February 06, 2023

IAG Index 2022: growing Italian startups and focus in pre-seed

2022 was a decidedly good year for Venture Capital in Italy, which celebrated the first 10 years of the Startup Act, the decree-law that officially gave birth to the Italian Startup Ecosystem, providing a framework for the sector on issues such as the labor market, tax breaks, administrative simplification, and bankruptcy law.

The past few months have been the scene of the passing of the two-billion-euro mark for Venture Capital investments in Italy: a clear +67% compared to 2021, unlike more mature European ecosystems, such as Germany and England, where the volumes invested have remained substantially stable.

This positive trend is also reflected in the data emerging from the IAG Index, a thermometer of the startup ecosystem and calculated on the broad deal flow of startups analyzed in the selection of investment opportunities by Italian Angels for Growth (IAG).

While the breakdown at the sector level has remained roughly like 2021 (except for a slight redistribution between Life Science and other sectors), the picture that emerges from the data on the type of round well reflects IAG's positioning as a leader in seed Venture Capital in Italy.

The gradual maturity of Italian and international Venture Capital in fact has made the roles of the various players more defined for each stage of startup development, and this has allowed IAG to focus on the seed stage, which, despite a slight decrease in the figure, remains the focus of business angels. More than one in two of the startups analyzed is raising capital for this type of round, representing strategic investments to feed the pipeline of potential scaleups.

However, the IAG Index 2022 highlights a remarkable growth (+47 percent) in the number of pre-seed startups. The reason for this result is in IAG's choice as a club deal to bring the focus back to the early stages of project development, being able to seize the best opportunities early, thanks to the launch of Eden Ventures.

Last October, in fact, the Eden Ventures program started, an investment tool focused on pre-seeded startups with the goal is to intercept the best investment opportunities at the origin and support entrepreneurs from the development of the business idea to the approach with institutional investors with tickets up to 100 thousand euros. (Press Release of the launch of Eden Ventures here).

Geographically, the 2022 results show a significant growth trend in favor of deal flow from Italy: compared to 2021, the share of Italian startups analyzed grew by 12 percent. The result comes mainly from two factors: on the one hand, the increased market opportunities in the country, and on the other hand, the continuous and steady growth of its innovation ecosystem.

In the past year, in fact, the national startup ecosystem has made numerous steps forward, both in legislation and in that of building a system to support and grow innovative companies: the mobilization of public funds has created a leverage effect, reducing the gap with other European countries in investments.

Confirming the progress of our ecosystem, the valuation of startups in all their life stages also shows a marked increase, bringing them closer to those of other ecosystems that are now much more mature than ours. The gap remains, creating on the one hand attractive conditions for foreign investors, but on the other hand also allowing Italian startups to be able to obtain funds and valuations that are not too penalizing compared to their colleagues from across the border.

The Diversity & Inclusion theme remains a key driver in the analysis of a deal, where the team reaches its highest quality if it is the result of different experiences, skills, experiences, and mindsets.

In this regard, IAG continues with initiatives to enhance these two principles, pursuing the diversity campaign and creating partnerships with territorial and sectoral realities to develop a more innovative, fairer, and more sustainable society. The rich calendar of editorial content and interviews conducted with members, associates, and ecosystem players turned the spotlight on the topic, sparking reflection on how much more can be done to enact real change.

The 2022 results, although slightly down from 2021, confirm that more than one-third of the projects have at least one woman among the founders: this consolidation indicates a now structural component of the female presence in entrepreneurial teams, representing a definite shift in our ecosystem.

Sustainability and the social element are also central issues when evaluating a startup: investing in companies that incorporate ESG values represents a great opportunity to differentiate oneself in an increasingly competitive Venture Capital market while actively contributing to solving the greatest challenges of the 21st century.

Just to increase sustainable investing, last November IAG as a leader in Italian seed Venture Capital, joined VentureESG, a VC community that unites over 300 funds worldwide with the 'goal of helping the Venture Capital industry recognize the importance of ESG and provide and share resources and guidance to make ESG a standard part of due diligence, portfolio, and fund management. (Press Release of IAG's membership in VentureESG here).

In line with this, the 2022 data shows a significant 25 percent increase in the number of compliant projects, aided by increased media attention to the issue. In evaluation, the ESG element is viewed positively by IAG, which considers this aspect increasingly indispensable for companies that are to be the market leaders of the future.

Carlo Tassi, President Italian Angels for Growth: "IAG's role as a leader in seed Venture Capital is to be on the side of entrepreneurs, contributing to their success and concretely supporting innovation and startups in this country, hence the increasing attention to the elements of team diversity and ESG compliance. The IAG Index proves to be a valuable indicator to measure market trends and perceive in which direction innovative startups are going and how our ecosystem is evolving."