According to Equidam, 85% of Italian startups struggle to break €100,000 in annual revenues.
Rotterdam-based Equidam – an online platform that helps entrepreneurs to understand, manage and disclose the value of their businesses – has recently published a report about the current state of the Italian start-up community. The research highlights overall poor results for the country, specifically for the South.
Founded in 2013, Equidam aims to provide start-ups with transparent and reliable valuations. The company uses the most updated valuation practices recognised by valuators all over the world and claims that more than 4,000 companies from 78 countries are regularly connected to the platform.
Although the number of Italian start-ups keeps on growing – breaking the 5,000 mark in Q4 2015 – 85% of Italian start-ups remain unable to cross the €100,000 mark in annual revenues. 2,721 start-ups (53% of the total) reported no classification – either firms that didn’t start their operations or haven’t yet submited an annual account – whereas 1,627 start-ups (32% of the total) have reported turnovers less than €100,000 per year. Those numbers clearly highlight some underlying problems in the growth of young Italian companies.
A breakdown of the Italian ecosystem for specific ranges of turnover is available in the graph below. Interestingly, no companies reported a turnover higher than €5m.
Another interesting result is the difference between the North and the South of Italy. It’s widely known that the South part of the country lags behind the North in terms of unemployment rate, quality of education and health services. This pattern seems to continued in the start-up ecosystems. Indeed, according to a regional breakdown of the data, the best in class regions are Lombardia, Emilia-Romagna (in the North) and Lazio (in the center), whereas Southern regions don’t appear in the top line at all.
The full breakdown of results is as follows.
Equidam accompanied its findings with some comment. The company seems to blame the presence of systemic obstacles, such as bureaucracy or lack of access to capital, as causes of the lack of growth amongst Italian start-ups. In a recent Euroview, AltFi examined the alternative finance market in Italy, focusing on peer-to-peer lending and equity crowdfunding.
Equity crowdfunding is regulated by Law 221/2012. This Law permits the raising of money online to support the development of "innovative start-up companies" – companies that meet requirements that are specified under the same Law. Each start-up may raise a maximum of €5 million per single offering (in a 12-month period) via equity crowdfunding, but there is no limit for traditional capital raising methods, which can be used alongside crowdfunding. €5 million is a remarkably high threshold when compared to the United States ($1 million) or other European countries (e.g. Germany and France, €100,000).
Considering the regulatory framework and the figures listed in the previous paragraph, we might conclude that a lack of “start-up knowledge” stands behind the stunted nature of Italian start-up growth, as Equidam has also suggested.
If you want to learn more about this topic, you may download the report in full here.
AltFi is returning to Amsterdam for its second annual Summit in the city. The inaugural event last year was a roaring success, with key figures from across Continental Europe's alternative finance and digital banking sectors highlighted. These included Jeroen Broekema, managing director of Funding Circle Netherlands, and Mieke van Engelen, head of innovative partnerships at ABN AMRO's standalone lending platform, New10.