• Bocconi Students Private Equity Club

Italian Venture Capital at the time of the pandemic – the cases of Tannico and Beintoo

Updated: Dec 8, 2020

By Tommaso Ballestri and Paolo Cerretti (Authors), and Konstantin Brandt and Florian Kramer (Editors)

COVID-19, halting economic activity on a global scale, also did not spare Italian Venture Capital. In the first half of 2020, as the pandemic spread throughout the Old Continent, VC investments in Italy fell to €240m (from €313m in H1 2019). Even though such an impact has been moderate if compared to the devastating effects of the pandemic on more traditional industries, it was sufficient to invert the positive trend that the sector had been experiencing prior to 2020, hindering the country’s efforts to catch up with the rest of Europe.

Currently, the Italian ecosystem is composed of a variety of VC firms, operating in seed, early-stage and later-stage financing, together with business angels and incubators. Investments focus on the IT sector, representing 43% of investors’ targets, followed by biotechnology and financial services companies which, according to the VeM 2020 Report [1], have both represented around 8% of this year’s VC deals. Meanwhile, from a geographical perspective, the most active regions are in northern Italy, with the noteworthy exception of Lazio.

Sources: GeoNames, Microsoft and TomTom

The latter has benefited from the establishment of the National Innovation Fund, a sovereign tool aimed at supporting innovation, enabling the region to stand out in the central-southern area. The country’s entrepreneurial tissue, strong research system as well as the rising attention of international investors all represent promising features for the development of its Venture Capital market; yet the gap with other Western countries remains evident. As a matter of fact, Italy’s low level of VC investments compared as a percentage of GDP (0.009% against 0.043% in e.g. Germany in 2019) show how Italy has been lagging behind its European peers. While in Germany, France and the United Kingdom between €4bn and €8bn are invested on a yearly basis to spur start-ups’ growth, in Italy, such an amount has never reached €600m, indicating that the sector is still under development in the Bel Paese.

Despite its modest absolute size, the growth of VC in Italy prior to the COVID-19 emergency had been rather surprising. While in the mid-2010s, the amount invested in the sector fluctuated around €200m, the Italian VC ecosystem had undergone a remarkable change of pace starting in 2018. As suggested by the P101 Venture Capital Report (2019), the rising number of start-up and scale-up investments together with the growing average dimension of deals resulted in a 250% increase in the total amount invested in the sector compared to 2017. This upward trend was confirmed in 2019, when both the numbers of operations and the invested capital, 148 and €597m, respectively, reached an all-time high. This growth was supported by multi-million-euro deals including Talent Garden (€44m) and BrumBrum (€20m). In the meantime, both business angels and incubators took on an increasingly relevant role in the Italian VC environment, with the former category investing €53m across 88 deals (€40m more than in the previous year), and the latter growing at 15% yearly. Finally, 2019 was the year of the establishment of the National Innovation Fund, set to introduce a €1bn influx of capital in the sector and potentially lead to its maturation.

With the Coronavirus crisis, the high expectations on the Italian VC sector became difficult to meet. In the first half of 2020, the crisis caused a decline in sectoral investments of 23% compared to the same period in the previous year.

Considering the first two quarters separately, the drop has been more pronounced in Q1 with a 33% plunge (from €127m in Q1 2019 to €86m), compared to the 17% decline in Q2. Moreover, ScaleIT, a platform that connects international investors with local scale-ups, underlines how the participation of international investors in the first six months of the year decreased from €109m in H1 2019 to €74m this year. Such an impact can be explained by the travel restrictions and physical distancing rules preventing investors from performing proper Due Diligence processes. Mega-rounds also experienced a slump of 32%. Within this category, the €45m round for Banca Idea, the €25m capital increase of Milkman and the €16m round for biotech company Genespire stand out.

Surprisingly, as market expectations forecasted a significant drop in divestitures for the year 2020, those of exits represented the most dynamic area in the sector. Following such a trend, some of the country’s most relevant VC funds have finalised several important exits during the first half of the year. Outstanding examples are Tannico, exited by P101, and Beintoo, whose sale was performed by Innogest.

Founded in 2013 by Mr. Andrea Di Camillo, P101 Sgr is a leading VC in the Italian market, directly managing two investment funds (101 and 102) and controlling a third by proxy (Italia 500). With almost €200m of AUM and Dry Powder amounting to more than €130m, the fund’s investment strategy is centred around early-stage opportunities in the digital sector. As of 2020, the firm performed more than 35 investments with their average size ranging between €1m and €10m, and completed 11 divestitures. The latter activity became increasingly relevant, as previously mentioned, in the first half of 2020, and culminated with P101 selling its stake in the Italian online wine retailer Tannico.

Tannico is the most significant player in online sales of wines and top-end spirits in Italy, controlling a market share of above 30%. Providing its users with around 16,000 labels from 2,500 different wineries, in 2019, the company recorded net sales of €20.6m and a three-year CAGR of 150%. In 2020 and specifically during the lockdown period, Tannico managed to boost its sales volumes by as much as 100%, turning the potentially devastating externalities related to Covid-19 into growth opportunities. Thanks to the resiliency of its business model and its excellent performance, the start-up attracted the interest of spirits colossus Campari, which acquired the online retailer in May 2020. The deal structure implied the Campari Group to acquire a 39% stake in the company and concurrently subscribe to a reserved capital increase, leading to a shareholding of 49%. The related acquisition price amounted to the sizable sum of €23.4m. Underlining Campari’s high expectations of the firm, the contract provides the beverage giant with the option to acquire the remaining stake in Tannico starting from 2025.

Along with P101, Innogest Capital Sgr represents one of the most active VC firms in the Italian market. Established in 2006 by Mr. Claudio Giuliano, Innogest mainly targets seed and early-stage ventures, focusing on digital business models and the healthcare sector. The firm’s first fundraising process was completed in 2007, piling up capital of €80m. In 2015, Innogest gave birth to its second investment fund, managing to collect €85m of capital, also thanks to the investments of Fondo Europeo per gli Investimenti and Fondo Italiano d’Investimento. The firm’s investment strategy is built upon leveraging its international network and, similarly to P101, it counts more than €200m of AUM. The latter sum is expected to increase as Innogest will be the first VC firm to ever launch a fund solely focused on cardiovascular technologies, seeking to reach significant degrees of sectoral verticalization. With around 30 portfolio companies, the firm performed 9 exits, one of which took place in March 2020 and involved the mobile data company Beintoo.

Incorporated in 2011, Beintoo operates in the digital advertising & marketing sectors, delivering its services through the employment of mobile data. The firm bases its offering on three fundamental drivers: proprietary technology, location data accuracy, and business innovation. Beintoo is thus able to collect offline behavioural data from millions of users through localisation signals. This data is then employed to structure targeted mobile advertising campaigns according to each user’s interests. Additionally, the company provides consultancy services to its clients by means of location intelligence products. The collaboration between Beintoo and Innogest started in 2012 when the Italian provider of risk capital finalised the investment of $5m Series A funding into the start-up. At the time, Beintoo was a new-born firm, generating revenues of just above €260k. Proving its high potential to investors, Beintoo was able to increase revenues to €5.4m in 2019. This performance enabled Innogest to monetise its position by selling its stake to Publitalia ’80, the advertising agency of the free television networks of the Mediaset Group. The deal created a win-win situation for both firms: Publitalia ’80 was able to benefit from Beintoo’s proven know-how in the collection and the processing of data, also employing its innovative technologies and proprietary assets, while Beintoo gained access to a larger database, managing to deliver location intelligence services on a larger scale and to support the international growth strategy of the Mediaset Group.

Tannico and Beintoo have not been the sole exit deals this season. Transactions involving Audiens, Checkout Technologies, LybraTech and Moneymour, among the many, provide testimony of the fact that, in the current downward trending Italian VC environment, exits have been unexpectedly relevant. Despite the negative externalities associated to COVID-19, the Italian VC sector is forecasted to be one of the first areas to recover from the 2020 economic downfall. Supporting this thesis, Massimo Ciaglia, an Italian business angel and author of “The Startup Canvas”, affirms that the intrinsic risk-taking nature characterising VC firms, along with the manifold measures implemented at national and European level, will drive such a resurrection.

For more articles, visit www.bspeclub.com

This article was first published on Bocconi Students Private Equity Club website in mid-November 2020.


[1] AIFI, Venture Capital Monitor 2020















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