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Italy’s National Innovation Fund gets underway: the first milestone in the building of a “Smart Nation Italy”

NewsFromThePlatform | September 18th, 2019

Italy as a Smart Nation? The time may have come. The first steps, at least, have been taken, even in the midst of a political crisis that creates uncertainty about the coming months. And there are some important news – starting from the very team of the new Conte government, which brings the Minister of Innovation back on stage.

Let’s start right here: Paola Pisano, the “lady of the drones”, professor of innovation management at the University of Turin, a true expert in the field, will serve as Minister of Innovation.

Moreover, a decree has been published in the Official Journal on August 27th, establishing the first Italian department for digital transformation reporting directly to Palazzo Chigi. Its operations will start in January. These are strong signals, to which we hope concrete actions will follow.

Meanwhile, the National Innovation Fund was officially created on August 5th, just before the government’s crisis, with an initial endowment of 1 billion euros and with the promise that it would operate as a fund of funds, directly investing in innovative startups and SMEs. It was announced with great fanfare in March by former Minister Luigi Di Maio. From June it was widely expected by the Italian Venture Capital ecosystem as a potential boost for a market that has just found its own growth trajectory, but which has yet to reach the levels of other European and overseas countries.

The official launch of the Fund corresponded to the transfer of 70% of Invitalia’s interest in the capital of Invitalia Ventures SGR to Cassa Depositi e Prestiti (CDP). In fact, the Fund is Invitalia-CDP’s investment vehicle and will be the pivot of the industrial policy for startups and innovation.

In terms of endowment, 110 million Euros will be allocated to the Fund, besides 400 million Euros that have already been allotted by Invitalia Ventures and 500 million Euros of VC investments that CDP will allocate into the new vehicle.

CDP will therefore act as a control room “aiming at unifying and multiplying public and private resources dedicated to the strategic topic of innovation“. The National Innovation Fund will be a multi-fund entity that will operate exclusively through Venture Capital methodologies, which the State definesmeaning the investments, both direct and indirect, in qualified minorities within the capital of innovative companies, aiming at supporting start-ups, scale-ups and innovative SMEs, in order to avoid the sale off and dispersion abroad of talents, intellectual property and other strategic assets… The investments are made by the dedicated funds of NIF in a selective manner, in accordance with the best practices in the sector and based on the ability to generate impact and value for both investments and the Italian economy. The selectivity, flexibility and speed of investments are the elements that allow the VC to be the key market tool for developing the innovation“. In short, the path seems to be the right one – the same one that allowed France to become the home of Venture Capital in continental Europe, surpassing Germany (as we have explained here).

The logic of venture capital is certainly the most adequate to create widespread financing opportunities for companies – like start-ups – that are not yet firmly structured and have a high potential for development. The next thing to do would be to create the best conditions so that the Innovation Fund could be effectively implemented, setting up investment monitoring tools and avoiding “rain investing”, in order to focus attention and money on truly innovative and strategic sectors.

The Fund is only the latest in a series of pro-innovation measures by the outgoing government, which, although against the background of other more controversial issues, has made the modernization of Italy its strong point. Among these, there’s a voucher for innovation managers: up to 75 million Euros in 3 years to support the technological and digital transformation of SMEs and business networks. Besides, there’s the extension of 30% tax breaks from startups also to investors in innovative SMEs. Just to give one more example, there’s the obligation for ISAs to invest 3.5% of the liquidity in venture capital funds. If this is the way, the idea of creating a Smart Nation can actually take shape.