Venture capital slowing down, 1.1 billion invested in innovative Italian startups in 2023 – VeM Report 2023

21 February 2024
Publications, startup, Observatories, Finance

Expected decline also considering startups founded by Italians based abroad (1.4 bilion) after the record of 2022. Slight decline for new operations, but VC in Italy is maturing and aligning with the most advanced innovative ecosystems

After a constant growth that began in 2018, venture capital is scaling up with a sharp slowdown in investments in innovative Italian startups in 2023. This is what emerges from the 2023 research report of the Venture Capital Monitor (VeM), officially presented on Tuesday 20 February 2024 in Milan.

The study - carried out by the VeM Observatory active at the Liuc Business School and AIFI with the contribution of Intesa Sanpaolo Innovation Center and E. Morace & Co. Studio Legale and the support of CDP Venture Capital SGR and IBAN - aims to permanently monitor institutional early stage activities in our country.

In an increasingly uncertain context, Italy aligns itself with the global trend and closes 2023 with 330 operations between initial and follow on, compared to 370 the previous year (-11%). Looking exclusively at new investments(initial), last year there were 273 (there were 310 in 2022).

As regards the amount of investments in innovative Italian startups by domestic operators (717 million) and international ones (368 million compared to 853 in 2022), the value stands at 1.1 billion euros distributed over 302 deals: a significant decline (-43%) compared to the almost 1.9 billion in 349 transactions recorded in 2022. However, for the third consecutive year investments exceeded one billion euros, rapresenting a sign of consolidation and maturity of the Italian market.

The amount invested in young innovative companies based abroad founded by Italian entrepreneurs is stable, standing at around 300 million euros distributed in 28 rounds in the last 12 months after the significant drop in 2022, when from 919 million in 26 operations in 2021 they had fallen to 302 million over 21 rounds.

Adding the two components, the overall total of investments in innovative Italian startups in 2023 stands at around 1.4 billion euros, while in 2022 they were almost 2.2 billion.

The maturation of corporate venture capital in Italy

As regards corporate venture capital activities, the recent trend is confirmed, with a notable presence of Corporates in the venture capital rounds which, in fact, participated in 22% of the deals supporting new entrepreneurial entities or in the early stages of development. Data in line with the findings of the last three years, demonstrating the progressive maturation of the Italian VC.

In detail, venture capital and corporate venture capital invested 559 million distributed over 200 operations in innovative startups based in Italy, while syndicate activities between venture capital, corporate venture capital and business angels recorded investments amounting to 526 million euros 102 deals. BAs alone invested 34 million in 71 rounds, with a decrease in the amount compared to 79 million in 72 deals in 2022.

Technology Transfer: invested 232 million euros in 2023

Furthermore, the total investments in TT (Technology Transfer) in 2023 amounted to 232 million euros across 67 transactions, attracting several international investors. Important results also reached thanks to the impact of the funds of the ITAtech platform, which to date have raised over 300 million, making 166 investments since 2018 for a total amount of almost 360 million euros (including co-investors).

The total of these activities leads the early stage supply chain in Italy to have invested over 1.1 billion euros across 373 rounds. Adding also investments in foreign startups with Italian founders, the amount in 2023 stands at over 1.4 billion euros out of 405 rounds: 800 million less than 2022, which closed with investments of just under 2.2 billion distributed across 445 deals.

Why investments in innovative Italian startups decreased in 2023: from alignment with international trends to the absence of “mega deals”

“After a long historical series of year-on-year growth, the Italian VC market has aligned with the trend of international markets which saw a contraction that emerged already at the end of 2022 - underlined Luca Pagetti, Head of the Financing and Growth structure of Startup of Intesa Sanpaolo Innovation Center -. The causes may be multiple, starting from the lower presence of mega deals compared to 2022 and the trend in interest rates. The maintenance of the overall value above one billion euros, the increase in the number of exits and investments in Technology Transfer also from abroad, are positive signs that emerged from the Report, as is the rebound of the VeM index in the last quarter”.

Pagetti then dispelled some clichés, clarifying how Italy is in 18th place among 27 European Union countries in terms of proportion of Venture Capital investments in relation to GDP and how Italian operators are not numerically limited, although they are to believe the opposite.

“Our Group, in the ongoing industrial plan, confirms through the Intesa Sanpaolo Innovation Center its support for the growth of startups also with ecosystem initiatives and in support of the territories. The establishment in 2022 of the SEI Sviluppo Ecosistemi di Innovazione fund managed by Neva SGR, a company 100% controlled by Intesa Sanpaolo Innovation Center, is a further confirmation of our commitment”, concluded Pagetti.

For the President of AIFI, Innocenzo Cipolletta, “in a year, albeit difficult, as 2023 was, a total of over 300 operations were carried out, a sign that the Italian venture capital market is consolidating the new level of development achieved, in I hope to fill the gap compared to more advanced markets. Despite the lack of large operations, the high number of those carried out is a sign of fertile ground in which we can continue to invest to aim for new champions of innovation”.

Geographical and sectoral distribution of investments in innovative Italian startups

Regarding initial investments, Lombardy confirmed itself as the Region with the largest number of target companies in our country, 113, or 46% of the market (in 2022 it was 44% with 124 companies). Followed by Lazio (13%) and Piedmont (8%). Worth noting is the significant concentration of target startups in Central Italy, which went from 17 to 23% mainly thanks to intense collaboration between private players and regional financial companies.

Exactly as in previous years, from a sectoral perspective in 2023 it was ICT that catalyzed the interest of VC investors with a share equal to 38% of the target companies. Specifically, 32% of the operations involved innovative startups active in the digital consumer services sector, while 68% concentrated on companies with a focus on enterprise technologies.

As observed in the first half of 2023, Healthcare confirms strong growth being the target of 12% of initial investments (+4% on an annual basis), while 9% was directed towards the other services sector leaded by the emergence of edutech. Follow Fintech and Energy and Environment, which attracted 7% of investments.