a startup to hire the right skills that it
needs.
This is made even worse by the financial constraints of startups at the first stages of growth,
especially for Italian startups in which the private equity market, as we said before, is still
developing; in fact, the financial constraint put limits to the amount of direct monetary incentives
that they can offer to skilled employees, reducing even more the probability to get the key human
resources.
In order to reduce the incentive costs, Italian government made possible, in the Decreto Crescita 2.0
in 2012, to pay employees with stock options, reducing the cash incentive needed to attract them,
even from abroad.82
This kind of payment is allowed, after the 2012 regulation, also for external collaborators or
freelance professionals, thus decreasing the pressure on the cash of the startup.
In Italy, labour market mobility and flexibility has become one of the main topics of
discussion in the government agenda, especially for what concerns inter-firm mobility83
, namely
firing/hiring practices and, for what concerns the latter, flexible work time schedules.
The importance on flexibility in the labour market has been caused by the global financial crises in
2008, with its aftermath on recent Italian economic condition, characterized by a slow rate of
growth of GDP or a low overall ranking in the job category (32th of the total 36 countries) of the
Better Life Index (BLI) classification84
.
82 Italia startup, “Restart Italia!”, 2013 (http://www.italiastartup.it/wpcontent/uploads/2013/11/RestartItalia-1AnnoDopo.pdf)
83 Friedrich Klau and Axe1 Mittelstadt, “Labour Market Flexibility”, Organization for Economic Co-operation and
Development (OECD), 1985, pp 12-13
84 Better Life Index is a measure developed by the OECD, trying to summarize the well-being of population in
different nations by looking at two macro-factors: material living conditions (housing, income, jobs) and quality of
46

Operating in a flexible labour market bring some benefits both to the startup and to the
employment situation of the economy; in fact, the main benefits are:
 increase employment, by making more appealing for startups to hire without being forced to
keep the same level of labour in troublesome situations
 reduce labour costs, by decreasing cash and time needed to employ or fire people, being able
to adapt quickly at possible economic downturns
In order to provide a flexible context, it is necessary to offer a fast bureaucracy that do not
undermine future employment decisions, especially in better periods for the economy.
Italian government, forced by the static employment situation, specially between young people,
since the recent years focused the efforts on regulating temporary contracts85
; the main objective of
the regulations are aimed to avoid the abuse of this type of contract, while, at the same time,
fostering the creation of open-ended contracts.
The first important bill about this subject has been enacted under Government Monti, in 2012, by
the minister Fornero, with the law 92/102. Besides the goal of creating a more dynamic
occupational environment, in which new jobs are created and a sustainable growth can be pursued,86
the regulation was aimed to
 Create new durable and stable working relationship, while at the same time reaffirm the
predominant importance of the open-ended contract, defined as the “dominant contract”
 Foster the creation of new jobs trough the learning process of apprenticeship, fundamental
among young people
 Avoid the misuse of regulation of flexibility of contracts while at the same time foster a
reduction of time needed to the fire decisions
The main points of the reform 92/102 are:
 Abolition of the motivation in the creation of the temporary contract, as long as the contract
is stipulated for first time and its duration does not exceed 12 months87
 In order to avoid the abuse of temporary contracts, the time needed to stipulate another
life (community, education, environment, governance, health, life satisfaction, safety and work-life balance). OECD
better index executive summary 2014.
(http://www.oecdbetterlifeindex.org/media/bli/documents/BLI_executive_summary_2014.pdf)
85 Temporary contracts are contract with a defined final exipration date, having any type of object concerning the
mansions of work between the employer and the employee.
86 Legislation decree 28/6/2012 number 92, art 1, http://www.normattiva.it/uri-res/N2Ls?urn:nir:stato:legge:2012-06-
28;92
87 http://www.pmi.it/impresa/normativa/articolo/61059/il-contratto-a-tempo-determinato-dal-2013.html
47

temporary contract has been increased, from 10 to 60 days if the contract lasts less than 6
months, or, if it is longer than 6 months, from 20 to 70 days.
 If the contract has exceeded the duration of 36 months, it must be converted in an open-
ended contract
 A mandatory contribution to the Insurance of Social Employment (ASPI) , equivalent of
1.4% of the social security taxable base, for each temporary worker. This has the goal to
discourage the use of temporary contracts.
Those modifications applied to the temporary contracts were due to the bad situation in which Italy
was in 2012 and were aimed at increasing the rate of people employed in an open-end contract,
trying to discourage the usage of temporary workers in order to give more stability to the job places.
However, those regulations were considered too severe by the government Letta in 2013, and this
brought to a new legislative decree, “Decreto Lavoro”, with much less obligations for temporary
contracts relations.
In fact, the key elements of the legislation are:
 Incentive for companies who employ young people, with age from 18 to 29 years old, even
with under a temporary contract. This incentive is calculated as one third of the social
security taxable base up to 12 months for temporary contracts.88
 The constitution of a individual formative plan89
, for what concerns the apprenticeship
contracts, is mandatory only for specialized skills in technological and professionals
competences
 The period of time from between the end of the temporary contract and the stipulation of a
new temporary contract has been brought back to the level before the “Legge Fornero”,
namely 10 days and 20 days for contracts lasting less or more than 6 months, respectively90
The focus on apprenticeship contracts is still a concern for the Italian prime minister Matteo Renzi,
with its “Jobs Act Legislation decree”91
has brought more features to companies, also for startups,
wishing to hire more people under temporary contracts for being more flexible:
 The temporary contract can be extend up to 6 times in the three year maximum, as long as
the contract refers to the same job activity of the previous ones92
88 Legislation decree 9/8/2013 n°99, Gazzetta Ufficiale,art 1, comma 1-22
89 The individual formative plan was first described in the legislation decree of 14/09/2011, n. 167
90 http://www.lavoroediritti.com/2013/09/il-contratto-a-tempo-determinato-dopo-il-decreto-lavoro-2013/
91 The data about the “Jobs act decree” are updated to 25 August 2014
92 http://www.ilsole24ore.com/art/notizie/2014-03-14/piano-renzi-ecco-regole-i-contratti-tempo-determinato--
165432.shtml?uuid=ABX5062
48

 Up to 20% of total employees can be hired with a temporary contract with the possibility,
for startups with 5 or less employees, to hire a temporary worker.
The goal of the recent legislation is to increase the flexibility of labour, especially important for IT
startups due to the difficulties in find skilled persons, while, at the same time, to mitigate the
adverse effect of increasing precarious labour condition caused by the temporary work.
In fact, this can be made possible through the creation of new jobs and by incentivizing the creation
of more stable working relationships.
However, the implementation of this legislation decree still needs more time to increase the
confidence of startups in employing more people with stable and durable relationship.
The difficulties encountered by Italian startups in the labour market is also evidenced by the data
about the number of employees that innovative startup disclosed in the business register of the
chamber of commerce, in which the majority of the startups has has less than four employees.
This data confirms the fact that the Italian labour market has still wide margins for much interval of
improvement but it is developing at a fast rate, especially for what concerns human resources,
helped also by the good network of universities and infrastructures.
However, the recent legislation failed to solve the difficulties of Italian IT startups to employ skilled
people, highlighting the fact that in order to foster an entrepreneurial culture and restarting the
engine of employment among young people, decisions made by government are not enough to offer
the flexibility and the certainties needed by startups during the growing phases.
In the next paragraph I will describe the bureaucracy encountered by Italian IT startups in
the creation and in the closure of a startup business.
2.4 Creation and dissolution process of an IT startup in Italy
The easiness in setting up a startup, as we explained in the first chapter, is fundamental for
entrepreneurs in order to exploit their business ideas; it is even more important for IT startups, in
which many business opportunities can be found and have to be transformed rapidly into businesses
before other entrepreneurs, from their countries, can exploit it.
It is moreover important also to give an easy bureaucracy for entrepreneurs wishing to close a
startup, helping them to start again another business without being frustrated by the previous failure.
Both of those feature are essential for an environment not only to foster the entrepreneurial activity,
49

but also for avoiding the “chronicle failure”93
, namely the fear of sullying the honour of
entrepreneur with a startup failure, especially in Italy after the fierce recessions hitting the
economy.
In order to fight the “chronicle failure” of the entrepreneurs my making easier the entrepreneurial
activities, especially among young people, the Government enacted several regulation facilitating
the process of setting up an innovative start-up. In fact, in the decrees of March 24 2012 n° 27 and
n° 138 of June 23 201294
, it is possible for entrepreneurs to create a startup with less requirements
than the usual Srl, namely the limited liability company,and it is called “Ssrl”.
Characteristics Srl Ssrl
Partners age and type Legal Entity (e.g Associations
and institutions)
Physical Persons of every age
Physical persons of every age;
previously there was the
constraint that partners must
have less than 35 years
Equity capital needed Equity capital: >10,000 Euro Equity capital: <10,000 Euro, if
it exceeds the Ssrl will become
an SRL
Reserve of revenues95
None 10% of the first revenues, until
it reaches 10,000 Euro
Foundation expenses (e.g
notarial expenses, stamp duty)96
2.072,87 - 2.572,87 Euros Averaging 780 Euros
Table 8: Comparison between Srl and Ssrl legal form
The step that has been done for improving the process of creation of startups In Italy was necessary
in order to match with other nations with more developed best practices; however, there are still
many aspects that the SSrl legislation does not covers; in fact, in 2012 there was also another
package of reforms, developed by the task force “Startup Italia” called “Isrl” aimed at further
reduce the bureaucratic costs incurred after the creation of the startup.
In fact the goal of “Isrl” was to produce a “zero statute”97
by reducing even more the waste of cash
for startups due to bureaucratic processes, such as:
 Expenses incurred by entrepreneurs after the creation of the startup
93 http://www.economist.com/node/21559618
94 http://www.pmi.it/impresa/normativa/articolo/58001/come-aprire-una-srl-le-diverse-societa-a-responsabilita-
limitata.html
95 Reserve of revenues, in this case, refers to unavailable reserves by the company, (http://www.studiorighetti.it/wp-
content/uploads/2012/04/RISERVE.pdf)
96 http://www.studiosavia.com/Costi_Srl.html
97 Italia startup, “Restart Italia!”, 2012 http://www.sviluppoeconomico.gov.it/images/stories/documenti/rapporto-
startup-2012.pdf
50

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