Musement, Octorate and Bauzaar: three of our subsidiaries have been recently acquired by big corporates. On the basis of the French model, in Italy large companies have started looking at VC funds as engine of innovation. This can make a difference for our ecosystem
The last one was Musement. The tech travel platform has entered the orbit of German giant TUI Group with all its personalized services for tourists, and is today accessible to a potential audience of 20 million new customers. This operation is worth a few million euros and brings disruptive start-up innovation into one of the world’s biggest tour operators, while on the other hand offering a wide audience to small players providing tours and attractions. Such an audience would otherwise be unattainable, since 90% of the approximately 350,000 companies in the travel industry have revenues of less than one million euros.
Musement is not an isolated case. Always in the travel industry, at the end of 2017, the start-up Octorate – that has developed an innovative all-in-one cloud service to manage reservations, billing and daily activities of hotels and tourist facilities – was purchased by Dylog Italia SpA, national leader in the development and distribution of software. At the beginning of 2017, 42% of Bauzaar, e-commerce of pet products, was purchased by the Megamark group, the southern Italy leader of organized distribution making 1 billion euros in sales and having over 3,000 employees.
These are virtuous stories of corporate businesses acquiring start-ups from the portfolio of a venture capital fund: these three start-ups were, in fact, all participated by P101.
These stories also indicate that a change of pace is taking place in the ecosystem of Italian start-ups. First of all, since it involves three exits and Italy is ranked 8th among the 15 countries that from 2010 to 2017 have had a high exit activity, according to the “Startup M&As report 2017” by Mind the Bridge Foundation. It seems that Italy can finally aspire to climb the rankings.
Secondly, because it represents a very important step for Venture Capital: in this phase of the Italian ecosystem development, the investment of a large industrial group in external innovation through the acquisition of a VC-backed company is one of the most powerful fly-wheels for growth. While in more mature markets like the US, innovation is made by giants such as Facebook, Microsoft or Google directly purchasing start-ups, in Italy, which is still in an embryo phase of this journey, taking interest in VC portfolios means that a corporate company wants to avoid the often unnecessary strain of fishing from the great sea of start-ups. On the contrary, choosing from a range of start-ups that have already been selected by professionals allows the big company to introduce disruptive innovations that it might not be able to identify as such without the essential scrutiny of a VC fund. As well as to rely on the work of a mediator who can speak the languages of two different worlds. Triggering a virtuous circle that inevitably fuels innovation.
If we look at the studies on corporate venture capital (CVC) – which in 2017 reached a record value of 31 billion dollars globally (1791 deals and a growth of 66% year-on-year; source here) – we can see that Italy owns a very little share of this amount: 40 million dollars, according to the Crunchbase data elaborated by OECD and collected in the paper THE EVALUATION OF THE ITALIAN “STARTUP ACT” (September 2018). Between 2007 and 2016, in Europe, the UK was by far the largest beneficiary of CVC investments and received approximately $ 11.3 billion. Even Spain is doing better than us: it received a CVC share over 10 times higher than Italy, namely 580 million dollars.
However, it’s worth repeating that CVC is only a part of the complex system that brings capital from corporates to start-ups, and works better in more mature ecosystems. Corporates can invest “indirectly”, i.e. investing into VC funds. Italy should follow the French model: large companies approaching start-ups through those who select them professionally. An example is that of the 360square seed fund by 360 Capital Partners, which has collected capitals by Societé Générale, MAIF, Yves Rocher and Thuasne.
In Italy, this kind of experiences are very few. There is the case of Cisco, that has invested 5 million euros in the Invitalia Ventures I fund and is collaborating with all the major players, launching accelerators and other initiatives. The platform GrowITup, on the other hand, connects corporates and start-ups. It was launched in July 2016 by Microsoft and Cariplo Foundation. Some of its corporate partners are Enel, Intesa, Terna, Barilla, Peroni, CNH Industrial, Luxottica and Alpitour.
The road is still long but paved with opportunities.