The Italian tech ecosystem — an international VC perspective. Did Italy finally wake up?

Federico Wengi
6 min readSep 30, 2021
An example of Italian intellectual properties — hand gestures

For many years now I have been waiting for signs of the Italian tech ecosystem coming of age and becoming a credible tech ecosystem able to attract international VC money and to compete with more mature ecosystems such as Germany, the UK, France, Sweden, etc.

In the last few months, a few events that could point towards a new inflection point for the Italian tech ecosystem caught my attention. Together with our MBA intern Andrea we researched the ecosystem and are now happy to share our findings with you. Being born and raised in Milan, this is a topic that is very close to my heart and I really hope to help to bring Italy a bit more in the center of the tech community discussions.

Recent catalyst events

  1. November 2020 — Satispay ( a mobile payment company based in Milan, raised a €94m Series C from Tencent and Square
  2. March 2021Casavo ( a real estate market-making platform based in Milan, raised a €150m debt round from Goldman Sachs and at the same time a €50m Series C from Exor, Project A, Picus and others
  3. May 2021 — Commerce Layer ( a developers tool startup based in Prato, Tuscany lands a $16m Series B led by Coatue following a $6m Series A just a year before led by Benchmark, USV Angels and Mango
  4. June 2021 — Depop ( a fashion discovery marketplace, incubated by H-farm in Italy (before moving HQs to the UK), has been acquired by Etsy for $1.6bn
  5. July 2021 — It´s coming Rome!! 🥳🎉🥳 ( Italy is the European football champ! What does this have to do with the tech ecosystem? Absolutely nothing…but it's amazing

These recent developments highlight a very appealing trend in a country that is slowly trying to become a hub for unicorns. Italians never lacked the creativity and the business mindset, so when is Italy’s time to become a startup country? Some think that time has come.

A quick ballpark comparison

As a starting point, let us put Italy in perspective, by taking a look at 5 years worth of data (total capital deployed in startups of any kind) and by comparing it to the relative size of the economy.

Warning: it looks bad.

This is Italy’s GDP compared to a selection of EU peers…

Source: CB, Paua research

…while this is the total capital deployed into startups in the last 5 years…

Source: CB, Paua research

Trends in capital deployed

By observing 5 years worth of data in capital deployed in Italian startups, we learned quite a few things:

  1. More capital is flowing into Italian startups
  2. A healthy ratio of capital is deployed by international investors
  3. There is a notable difference in size between rounds with at least one international investor vs rounds with domestic investors only
  4. Probably one of the most encouraging signs, total capital deployed has been constantly growing. In particular, a run rate prediction of 2021 data shows that this year will likely break records and keep on building in the right direction. As of August 2021 Italian startups were able to raise almost as much capital as in 2019!
Source: CB, Paua research — data as of August 2021

2. The presence of international investors is arguably a sign of a maturing ecosystem. Data on the Italian ecosystem also here point in the right direction, with sustained growth and a healthy nominal value in relation to the total capital deployed. 2020 showed strong negative growth compared to 2019, but I would argue that this data point was driven by Covid-19, as international investors likely targeted investment more conservatively in domestic ecosystems. 2021 run rate forecast show a return to growth.

Source: CB, Paua research — data as of August 2021

3. To quantify the effect of international investors in the Italian ecosystem, we took a look at the average round size when international investors are involved and when not. Data clearly suggest that rounds with international investors are significantly larger (2x — 3x) than rounds without them.

Source: CB, Paua research — data as of August 2021

Some initial success stories and one major hub

Some Italian startups are emerging as (initial) success stories (for this mapping we considered companies with more than USD 10m in funding) and quite clearly Milan has established as the major hub for tech companies. Both startups with more than USD 100m financing are based in Milan (Casavo and Satispay).

Source: CB, Paua research

Having success stories is a factor that can kick-start a virtuous circle of newly minted millionaires that re-invest capital in the ecosystem at a high pace and builders that start companies based on the learnings they did while building.

Almost every startup ecosystem has had that:

Hopefully, companies like Satispay or Casavo can be that spark for the Italian ecosystem.

The human capital factor

Arguably, the building block of the Italian tech ecosystem now and in the future is the human capital. It has always been my belief that the Italian education system (I have been through it and through several others around the world) is second to none and data seem to support this theory.

Top-notch tech talent

A whopping 12% of top-tier AI researchers from Europe come from Italy (Italy's population account for ~8% of the European population). One can take this data point as a proxy for more general top tech talents.

Source: State of European Tech

Tech talent quantity

While Italy seems to be producing many top tech talents, it also seems to produce a large quantity of “tech employees” in general. Data show that in % Italy has the 3rd highest number of tech job postings after Spain and Portugal. I believe that this is a consequence of a low salary structure that put the country in the basket of “high-quality / low-salary” tech hubs such as Portugal and Spain.

Source: State of European Tech

What is still missing and hopes for the future

In summary, Italy can count on some growing fundamentals to support its ecosystem:

  • a strong and public education system providing tech talents
  • a growing influx of capital also from international VC investors
  • some initial success stories that can inspire new generations of founders

On the other hand, some factors are still missing for Italy to consolidate its position as an international tech hub:

  • too little capital deployed in absolute value
  • lack of Italian VCs investing and leading rounds in other countries
  • lack of very large exits, originating groups of angel investors and employees starting new companies

Although we are still in the very early days, this research and my gut feeling make me bullish about the future of the Italian tech ecosystem, and I would love nothing more than to invest in the next big B2B Software company coming out of Italy.

So if you are building a B2B tech company out of Italy, please let us talk →

That's it, folks! If you have feedback, feel free to leave a comment here or leave a clap if this was useful for you!



Federico Wengi

Early stage tech VC at SquareOne VC. Tech and Food enthusiast. Europe's Citizen. FC Internazionale fan.