Andrea Colombo is the Founding Partner at U-Start Club, the leading Italian club for private investors in the venture capital field (u-start.biz).
The club has more than 100 members, who have invested more than € 50 million into international start-ups and scale-ups.
Q: You founded U-Start in 2012, when Italy started to look again at venture capital investments, thanks to the Startup Act. How did the idea of U-Start come about? What is its mission?
Andrea: U-Start is the “result” of various discussions I had with our former Founding Partner Stefano Guidotti and a family office based in Milan, which was looking at alternative investments.
In 2012, Italian private investors did not allocate much capital to venture capital investments. So we realised that there was the opportunity to establish a specialised advisory firm, able to assist Italian investors in approaching this particular asset class. We decided to focus on international venture capital investments, also because no other firms were chasing venture capital opportunities outside Italy.
Q: U-Start helps Italian investors to participate in series A to C fundraising rounds of selected digital and tech companies in Europe, US and Israel. What types of investment opportunities do you propose to the club members? Can you provide some examples?
Andrea: U-Start provides its members the opportunity to participate in rounds of private companies, from seed to growth stages, always in co-investment with the best international venture capital funds.
U-Start focuses on digital and tech companies, which are barely targeted by Italian private equity funds. We certainly look at companies that use digital business models, which are able to enhance Italian assets (i.e.: brands, food).
Some examples I can provide are Freeda, Deliveroo, Sum Up and Finless Foods.
We looked at Freeda at the very beginning, when the company was just a community of new generation women. Our club members were the first Italian institutional investors who believed in a new business model, able to interpret the revolution that is still taking place in the media world. We analysed the market, and we understood that there was room for a social digital company like Freeda in the media industry.
Deliveroo was an investment in the growth stage. Our club members invested in Deliveroo 3 years ago, when the company was already mature, and when nobody believed that food delivery could work in Italy. Instead, Deliveroo created the need of having restaurants at home, and now is part of everyday life, representing one of the most significant phenomenon in Italy.
Another example of growth stage investment is Sum Up, a mobile point-of-sale (mPOS) company that operates in an almost monopolistic sector, characterised by few large companies. Sum Up was able to make its way through the industry, with value added solutions. Recently, some of our investors exited, with satisfactory returns.
Finless Foods is an example of a disruptive seed investment. The company – which uses cutting-edge cellular-agriculture technologies to grow marine-animal cells, creating fish and seafood products – aims at changing the world. The risk associated to the investment is definitely high, because the technology is not ready yet, but the returns are definitely interesting.
Q: What differences do you see in the investment strategies between Italian and non-Italian professional investors? What is your vision of the Italian venture capital industry?
Andrea: US and European VCs use two completely different investment approach.
Since the USA has an incredibly high capacity for creating unicorns, US VCs can afford to use an aggressive investment approach. As they say, US VCs are “disrespectful” with their LPs’ money. They often carelessly decide to kill an investment because they have already invested in a unicorn, which can generate attractive returns for the entire fund.
On the other hands, European VCs adopt a more conservative approach: the number of write-offs is lower, and the performance is more distributed between the venture-backed companies.
The USA is still the reference point for the venture capital industry, even if now the market is extremely liquid, and it is difficult to invest at interesting valuations: competition in US is extremely high, and this raises prices.
Also in Europe there are some excellent opportunities, especially in well-established markets such as UK and Germany, but also in France, which is doing a fantastic job.
The Italian venture capital market is developing slowly. Probably because the managerial and political classes do not fully understand the power that venture capital and start-ups can have in transforming a system.
The capital invested in new companies creates employment, social mobility and unique skills. This is why successful companies are born in the USA or Israel, in ecosystems with the best digital skills.
Italy is beginning its development path. At the moment, only few entrepreneurs have experienced the full cycle: from the start-up phase, to the growth up to the exit
Italy is still struggling to get interesting performances because the capital available is not enough to support the growth of Italian start-ups. Exits are few, returns are still to be proven, and therefore private investors tend not to allocate capital to the venture capital asset class. That’s why public capital is needed, to give trust and support professional operators, in order to awake the system.
Q: In your opinion, are there good investment opportunities in Italy? Are international VCs looking at Italy?
Andrea: Yes, in Italy there are good opportunities that also appeal to foreign investors. Our country is not known for digital successes, except for few cases such as Yoox, Facile.it, Immobiliare.it. However, the Italian industrial base is unique for many other sectors such as food, industrial technologies, brands and lifestyle.
Personally, I’m a fan of business models that capitalise the know-how and the skills we have in Italy, in order to create incremental innovations or digitise traditional off-line sectors. And that enhance the industrial and entrepreneurial assets of our country.
I confirm that I see international VCs looking at Italy. These VCs are targeting less liquid markets, where they can find investments at reasonable valuations. And Italy is certainly one of the targeted markets.
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