June 10, 2022

Professional business angels: interview with Carlo Brunetti, Enrico Chiapparoli and Roberto Scibetta

Italian Angels for Growth is Italy's leading Angel Group with a mission to facilitate private capital investment in the Italian and international startup ecosystem, becoming the meeting point between entrepreneurs, investors, and companies.

This year IAG is celebrating its 15th anniversary since its founding. With Carlo Brunetti, Enrico Chiapparoli and Roberto Scibetta, we find out more about the processes and changes of the business angel figure.

Enrico Chiapparoli

Enrico, you boast more than 20 years of experience in investment banking and angel investing. You currently serve as CEO Italy and Head of Banking Central Eastern Europe. How did you approach the role of Business Angel?

I approached the role of Business Angel because I have always communicated to everyone my passion for technology, innovation, and entrepreneurship and so one of the founding partners of Italian Angels, whom I had met years earlier in my profession as an investment banker, contacted me in 2011 to ask me to join the group. I gladly did so and have continued to invest ever since.

Business Angel of the Year 2020 and IAG Board member since June 2021: How have the processes in the investment world and within IAG changed?

They have changed a lot. Ten years ago, there were very few seed investors in Italy. IAG was the focal point of the Seed ecosystem and could take time to best analyze each investment opportunity. As the ecosystem matures and there are more and more players (crowdfunding platforms, other angel groups, venture capital funds with Seed compartment, family offices, etc.), there is more capital available to entrepreneurs, deal flow is much faster, and processes have to adapt and speed up. It applies to the ecosystem and to IAG.

What was the investment you let slip through your fingers?

Everli. I did not participate in the initial investment; the founder then left the reins of the company to a professional management team with great industry experience who did a great job of growing the value but by then the rounds were too big and the valuations too high.

What, on the other hand, is the investment you remember most fondly?

Biogenera. Although through ups and downs, like all start-ups, we have been funding a project with high scientific relevance and significant growth prospects for more than a decade. Recently, in October 2021 we raised c. €2.8mln with a crowdfunding campaign and are now working to list on Euronext Growth Paris by the end of the summer, markets permitting.

Roberto Scibetta

Certified Public Accountant and Auditor with more than 20 years of experience in ordinary, extraordinary, and international taxation and a professional at Studio Pomara Scibetta & Partner. How did you approach the world of startups?

In my case, it all stemmed from Accenture, a company for which I worked for a long time before setting up on my own. Former colleagues, with whom I was writing a working paper on innovation and Technologies Transfer, told me about IAG and introduced me to Enrico Castellano, also a former Accenture. The meeting was revealing. He told me about the American mission, about that cultivated dream of making Italy great through innovation, about the spirit of Give Back and the salt of competition, complete with go-kart racing. It seemed like a fun and exciting experience. I wouldn't have been able to make gargantuan contributions on the track, but I would have had a say in investment, so I agreed. I still remember the first pitch meetings: I was coming from the elephantine world of banking, and I worked with multinational corporations and "cumenda" with the "little factory" every day; dealing with startups was completely different. I was faced with guys churning out brilliant ideas in garages, with a speed and dynamism I had never seen before. It was extraordinary, very fascinating. Just as extraordinary were the people I met. One above all: Lorenzo Franchini.

In 2020, business angels were fully recognized as qualified investors, part of the innovation ecosystem and the startup economy, no longer subjects with undefined contours. What has all this meant?

In 2009, if I had spoken about IAG's activities, I would have been looked upon almost with pity: it was as if I were helping the needy, those who invested in startups were seen as deluded, dreamers, or even fools. Today things are different: if you invest in the right startup, you win headlines. The social role we are given has changed, and today it is recognized not only by those who work in this field, but also at the social and political level.

Looking at the tax aspect, in 2020, the deduction on capital invested by Business Angels in innovative startups and SMEs has been raised by the government from 30 percent to 50 percent. Is this a tool that will help the sector?

As I also pointed out in my report to Parliament, this rule alas risks being a mere bait and switch: the deduction is pretended to be raised but the stakes for taking advantage of it are increased. The result is only one: 95 percent of investments cannot benefit from it. It is no coincidence that since it was introduced, no one in IAG has taken advantage of it. The doubt arises that it was written by unskilled people. Net of my critical view of this legislation, however, there is no denying that several steps have been taken in recent years to facilitate startups. There is a construction site in Parliament that continues to make progress. We ourselves as IAG were partly inspired by the reform of DL 179 of 2012, brought forward by the then Monti government with Corrado Passera. The truth, however, is that the lever of the investment tax deduction is not enough. Many other things are needed: for example, work could be done on the deductibility or deductibility of liquidation losses, or startups could be facilitated in their growth path so that they can be more easily acquired and aggregated.

Carlo Brunetti

Notary public, Life Science enthusiast and Champion in companies in the biomedical sector. holder of Innovative Startup Law in the Digital Innovation and Entrepreneurship course at Catholic University. In IAG for ten years, how did you get passionate about the world of innovation?

I have always had a knack for entrepreneurship and based on the principle "if you don't have a competitive advantage, don't compete," I have always tried, not always succeeding, to invest in activities with competitive advantages.

Innovation is aimed at competitive advantage par excellence, bringing with it greater risks and greater opportunities. It should also be said that the world of innovation is populated with enthusiasts, in every declension and with every meaning, and so it is a lively and pleasant world that exorcises the depressing and irritating aspects of the day by day, at least until the next write off.

Moreover, I think this is one of the few roads Italy can take to get out of the swamp of productive stagnation it has been in for 30 years. Of course, then there are the Italians, and that is often the problem.

What best practices has IAG brought to club deals and what changes have you seen in recent years within IAG in approaching startups?

IAG has grown a lot over the years, and if it is not yet of age, it is in the behaviors adopted. The level of startups we see has grown this for 2 reasons:

A) Growth in the level of entrepreneurial ventures that come up.

B) Most importantly, improvement of selection processes by the team and greater involvement of partners in selection.

This has led IAG to carve out its own influential space in the early-stage investment world.

The team has become very professionalized, at the operational level the leap occurred with Mezzotero's leadership, and continued effectively by Giacomo Valentini, and today by an excellent machine man of the caliber of Leo Giagnoni whose appointment as Managing Director I was a switched supporter despite (but for me it is a plus) his young age.

The level of analysis and the procedures implemented over the years are of a high standard partly because they are based on excellent elements with a lot of drive. Of course, sometimes the level of analysis clashes with the speed required by startups, especially in web sectors or otherwise in digital, and this is a difficult issue that will weigh even more heavily as new financial players continue to enter the market.

I think this is the main challenge ahead of us, I also think we need to push even harder on training our members. Structuring even more training with workshops and if possible, getting to do actual courses.

One suggestion I would then make would be to have HR experts assess investable teams to understand, as much as possible, the people and the relationships between them to assess the impact on the future of the startup. If we say that the team is the most important thing because execution is everything, it would be worthwhile to act accordingly.

What differences do you see between the Italian ecosystem and those in other countries from a business angel perspective?

In Italy there is no legal regulation of the business angel (Sec accredited) as it is in the US. Probably requiring capital/income requirements would avoid misunderstandings that can hurt. I have my regulator at home: it is my wife who "scolds" me when I get close to the Piave's line established on the investable portion in illiquid assets, but not everyone has this "luck" of having a wife nicknamed "cash is king" at home.

What is the importance of investing together with a group of business angels, (IAG), and what is the difference in doing transactions on an individual basis?

I have made investments both on my own (also with some good satisfaction) and with IAG.

I must say that with IAG:

(a) There is the possibility of examining deals from a multiplicity of angles that individually is simply impossible. The pooling of knowledge from so many different parties and in any case with different experiences and points of view is an asset that no fund, at least an Italian one, can hope to have. Of course, you lose flexibility and speed, but no one is perfect. However, selfishly, for my sector of choice, life science, this is not a problem.

(b) Access to quality deal flow is not comparable to what any individual, even if entrenched in their vertical, can hope to have.

(c) The team juggles at a high level several tasks that at best I would have to handle inefficiently or, worse a partner, and I could write a book on this entitled "course on shenanigans."

d) You get to know, and this is not the last reason, outstanding people and with some you create a human relationship that in the end is the real richness of our existence and is a great incentive to participate in the life of IAG.