If you want to be a high-tech entrepreneur in Italy you have to be in Milan or Rome

This is going to sound hard and I’m sure some people will disagree, however I will elaborate on why it will improve everybody’s chance of success to concentrate high-tech entrepreneurship in Italy in Milan and Rome. The 20 VC investments made last year in Italy, are already highly concentrated particular around Milan and Rome, so the reality already matches my suggestion.

What it meant when talking about an ecosystem is that there has to be critical mass of activties to support new high-tech ventures so in turn there will be increasing returns to being in a certain location. Firms do not exist in a vacuum and they rely on advisors, lawyers, accountant, investors, suppliers and of course employees.

While it is true that web startups can be build virtually today face-to-face interaction is still essential and investors are most likely to invest in companies they can visit within a couple of hours. The most respected incubators like Y-combinator and Techstars also bring people together in a specific place and for the few success stories of virtual startups, the rule is still that co-location fosters transfer of tacit knowledge, something that doesn’t happen much via skype.

What is the way forward then?
As I have argued before, Italy needs a larger pool of potential entrepreneurs to select from and an excellent approach that I admire, is that taken by Fabrizio Capobianco and Funambol which has their business development in Silicon Valley and R&D in Italy. This means more technical people who are exposed to the nuts and bolts of a startup.
Two other initiatives I believe should get much more attention is making the startup scene much more international and focus much more on immigration, particularly from Eastern Europe and South America where Italy can offer higher salaries and quality of life.
The important thing though, is that every regional politician does not want Catania or Bologna or etc. to become the hub for high-tech entrepreneurship. Fragmentation is not going to help and both Milan and Rome are great and vibrant cities to live in, so Italian’s must forget their idea that their home town is the only place in the world to live and move to where the action is.

There are a lot of good intentions in Italy and I think that things are slowly moving in the right direction, however instead of each region trying to become high-tech clusters Italy must make an overall decision for the common good and encourage all aspiring entrepreneurs to go to either Milan or Rome the financial and state capital respectively which both have a good mix of institutions already in place.

P.S There are great companies such as Balsamiq and Yoox that have come out of Bologna, however Milan and Rome remain the two most obvious choices as I see it.

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Posted: november 25th, 2010
Categories: Italy, startups, VC
Comments: 4 Comments.
  • http://www.facebook.com/thesp0nge Paolo Perego

    Great post Jesper as usual!

  • Anonym

    Yoox started in Bologna, which is a great hub for logistic in Italy, but opened quite soon an office in Milan for marketing/pr/biz dev , so i guess it’s a perfect example of what you’re theorizing in your post =)

  • http://twitter.com/fmasia Francesco Masia

    Calameda started in Sardinia and now has an office in London. I believe that there could be a balance in the organization of a startup that allows some freedom about the location it chooses. Many of the other startups located in the same co-working space we use have development teams scattered all around the world. The good side of software development is that it can be carried on by distributed teams. I agree that being based in a key location is very important regarding financing, promotion and networking, though.

  • http://www.facebook.com/profile.php?id=716330190 Jesper Bergmann

    Thanks for your comments.

    @Francesco: I’m really happy to hear a positive example from Sardinia and I also think dispersed development teams can work, especially for routine tasks or jobs which can be very clearly defined.
    However I still think that tasks that involve as much tacit knowledge as starting a company together, you have to be in the same location.
    Immagine, the effectiveness of e.g Facebooks early days if the 5 first guys had been in 5 different locations as opposed to sharing a house. I’m certain they wouldn’t have been close to the same level of productivity.