The Wake Up Call to Start Up

Italy’s new business ventures may revive the national economy

By Alberto ONETTI

The subject of the “startup” is becoming headline news even in Italy.

We could say it’s about time, too, given that data confirms that startups are powerful job creation engines. (In the U.S. startups contribute to roughly 20% of job creation and represent approximately 3% of overall employment.) (1)They are therefore a kind of mechanism for industrial system renewal. Without them, the productive system antiquates and begins to suffer the effects.

This is exactly what has happened to our country. If we look at the Italian macroeconomic data (a virtually zero average growth of GDP since 2000), the image of a stagnant country that is no longer able to grow (“Zero Growth”) clearly emerges.

There are many reasons but the bottom line is that there is an industrial mechanism unable to renew itself. Indeed, as is clear from the illustration on the right (which summarizes the results of a study conducted by the University of Insubria, Varese research center, CrESIT, of which I am the director), it is the older ones that generate almost all of our gross domestic product, while the most innovative contribute less than 10%. At the same time, the weight of the base economy (the manufacturing sectors, the socalled “production economy”) declined progressively from 22% to 18% since the beginning of the millennium, in favor of the service economy. But, as noted by John Kay, you cannot just have “an economy of hairdressers.” The services are by definition ancillary to the productive economy. If that begins to fail, all else is destined to also fail, taking with them the wealth and competitiveness of a country.

How can this inexorably negative trend be stopped?

The only possible way is to undergo a complete reboot of innovation through the use of startups that, as mentioned, are the engines necessary to renew a productive environment. Therefore, we embrace the high success that is presently occurring with startups in Italy and welcome this extremely positive news.

The fact that many people, young and old, are venturing onto this scene is signaling a new fascination with startups, resulting in the emergence of a new generation of entrepreneurs in Italy – the same phenomenon that we saw in fact decline during the Sixties and Seventies when fewer companies were established.

This is perhaps the biggest and most positive change that we are witnessing in recent years in Italy. Doing business seems to be back in fashion, to be perceived as a positive challenge. Media has begun to gradually give it attention and even the political world has started to notice (we have a law that regulates innovative startups).

Young people in Italy are beginning to perceive the startup as a mode of entry into the working world. The Mind the Bridge Survey 2013 shows that 20% of Italian startups have been formed by people just entering the labor market precisely through the creation of a startup. For young people, building their own company is emerging as an alternative to seeking a job. This is a strong signal of discontinuity, at least in terms of culture, in a country where previous generations have been raised and educated with the myth of the “job.”

I am not able to say with definitive certainty whether the choice of entrepreneurship is deliberate or is a necessity imposed by the serious crisis we are presently experiencing. In fact, the same Mind the Bridge Survey 2013 shows that 50% of our startups are initiated by people who, in the face of difficulty/dissatisfaction with their current work situation, are reinventing themselves as “startuppers”. The question that arises in this regard is whether these startup companies are able to grow and create value or are intended to be temporary stopgaps for people who cannot find employment opportunities.

Percentage of Self-Employed Business in Italy by Region

Percentage of Self-Employed Business in Italy by Region

The risk is that this enthusiasm will transform itself into a bubble. Having a startup is notoriously difficult (“fucking hard”, to borrow an expression from Tara Hunt which is perhaps a little direct but effective), with low rates of success (in the words of a search for Shikhar Ghosh Harvard Business School, 75% of startups are doomed to fail). Cultivating enthusiasm is important, but avoiding the illusion of simplicity is even more important; by entering into such a state of widespread pessimism (“the apathetic generation”), in a couple of years we would find ourselves in a new situation of generalized despair (the “burnt-out generation”).

Our analysis suggests that only 30% of Italian startups have the basis and skills to succeed. Behind these companies are teams characterized by diverse backgrounds with the right mix of technical knowledge, managerial skills and an international mindset. It is no coincidence that they were able to raise capital. It is with these startups and skills where we must work to write Italian success stories.

There is talent in Italy. It only needs patient cultivation (success doesn’t happen overnight), optimism (negativity only clips one’s wings) and sometimes healthy stubbornness (because success rewards perseverance).

Endnotes 1. Data refer to the US (Source: Haltiwanger, Jarmin, and Miranda (2010), “Who Creates Jobs? Small vs. Large vs. Young”, NBER Working Paper 16300). A report recently published by OECD shows that small newly-created firms (not including the financial business) represent around 11% of the overall employment and account for more than 33% of the total job creation (OECD calculations are based on the OECD DYNEMP data collection, July 2013).

The Mind the Bridge Foundation is a non-profit corporation, based in Italy and United States, founded by Marco Marinucci in 2007 and chaired by Alberto Onetti. The goal of the Foundation is to foster a sustainable entrepreneurial ecosystem, spur more innovative ideas, and reinvigorate the new venture economy, providing entrepreneurship education, 360 degrees. Mind the Bridge provides startups, investors and managers with direct exposure to the most experienced, entrepreneurial ecosystem in the world, the Silicon Valley. The ultimate goal of Mind the Bridge is to help create in Europe a new generation of entrepreneurs and success stories. www.mindthebridge.org

 


About the Author

Contributors 2 Onetti

Alberto Onetti, Chairman and President, Mind the Bridge Foundation. Forwardlooking, dividing his time between Italy and the United States, Alberto works on bridging technology to business. He is a seasoned serial entrepreneur with core competences in corporate strategy and finance. Among the others, he founded, together with Fabrizio Capobianco, Funambol, Inc., a mobile personal cloud company based in Silicon Valley with R&D in Europe. Alberto is Professor of Business Administration and Entrepreneurship. His academic career is divided between Italy – where he teaches Management and Entrepreneurship at the University of Insubria in Varese – and the United States, where he is regularly visiting the San Francisco State University since 2006. In 2009 he has been appointed as Chairman of the Californian Mind the Bridge Foundation, its mission is to inspire, educate and stimulate a new generation of young European entrepreneurs and create startups inspired by the methods and successes achieved in the Silicon Valley. Through the seed venture fund Mind the Seed, whose he is Partner, Alberto concretely invests in the best startups to create successful international ventures. Since 2014 Alberto has been selected by European Commission to help drive the Startup European Partnership (SEP), the first integrated platform to support growth and sustainability of European companies. Alberto Onetti has authored and co-authored insofar over 100 publications, regularly blogs and writes for some important newspapers, and frequently tweets (Twitter: @aonetti).


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