Decreto Rilancio, a roadmap to support VC and startups in Italy

9th July 2020  

by Gaia Giorgio Fedi

In 2019, the Italian Venture Capital market experienced a period of strong growth which was expected to continue throughout 2020. Then the Coronavirus crisis shuffled the cards, bringing new challenges for the players in the innovation landscape, on top of the economic shock. Yet, it was precisely the pandemic that offered the opportunity to question the current policy framework for Venture Capital and startups, paving the way for new supporting measures. 

After weeks of debate, when observers and VC exponents voiced the need for a more supporting ecosystem for startups, Law Decree 34/2020, known as 'Decreto Rilancio' (Relaunch Decree), enacting several measures aimed at supporting Italian enterprises these difficult times, provided for new funds and subsidies for Venture Capital and startups. In this way, it filled the vacuum left by the previous business-supporting decrees ('Decreto Cura Italia' and 'Decreto Liquidità'), which had completely forgotten the most innovative part of the economic world.

In order to tackle liquidity shortage for startups and innovative companies, the text refinanced the fund established within Invitalia's program Smart&Start, with additional €100 million. The program is designed to support the creation and growth of innovative startups, and it offers interest-free loans (up to 80% of the total investment) as well as non-repayable grants for startups based in Central Italy seismic zone. Within the 'Smart money' measure, 10 million are destined this year for grants that Italian startups can use in the early phases of their life cycle, to access services from incubators, accelerators and innovation hubs. 

Furthermore, the government has earmarked additional 200 million this year for the VC Support Fund, which had been established by the ministry of Economic development in 2019; these are resources addressed at backing startups and innovative SMEs, also with the subscription of participative financial instruments such as convertible bonds. 

Among the most interesting initiatives, it is surely worth mentioning the creation of the new Fund for technology transfer – in other words, the process of transforming the results of research & development into marketable products. With an endowment of €500 million, the Fund aims at supporting initiatives and investments to promote the results from the research among the entrepreneurial world, and facilitate a cooperation between industry and academia to develop innovative projects and corporate spin-offs. The government decided to entrust the Fund to the care of Enea (the National agency for new technologies, energy and sustainable economic development) by the means of Fondazione Enea Tech, which is still to be established. 

Among the measures announced by the government, the Decree also provides for the establishment of the "First Playable Fund", with an initial allocation of 4 million euros in 2020 to help developers of video games in the ideation and pre-production phases. 

But that is not all. Following the approval of an amendment, the Decree provides for a multiplier mechanism, on the basis of which every €1 invested by private investors will be quadrupled thanks to the participation of Cdp Venture Capital. And the 50% tax deductibility threshold on private investments has been raised from €100,000 to €300,000. 

The whole package seems to go in the right direction in fixing existing problems and helping the sector overcome the difficulties created by the current crisis. It provides for liquidity measures for startups, looks after companies in their very early stages, it takes a serious step to improve the technology transfer, in which Italy has been lagging behind other countries with inevitable effects on the innovation ecosystem. And, last but not least, it promotes investments. 

An adequate level of private investments is vital for innovation. AIFI's president Innocenzo Cipolletta claimed that government aid for high-potential companies has to be combined with private capitals. “We cannot fail on this chance,” Cipolletta said. We need investments, and an ecosystem supporting them. Italy needs to maximise innovation to compete in global markets increasingly defined by new technologies.