The rise, fall, and rise again of Italian entrepreneurship 

In the wake of World War II, Italy was devastated. The war left the Italian economy in ruins, with a high rate of unemployment and inflation.

Aid from the United States helped kick-start its post-war recovery, along with country-wide initiatives and the hard work of its people, setting Italy on a period of rapid industrialization and economic growth in the 1950s and 1960s, often referred to as the "Italian Economic Miracle."

Car manufacturer Fiat exemplified this spirit of Italian innovation. Like many European companies, Fiat's factories were significantly damaged during the war. Post-war recovery saw Fiat introducing cars like the Fiat 500 in 1957, a compact and affordable vehicle, often credited with motorizing Italy. It became an iconic representation of Italian design and ingenuity.

By the late 1960s, Italy had transformed from an agrarian-based economy to one of the world's leading industrial economies. For Italians, this came to define ‘La Dolce Vita’ (named after the popular film from the 60s), during which the country became used to economic prosperity. Italian brands became a hallmark of quality—Ferrero, Ferrari, and the many Italian fashion houses that gained international renown. An SME boom saw Italy, in 1987, overtake the UK economy in terms of size, becoming the fourth wealthiest nation in the world (known as ‘il sorpasso’, the overtaking).

What goes up will often come down. Italy was one of the hardest hit during the 2008/9 Global Financial Crisis, its GDP shrinking by nearly 7% in that period.

Italians gravitated towards security, swapping small business for large corporations in finance, legal, and other steadier industries. This reverberated through the education system, where the culture of risk taking and asking ‘why’ disappeared in a favour of pure academic achievement. 

Not only this but the country’s top talent started leaving the country, deterred by economic and political instability, seeking jobs or looking to start their own business elsewhere. The Brain Drain was like no other. 

The number of Italian entrepreneurs who left to set up businesses abroad exemplifies this. Depop, Kong, Pleo, TrueLayer, and Northvolt, to name a few, all demonstrated the quality of Italian entrepreneurial talent, but also that, to be successful at the time, you had to go abroad. 

Italy’s physical, financial, and cultural capital

Three factors drive ecosystem success in tech: physical capital (a market), financial capital (institutional and angel money, plus government incentives), and cultural & intellectual capital (talent and growth mindset). Italy is showing signs of all three. 

First of all, physical capital, by which I mean a receptiveness and market demand for certain products and services. Italy has proved that it can produce companies with a global demand. 67.5% of Italian exports are capital goods and intermediate goods in electronics, robotics, materials, and more. 

Secondly, financial capital. While Italy has experienced economic turbulence, its GDP has been on the rise and there still remains a tremendous pool of capital. This comes in the form of generational wealth from Italy’s oldest institutions, now manifesting as family offices eager to spot upcoming opportunities. These include Exor Ventures (backed by Fiat’s Agnelli family), H14 (the Berlusconi family office), and Milano Investment Partners (family office of Moratti family, who owned the Saras energy multinational). 

This is backed well by the Cassa Depositi e Prestiti (CDP), an Italian government development fund who have backed 187 startups since 2015. Not only is this providing funding across the startup lifecycle, it is also acting as a catalyst for other financial institutions to channel money into venture. 

Venture capital is of course growing year on year, and we’d expect 2023’s drop to be little more than a hiccup. Much of this comes from the ‘pay forward mentality’: wealthy expats who are now coming back to invest in the ecosystem. But as well as this, large VCs are now taking note and eager not to miss out on the next Italian unicorn. Last year, Insight Partners led a Series A for mental health app Unobravo, a huge moment seeing a big US fund investing in an Italian startup. None of the big international funds have established an office in Italy yet—in this sense, we are still early movers. 

Finally, the talent is exceptionally strong. Italy’s universities remain prestigious and coveted—and compared to last decade, more students are staying to work domestically after they graduate. This is a huge pull for startups to launch in Italy—a chance to source from a high calibre talent pool at a comparatively lower cost to the rest of Central Europe. The fact that this generation currently joining the workforce is more risk oriented is a positive indication for entrepreneurial activity.