In the era of TikTok trends and YouTube retrospectives, the resurgence of interest in the Roman Empire offers a nostalgic glimpse into a time of opulence, architectural marvels, and boundless conquests. Yet, this illustrious past stands in stark contrast to the contemporary technological landscape of Italy.
Despite its historical grandeur, modern-day Italy grapples with a digital infrastructure that ranks among Western Europe’s least advanced. The reasons behind this technological lag extend beyond infrastructure challenges, encompassing cultural barriers and bureaucratic hurdles. To comprehend why a nation once at the vanguard of innovation now languishes, we embarked on an explorative journey.
Financial Crisis PTSD and Fear of Risk
The reverberations of the 2011 sovereign debt crisis continue to haunt Italy’s entrepreneurial spirit. Escalating labor costs and governmental austerity measures cast a shadow over investments, stifling the country’s growth. This aversion to risk-taking, however, traces its roots back further, emanating from the post-World War II era. The nation’s focus on fortifying its economy led to a preference for secure investments guaranteeing capital preservation or positive returns. Consequently, ventures like Generali thrived, while realms such as venture capital and private equity lagged.
This risk-averse climate stifled Italy’s startup ecosystem. In 2019, Milan’s tech hub secured a mere €311 million in venture funding, a fraction compared to other European counterparts like Amsterdam (€900m), Paris (€3.3bn), and London (€9.7b). Such hesitancy to take risks led to constricted cash flows, exacerbating Italy’s technological stagnation.
“Fuga di cervelli” (Brain Drain)
The phenomenon of “fuga di cervelli,” commonly referred to as the “brain drain,” encapsulates a poignant narrative within Italy’s socio-economic landscape. This poignant term compacts a multifaceted exodus of highly skilled individuals, particularly young talents and professionals, seeking opportunities beyond the confines of their homeland due to a variety of challenges they encounter.
The history of brain drain in Italy finds its roots in the amalgamation of diverse factors. Historically, Italy has grappled with economic challenges, bureaucratic complexities, and limited job opportunities, especially in certain specialized sectors. This, coupled with institutional constraints and a business landscape perceived as less conducive for innovation and entrepreneurship, has contributed to the migration of bright minds seeking better prospects elsewhere.
One of the primary catalysts for brain drain is the scarcity of opportunities commensurate with the talents and aspirations of highly educated individuals. Despite being home to prestigious universities including Bocconi and Politecnico di Milano, the local ecosystem often struggles to attract and absorb these graduates effectively.
Moreover, bureaucratic hurdles, rigid labor markets, limited support for innovation and startups, and perceived difficulties in climbing the career ladder have further dissuaded these skilled individuals from establishing themselves within Italy’s borders. The lack of a vibrant and supportive ecosystem for entrepreneurial endeavors, particularly in burgeoning sectors like technology and innovation, has prompted many aspiring entrepreneurs and tech-savvy individuals to seek greener pastures abroad. One of the first entrepreneurs to build his business in the UK instead of Italy was Riccardo Zacconi, co-founder of the CandyCrush giant King.com. On the topic, he remarked “if only it were possible to ‘think globally’ in Italy, many more startups would be successful.” And he was not the only one to pursue his entrepreneurial dream abroad. As reported by Sifted, there are three billion-dollar tech companies founded by Italians in the UK and eight in the US, versus just two unicorns in Italy itself.
This exodus of talent has far-reaching consequences for Italy’s innovation landscape and economic growth. As skilled individuals depart seeking better opportunities elsewhere, Italy loses the potential contributions these individuals could make to the local economy, entrepreneurship, and technological advancements. It not only impacts the existing business ecosystem but also stunts the growth of nascent industries and hampers the overall competitiveness of the nation in the global arena.
Addressing brain drain necessitates a comprehensive approach that involves policy reforms, fostering a conducive business environment, incentivizing entrepreneurship, and creating ample opportunities for talented individuals to thrive within the country. Encouraging initiatives that promote innovation, ease bureaucratic hurdles for startups, and foster a culture of entrepreneurship can serve as stepping stones toward stemming the brain drain phenomenon.
Efforts to bridge the gap between academia and industry, providing mentorship, facilitating access to funding, and creating an ecosystem that nurtures and rewards innovation could incentivize talented individuals to stay or even return to Italy to contribute to its growth and development. In essence, understanding and mitigating the causes of brain drain are crucial for Italy’s sustained economic prosperity and innovation-driven growth, ensuring that the country retains and harnesses the potential of its brightest minds for the collective benefit of society and the nation’s progress.
The Governamental and Dynastical Push
Over the past decade, the Italian government has actively promoted fearless VC investments, recognizing the increasing importance of tech. In 2012, the Minister of Economic Development, Corrado Passera, launched the “Growth 2.0” programme, providing millions of euros and tax incentives to qualifying startups. Subsequently, in 2015, the government invested in the Italian tech ecosystem through Cassa Depositi e Prestiti (CDP).
Further, the government-controlled CDP Venture Capital’s “National Fund for Innovation” manages €765m, with €100m supporting 160 startups. Since its venture arm was formed, CDP has backed almost 200 local startups. With the onset of the pandemic, the government explicitly pursued a digitalization strategy, offering incentives to tech startups, investing in businesses in the poorer south, and implementing digital public services like PagoPA for online tax payments.
While there are numerous commendable government initiatives to grow the tech sector, there are many others in the private sector stepping up to the plate. In fact, Italy’s wealthiest families have recently gained a profound interest in tech investing as an asset class, playing a fundamental role in betting on Italian tech.
Funds such as Exor Ventures (Agnelli family focusing on growth deals) and its accelerator seed fund Vento, H14 (Berlusconi family, focusing on growth deals) and its seed fund Ithaca Investments, Alecla7 (Moratti family), Rancilio Cube (Rancilio family), and others are the clear examples of how Italian entrepreneurs are starting to invest in VCs and startups internationally, gaining the know-how, and bringing it back to Italy to help the ecosystem grow. Most recently, Alessandro Benetton, part of the Italian family behind fashion brand United Colors of Benetton, backed as anchor investor the new VC firm, 2100 Ventures — launched by Andrea Gennarini and Andrea Casasco — investing in early stage B2B startups across Europe as reported by Sifted.
A New Dawn
The recent surge in Italy’s investment sector, catalyzed by the unforeseen acceleration towards digitalization prompted by the COVID-19 pandemic, has ignited a renewed sense of optimism within the nation. Notably, the meteoric rise of homegrown successes such as Scalapay and Satispay serves as a testament to the untapped potential of Italy’s burgeoning venture landscape. These success stories have reverberated throughout the entrepreneurial circles, signaling the emergence of a robust Italian venture ecosystem, albeit still in its nascent stages.
Yet, despite these glimmers of triumph, Italy stands at a crucial juncture demanding substantial reforms to fortify its position on the global innovation stage. The need of the hour lies in initiatives aimed at enticing expatriates back to their homeland and alluring Italian talent working abroad. Comprehensive reforms should address not only the bureaucratic complexities but also the fiscal and regulatory impediments that have historically dissuaded bright minds from contributing to the nation’s growth within its borders.
This pivotal moment demands a proactive stance in creating an environment that fosters innovation, entrepreneurship, and technological advancement. Encouraging policies that nurture startups, incentivize research and development, and streamline administrative processes are imperative. Moreover, creating platforms for knowledge exchange, mentorship programs, and providing access to funding and resources can serve as pivotal measures to beckon the diaspora of Italian talent back home and attract international expertise.
Furthermore, collaborations between the public and private sectors to invest in cutting-edge technologies, such as AI, cybersecurity, and digital infrastructure, are crucial steps toward propelling Italy into the vanguard of global innovation. The commitment to fostering a vibrant ecosystem, supported by conducive policies and a culture that celebrates innovation and risk-taking, will play an instrumental role in solidifying Italy’s position as a formidable contender in the global tech landscape.
Italy is uniquely positioned to capitalize on its inherent strengths — its rich cultural heritage, a reservoir of talent, and a spirit of resilience — to forge a path towards sustained technological excellence and economic prosperity. Embracing this moment with strategic reforms and visionary leadership can undoubtedly propel Italy into a new era of innovation, entrepreneurship, and global influence.