SINGLE-PUBBLICAZIONE

Financing Innovation – Foundation of a Fund of Funds of Venture Capital (Follow up note)

Autore : C. De Franceschi, A. Piol

Data: 28-07-2014

Tipo: Policy Brief

Tematica: Innovation

EXECUTIVE SUMMARY

The following note’s main aim is to analyse the proposal presented by Action Institute in the paper “Financing Innovation. An actionable proposal to support innovative enterprises”, that suggests the foundation of a Fund of Funds of Venture Capital (“FoF”), capitalized with at least €150 million, managed alternatively by the Italian Fund of Investment (“FII”) or by the European Fund of Investment (“FEI”). Four months after the note’s publication, on the 28th of May 2014, the Board of Cassa Depositi e Prestiti approved the subscription of €100 million, that will be invested in a Fund of Funds of VC which will be promoted and managed by FII; the deposit will be done within summer.

This note welcomes positively this announcement and, taking inspiration from the international best practices, wants to offer a detailed study and some constructive proposals to italian policy makers in order to obtain maximum benefits from this instrument that has been recently introduced. A bigger development of the capital market, indeed, means bigger opportunities of development for the whole country. In the specific case of Italy, an intervention dedicated to the development of Venture Capital’s industry represents a structural investment made with the aim of supporting the competitive capacity of our economic system. This part of the capital market is indeed necessary to guarantee the financing of innovative enterprises in an extremely delicate phase of their life cycle. Without these intermediaries the innovative enterprises are condemned to fail or to move abroad. The obvious consequence is that without Venture Capital’s industry there aren’t possibilities to start a virtuous circle that enables the birth and development of national innovative champions, that are capable of affirm themselves in a worldwide context. Especially, in a period of economic contraction such the one that Italy is currently living, the foundation of a Fund of Funds of Venture Capital for the indirect investment in innovative start-up is extremely important to support the recovery and growth of the nation.

An influential study shows how, thanks to VC operators’ knowledge of the market and managerial skills, the venture-backed start-up are able to invest more in R&D, to produce more patents and to invest more frequently and faster than other enterprises in new products.

Our note suggests that:

the FoF pursues an active involvement of FEI with the double purpose of maximising the possible synergies between the two institutions and of increasing the amount of capital given by Italian State;

the FoF, working with FEI, pursues a policy of attraction of foreign VC funds and institutional investors;

the FoF pursues a wide strategy to reduce limitations of the investments due to the sector, the stage of enterprises’ life cycle and the geography of enterprises;

the capital is directed towards both already existing VC’s operators and new operators.

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