Loris Lanzellotti is Co-Founder and CEO at Boost Heroes, one of the leading Italian venture capital firms focusing on investments and advisory services for high potential and globally scalable companies (boostheroes.com).
Previously, Loris worked at Salvatore Ferragamo, Accenture, Cisco System and Dpixel, a venture capital fund specialised in seed capital investments, targeting tech start-ups.
Loris graduated in Engineering at the University Tor Vergata in Rome, and received and MBA from NYU Stern School of Business and an International Management Program from London Business School.
Q: You have been working in the VC industry in Italy since 2010. How is the Italian industry compared to the rest of Europe? What good opportunities do you see in Italy?
Loris: The Italian VC industry is less capitalised compared to the rest of Europe. In fact, despite the € 4.4 trillion of private savings estimated in Italy, investors do not allocate much capital to VC investments.
In my opinion, this is due to the fact that the current risk-return profile of the Italian VC industry is not well balanced: the risk is not adequately remunerated by the expected return.
Seed and VC funds in other European areas, such as France, Germany, Scandinavia and UK, are well capitalised and able to reach a 20-25% net IRR, that correctly remunerate the risk of such investments.
In contrast, Italian funds are few, mostly dedicated to digital and medical sectors, have little capital compared to the incoming deal flow, probably because they struggle in reaching interesting returns for their investors.
In fact, in Italy we still record few exits at low prices, corporations don’t buy start-ups yet, and IPOs just started, with few listings in the AIM segment of the Italian Stock Exchange dedicated to SMEs. One of our portfolio companies, CleanBnB, was listed few months ago.
But Italy is full of investment opportunities: the deal flow is good and prices are low compared to other European countries.
In Italy, there are interesting start-ups that have built significant assets, not only in the digital field, but also in other more traditional sectors.
The labour cost of skilled employees is low, and Italian entrepreneurs have excellent entrepreneurial capabilities, but probably find hard to work together in order to create big scalable businesses, which can expand outside Italy. And the latter is probably the main reason why valuations are low.
Q: You are Co-Founder and Managing Director at Boost Heroes, a holding company focused on minority stakes in growth companies with no specific sector. What is the firm’s investment strategy? What are the results till now?
Loris: Boost Heroes is a holding company with more than € 10 million raised from more than 60 investors. The company’s investment strategy was not pre-set, but it’s the result of the experience I gained by working in this industry since 2010.
Boost Heroes’ approach has two subsequent investment phases.
In the first phase, we adopt a diversified and quantitative investment strategy. The goal is to lower the risk of the venture capital asset class, by investing small tickets in a significant number of Italian companies at seed level, leveraging more capital through co-investments with business angels or venture capital funds.
Therefore, in the first phase, we invest on average € 100k in 2 start-ups per month, which are raising from € 250k to € 5 million. We invest in start-ups that have already raised pre-seed money, have already validated their business model on the market, and have first KPIs to show us in a very light due diligence process.
In this phase, we co-invest with other professional investors; in seed rounds we act as lead investors, whilst in more advanced rounds we are followers. After our investment, we adopt a hands-off approach, which means we mainly facilitate networking with strategic or financial players.
In the last 4 years, we completed 100 investments, keeping our pace at 25 investments per year.
In the subsequent follow-on phase, we embrace a completely different investment strategy. We carefully select and invest in subsequent rounds of about 10% of our portfolio companies, which we believe have more chances to scale. Therefore, we invest maximum € 400k per company, in 2 or 3 start-ups per year.
The aim of the second phase is to achieve an attractive IRR for our investors. In order to do that, we aim at realising high multiples on the most promising portfolio companies; hence in companies we invested more. That’s why we are very selective in this second phase, and why we use a hands-on approach.
For the companies selected in the second phase we adopt a “buy & hold” strategy, as we don’t define in advance an exit horizon; for the remaining companies, we try to exit at the first viable occasion, and this should be easier with small tickets.
Few numbers till now:
70% of our participating companies are Italian based start-ups, companies run by Italian founders, or companies that target Italy from a commercial point of view. We have made more than 15 investments in EU, and we are main investors in Seedstars International, a US vehicle that invests in start-ups based in emerging markets, following the same investment strategy of Boost Heroes. We have recorded 3 exits (with 3x, 6x, and 9x multiples on invested capital), and we have written off only 4 start-ups so far.
Q: Do you think that Italy is an interesting country also for non-Italian investors? Why?
Loris: I am sure that Italy is interesting for international investors. We have been directly contacted by some relevant European VC funds, and a significant part of our portfolio companies raised capital by international investors.
In Italy, international investors can “buy” at prices that are lower than the ones in their countries of origin. I see that international funds are very selective, as they know that Italian entrepreneurs struggle in the scaling-up phase. But if they are able to help Italian entrepreneurs to embrace the right business attitude for a scaling-up and internationalisation process, I think that they will increase the chances to get high and interesting returns.
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