Fishing in the right pond

20th December 2016  

by Stefano Guidotti, CEO U-Start

In my recent Christmas wishes to those among our U-Start Club Members that had a chance to attend our Christmas event, I said that this period of the year is always good to look back at what one has done as well as to look forward at future plans. I would add that it is also a great time to look at the REASONS behind what we are doing, to dive deeply into the underlying motivations that guide us in our day-to-day activities and long-term commitments.

Let me begin  by reminding you of what defines us at U-Start. One could read our activity as “simply” facilitating private investors to get a foot into some of the best digital investments on a global perspective, co-investing with top tier global players. That is a true but a limited point of view on the vision moving us forward.

As my co-founder and one of the real engines at U-Start, Andrea Colombo, keeps saying: we are building the one and only platform that will allow over time to bridge the Italian industrial knowledge and private wealth into the digital revolution.

At the heart of WHY we are doing that there is, of course, the strong belief that, as in Marc Andreessen’s words, “software is eating the world”. We think that the future of our economy, our cultures and ultimately the world we live in, is strictly linked to the technologies that are being developed, all relying on the shift from the analogical to the digital era. But we can take that as a consolidated belief.

Just as important in defining the reason why U-Start exists is the fact that we are doing that by focusing on Europe and starting from the Italian speaking part of the Continent. I totally share Mattias Ljungman (Co-Founder and Partner at Atomico, one of the most interesting and successful VC funds focused on Europe) view when he says that “the future is being invented in Europe”. The growth that tech ecosystems are experiencing throughout the continent is just amazing, with new hubs like Paris, Munich, Copenhagen, Lisbon joining the “historical” ones of London, Berlin and Stockholm in the league of the best places in the World to start a tech company in terms of availability of talent, capital and structural support.

More and more, established corporates are seeing the links with younger tech companies as a vital part or their future strategies, creating opportunities for founders and investors and boosting the growth of the whole ecosystem. Data from the “State of European Tech 2016” report show that more than two-thirds of Europe’s biggest corporates for market capitalization have either invested in or acquired tech businesses in the last two years alone. Exit opportunities are not limited to West Coast giants like Facebook and Google anymore. PSA buying AutoButler, Accor acquiring OneFineStay, Lidl with KochZauber, Carrefour with Rue Du Commerce, Adidas with Runtastic, Michelin with are just a few examples in the last 18 months of such M&A trend. Similarly important is the growth in the number of the so-called European “unicorns” in the last 18 months, a period where valuations have calmed down globally and got more linked to solid unit economics and business models as well as to safer paths towards profitability. The Deliveroos, Farfetches, Xings, Funding Circles, TransferWises, Mindmazes, Auto1s, Boohoos are just some examples of companies that, on a solid growth path, are building up their global success from Europe, and in many cases, BECAUSE they started up from Europe.

And again, a key part of our vision is to create a long lasting entrance to this future being crafted in Europe precisely from where we are, in Lugano and Milan. We are sometimes criticized by our “neighbours” in the Italian ecosystem for our focus on Europe rather than Italy. But my reply to those comments is always pretty straight forward. We know all too well where our roots are, and we do want to play our role for the future of digital in Italy. But we are convinced of the fact that Italian start-ups are too often sub-optimal investment opportunities for financial investors. And we are also convinced that channeling private money to them (as too many players are doing in Italy) is probably more a damage than a favour to the Italian ecosystem. Data are there to tell us the truth: taking into account app downloads between October 2015 and September 2016, only 2M total downloads have been done on Italian-startup-made apps, versus 7M for Swiss start-ups, 206M for French start-ups, 223M for German ones, 230M for Spanish, 448M for Swedish, 489M for British and an astonishing 635M downloads for Finnish start-ups. What does that (together with a number of other indicators) mean? It means that Italian start-ups are 90% of the time not ripe yet to be treated as an asset class suitable for private investors.

The best things we think we can do for the future of the Italian digital ecosystem are to: (i) support those private investors in building up their competences and their knowledge of what does investing in a digital company mean in terms of valuation, investment process and follow-up support: in this way, when a mature, fast-growing Italian start-up shows up, those investors can look at it with knowledgeable eyes, set terms that make sense for both them and the company and be ready to deliver the value the company needs to grow; (ii) create the stronger links possible with international players in the digital VC arena. In that way we will be able in future to support Italian start-ups to be more visible and potentially get funding and support for those players who can be more relevant in helping them grow at a continental/global level; (iii) support other great European companies in expanding their operations to Italy. In this way we can bring real benchmarks closer to Italian founders and developers, while also help Italian talents to have extremely valuable working experiences that can create a fertile ground for future successful and investable ventures.

2016 is closing up giving us the strong confirmation that, as far as the digital revolution is concerned, we can be a crucial factor in taking the best of Italy to Europe and the best of Europe to Italy, creating value and opportunities for the investors and companies that are our constant guiding stars. We will keep being true to our vision while we are evolving into one of the most innovative players in the VC space in Europe, and our wish for 2017 is to keep doing that with the great people that have been supporting us in our path so far.

*Most of the data in the article have been gathered from the "State of European Tech 2016" report from Atomico and Slush