Startups: many small rounds or few, but good?

We Wealth's editorial staff, Andrea Messuti, Federica Albano

21.7.2022

Read Time: 3'

Finance Financial instruments & advisory Startup Businesses Pmi

Many mini-investment rounds are made in Italy, but our country is at a disadvantage compared to the rest of Europe and the United States in terms of investment rate in startups

Our country remains among the last in Europe for the rate of startup investment. Among others, one of the reasons for this backwardness is that Italy has never been prone to venture capital. However, a severe change of course in recent years is there for all to see. The United States is light years ahead of Europe. However, Italy remains the tail end even compared to similar contexts, such as France and Spain.

Average startup valuations

The data speak for themselves: in Italy, at the pre-seed and seed stage, the average valuation of a startup is about 2.5 million and 4.5 million euros, respectively, compared to 6.3 and 9.5 million dollars in the U.S. for the same stage of investment. Moreover, at the later stage of Round A, valuations in Italy are around 10 million euros, while in the U.S., the average valuation is $45 million.

Italy-other countries comparison on startup development

Our country's situation does not look good compared to the European context. Spain is the most developed country in southern Europe in terms of the amount raised (€4.1 billion in 2021) and the number of rounds (618). Germany is the second largest European country regarding the number of startups and volume of investments, second only to Great Britain. In 2021 in Germany, the total value of all venture capital investments more than tripled, from €5.3 billion to almost €17.4 billion (+ 229%). France, which in 2022 established itself on the European continent as a "startup nation," raised as much as €11.6 billion in 2021 (10 times the Italian startups raised in the same period).

Obstacles to startup development

A key factor hindering substantial investment in innovative companies in our country is a congenital aversion to risk, especially in the early stages of the venture. There are many high-quality enterprises that no one finances or that are financed only "in hiccups," with an inability to develop and operate efficiently. While it is true that gradually investing tends to be less risky, it does not allow innovative enterprises to start operating in the market and develop adequately.