News for the ‘Italy’ Category

New entry in Italian telecom – The emperor is not wearing anything

If an outsider observes the Italian mobile telecommunications industry, they might be tempted to think that it is an industry that has seen significant changes in its competitive dynamics due to much more competition for customers’ money.
After all, from having to pick an operator between the 4 incumbent MNOs 5 years ago, an Italian consumer today can choose his operator from more than 15 different operators.

However, in reality very little has changed and although Italian consumers have more operators to choose from, they still pay some of the highest prices in Europe. There are multiple reasons for why no new entrants have been successful and they vary from poor strategy to poor distribution to poor marketing. However, on a more overall level new mobile operators must offer a clear value proposition to customers relative to the incumbents. After all, why should you buy your SIM in your supermarket, bank or post office if these operators don’t offer any advantages over the incumbents? And in addition to that, they don’t have the same level of service that you get when you walk into the stores of 3/Vodafone/TIM/WIND.

There are several strategic problems and reasons for why the situation is like this but the most important one lies in the relationship between the MNOs and the MVNOs. You should only launch an MVNO if you feel you have an edge over the existing operators, and MVNOs should negotiate contract terms that allows them to execute on whatever value proposition they offer to customers (e.g. distribution, service, pricing). Observing all the Italian MVNOs reveals a similar an un-creative approach: “We have a brand, distribution and a popular website, we’ll leverage that by launching an MVNO”

Italy has the highest mobile penetration in the world. 1 in 2 Italians have two mobil phones but from an operator’s perspective you want to sell them the primary SIM because that’s where the money is. What you wont hear from any of the MVNOs is that almost all of them only have second SIM customers and their numbers look terrible. As it is today, most MVNOs are part of large parent companies which can afford to bank roll their failed strategies. Negotiating with MNOs in Italy is difficult and full of secrecy so it is time consuming and difficult to find the best deal for an MVNO and they can only succeed if MNOs see them as an effective way to acquire customers. The current regulation, favours the incumbents and makes it impossible for MVNOs who can challenge the status quo to enter and that’s why despite 15 operators, they are all remarkably similar while Italian consumers continue to pay some of the highest prices in Europe. As much as I would like MVNOs to challenge the stale MNOs, consumers simply don’t have any good reason to pick an MVNO as their provider.

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Posted: februar 21st, 2011
Categories: Italy, telecom
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Comments: 1 Comment.

The State of MVNOs in Italy

After MVNO News just published the results (in Italian) of their annual survey about MVNOs in Italy, I want to look closer at how the Italian MVNOs are doing, and in some cases compare it to a similar survey MVNO News published for 2009.

The survey is based on people who have visited mvnoforum.info so the sample is clearly biased towards people interested in MVNOs, and the patterns that emerge are somewhat predictable:

  • MVNO subscribers are most likely to be men, between 31-40 who has PosteMobile as their preferred MVNO
  • It is more likely that the primary SIM is from an MVNO (59% versus 33% in 2009)
  • Price on voice tariffs are still the main reason customer’s choose to switch to a MVNO

While MVNOs might seem like they are doing well, all the numbers are relative to each other and the most essential question of average revenue per user (ARPU) is not given so it would be risky to conclude that things are going the right way for MVNOs in Italy.

ARPU is particularly important in Italy. Because Italy boasts one of the highest penetrations of mobile subscriptions in the world. At around 150% one out of every two Italians have two SIM cards and as an operator the value is in having your name on the primary SIM. Therefore, the truth is that most MVNOs are only customer’s second SIM, and it is difficult to be very optimistic as an Italian MVNO. While PosteMobile is significantly dominating the picture in terms of market share, their ARPU is much lower than their MNO competitors and they are therefore far from financially sustainable. In 2009 PosteMobile had an ARPU around €8. This is around 60% lower than their MNO competitors’ and also 50% lower than the most successful Danish MVNOs. PosteMobile has lost a boat load of money since they started (a boat loaded with more than €50 million) and at the same time they are less effective in terms of revenue per employee than their Scandinavian counterparts. So to put it very simply, if you were an investor you should short the entire Italian MVNO industry.

An interesting question for an Italian consumer would also be: “why should I choose an MVNO as an operator?” Except for bundling with their mother companies activities they don’t offer clear advantages in terms of price, value added services or customer service so in most ways I understand the Italian consumers and I don’t see these trends changing anytime soon.

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Posted: januar 10th, 2011
Categories: Italy, telecom
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Comments: 1 Comment.

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
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Comments: 4 Comments.

You don’t need to know anybody – Italy is full of good fellas

I find that a reason for why people in italy stay away from starting things is a misconception that they have to have some super-wealthy family or be very well-connected with a lot of influential people. In my experience this hasn’t been true at all and I would like to share how I have gotten many interesting people to listen to my startup idea because the recipe is very simple.

About a year ago two friends of mine and I got the idea to start an online discount mobile operator in Italy. It’s quite an ambitious idea since you essentially would be competing against Vodafone, Wind, TIM and 3 Italia (also called MNOs), but we had seen it work in Denmark, so we knew it could work. As I have written about here our professor was not very supportive of the idea but we wanted to give it a shot. I followed a guy on twitter who blogged about telecom and who turned out to work for one of the Italian MNOs. From twitter I emailed him more details about our project and he ended up introducing us to the most senior guy at his firm which was relevant for our project. From that point on we have continued negotiations and are still in contact.

In terms of investors and people from the startup environment, I was lucky to meet some investors through our course. Additionally, I really liked what Stefano was doing at www.thestartup.eu so I emailed him an we met a couple of times and through him I have been introduced to some great people and pitched my project to dpixel where he works. Additionally, a guy Stefano and his firm introduced me to has formerly held key management roles at three of Italy’s four MNOs and is now a very helpful advisor.

At conferences like “mifaccioimpresa” and Milan Startup Weekend, I have also met interesting people. Although introductions work best don’t be afraid to approach the people you meet at these kind of events. Most people, and this goes perhaps particularly for successful people are usually very friendly and are glad to help young entrepreneurs if they can. They have been in the situation you are in, and appreciate how much help and advice can mean.

As i said the recipe for this is really simple: Be very well prepared and try to be convincing. You’re selling your idea and you must convince people that you are going after something relevant and feasible. Also be friendly and flexible. Many people are busy and first impressions last a long time so if you haven’t done your homework and don’t know the market or your competitors or your business model you wont be taken seriously.

It’s fair enough to have blind spots (e.g I still don’t know a lot of things related to the technical aspects and telecom regulations) but be upfront about them and how you are going to solve them. In our case a mobile operator is really a lot of marketing and the legal aspect not even lawyers are sure about, but if you are honest about what you don’t know your can avoid unpleasant surprises later on.

Overall it should be clear that we have spent a lot of time seriously putting together convincing reasons for why an online discount mobile operator is a good idea and could be a good investment, we really haven’t done anything extraordinary but that, to meet a lot of interesting people so there is no reason that you shouldn’t be able to do the same, if you have an good idea and a compelling reason for why you are the right people to execute it. Take my word for it, Italy is full of nice and supportive people that are doing what they can to help people start something cool, you just have to be proactive and persistent to find them and get in touch with them.

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Posted: november 19th, 2010
Categories: Italy, startups, telecom, VC
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Thoughts on Milan Startup Weekend and why programmers should know some strategy

Last weekend I participated in Milan Startup Weekend and overall it was a really nice experience and a great initiavive. If startup weekend is coming to your city you should go. You will meet lots of like-minded people and although the entire thing was in Italian most people spoke English so don’t be shy if your Italian is not perfect you can still attend.

The idea about startup weekend is not so much work on existing startups as actually showing a real demo that has been made in about 48 hours. This means that the main focus will be on web technologies and rightfully programmers and designers are in highest demand where us with business degree were helping out in terms of strategy, market sizing and marketing ideas.

I really like the concept and I was working on someone’s idea of a social Q & A site for shopping, which I really like. It’s still a work in progress but you can see the site here. Overall, there was a very nice and helpful atmosphere the entire weekend and between working on projects there were guest speakers (Massimo Sgrelli, Raffaele Mauro and Alberto D’Ottavi were most interesting in my opinion).

Since time is the main restraint on building something, many of the ideas will be pretty small features and applications but I like the idea of finishing something managable than start out with some big and time-consuming vision that is unlikely to be realized. It has already been explained that it is becoming cheaper to start web companies and here is an excellent explanation of how disruptive cloud computing is for startups.

However, as the barriers to entry has been significantly lowered  a useful  concept taught in business school today is called the resource-based view comes into mind. The quintessential part of strategy is to create sustainable competitve advantages, and sustainable means that you still kick ass after someone repeatedly tries to copy you, however in order for companies to create these advantages they must do things in ways that competitors cannot easily copy. As anybody can now launch a startup in 48 hours and take advantage of the same tools and technologies (Twitter, Get satisfaction, Amazon web services etc.) the competition shifts to being the best at acquring users and build some a brand as quickkly and effectively as possible. Strategic partnerships e.g. with key suppliers or distribution channels (e.g Groupon if they partner with Yahoo) and finding ways to increase switching costs for users become critical.

Aalthough this is not something that should be the main concern at an event like Startup Weekend it is something that anybody who is thinking about starting a company should spend time on thinking about. If you can launch a live demo in 48 hours so can anybody else and from then on it’s game on about who is able to convince users that they should use your site and not any of your competitiors.

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Posted: oktober 24th, 2010
Categories: Italy, startups
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Yozma and Italy – Why copying Israel’s VC cluster is unlikely to be a good idea

On his blog at il sole 24ore Gianluca Dettori recently pointed to a new proposal for VC in Italy. The gist of the purpose is to create a fund of funds with a mix of public and private money. The proposal is nicely summed up here and the idea is clearly to create an Italian parallel to Yozma, which was fundamental in creating Israel’s thriving VC and high-tech clusters.

VC getting more love and attention from politicians is very nice, however there are in my opinion several reasons why the “let’s make an Italian Yozma” is unlikely to be an ideal approach. (disclaimer: I don’t follow Italian politics, so if you believe my assertions below are wrong, please point it out).

First of all, it is a traditional cause-effect fallcy within public planning to observe a successful effect in one context and trying to replicate it without thinking more about all the underlying causes. This is similar to why many companies have failed in trying to copy the Toyota Production System. They observe that any employee can stop the entire prodution line by pulling a chord and then the problem is traditionally resolved quickly, so the key to lean production must be to install this system. However the system works because of all the tacit knowledge, trust and mutual understanding between the workers and therefore it is extremely difficult to copy and require a change in all the underlying processes that lead up to the “pull the part chord”. The similarity to the VC system is the countless and failed attempts to emulate Silicon Valley and just like I consider it unlikely that Italy can successfully copy Yozma, the people behind this proposal should start somewhere else and study the conditions in Israel when Yozma was launched.

Before Yozma became world famous they had the Inbal program which was a similar approach that suffered from problems such as too much bureaucracy, low upside and difficulty to attract good VCs. If an initiative in Italy is going to work there has to be a compelte minimum of bureaucracy, and the state has to acknowledge that private VC fund managers have to have an upside and might become very wealthy if the fund is successful. Paricularities of Israel, that I doubt are present in Italy:

  • A strong domestic military indusstry. A lot of Israel’s successful startups had a background in the military industry.
  • Office of the Chief Scientist (OCS). Excellent capabilities in applied sciences and a generally the OCS was a very respected and admired  institution.
  • Tech-heavy foreign multinationals such as Intel, IBM and Motorola.
  • Immigration in the form of thousand of highly skilled engineers and scientists.

Another aspect that is critical is that the Yozma program was seen as the third phase of the VC industry lifecycle which began with the background being set in the 1970. You therefore can’t ignore what happened in the 20 something years leading up to the Yozma program and instead Italian policy makers should study this period and find out why conditions in Israel were ripe for a VC cluster. Particularly, the experience from Israel also showed that there needs to be a critical mass of high-tech entrepreneurs before a VC cluster can successfully emerge, and as much as I wish this was the case in Italy, I think we are at least a decade from where Israel where when Yozma was launched. A good start would be to educate more engineers and scientists and make Italy more open to the best immigrants in these disciplines.

If you want to read more in detail about the the co-evolution of Israel’s high-tech and VC clusters, I co-wrote a paper about this two years ago. I couldn’t embed it but you can read it here.

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Posted: oktober 6th, 2010
Categories: Italy, VC
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Comments: 2 Comments.

Entrepreneurship news from the past week

Last week there were a couple of positive entrepreneurship-related events that I think deserve to be mentioned.

The first was the inaugural meeting for Bocconi’s new entrepreneurshup club Young Entrepreneurs at Bocconi. The club has the valiant purpose to encourage more entrepreneurship and to be a place where young entrepreneurs can meet and exchange ideas and help each other out. The idea is also to have guest speakers and work shops with various purposes so its activities are like entrepreneurship clubs at most universities. It’s a great initiative and it seems like Bocconi is also supportive, so I hope it’ll be succesful. However there is also room for improvement:

  • First of all more people have to know about it. Only 6 people showed up and three of us were foreigners so foreigners are perhaps more apt than Italians to have entrepreneurial aspirations?
  • If it’s going to be helpful people have to openly share their ideas and what they need help to! I can’t say this enough but it’s really a banal and unjustified fear to be afraid of having ones idea copied.
  • More technical focus and not being afraid of bold projects. The challenge with an entrepreneurship club just for business students is that the skill sets are very similar and whenever somebody has to built somethng technical, software developers are needed. I think it would be ideal to have the entrepreneurship clubs of Bocconi and the different technical universities meet up and share ideas.

The club doesn’t yet have a website but if you are at Bocconi and interested in joining I really suggest you go check it out, since it is just getting started you have a great opportunity to get a lot of influence from the beginnig! If you want to know more then send me an email and I will get you in touch with the founders.

The second event I attended was “mifaccioimpresa” this weekend at Bocconi. It was a fair dedicated to entrepreneurship and with lots of panel discussions about everything from financing and marketing to legal issues and the role of VC in Italy. The fair lasted all of Friday and Saturday however I only attended on Friday and the most interesting thing for me was a panelk discussion about innovation and financing and SMEs and the role of VC in this.

The panel consisted of Roberto del Giudice head of the Italian Private Equity and Venture Capital association AIFI, Francesco Perrini from Bocconi and an investment manager from the Italian VF fund Quantica sgr. The discussion was about the status of VC in Italy and although this might be already know to some, the state of affairs is pretty bleek. Here are the main takeaways from the discussion:

  • A total of only 20 VC investments were made in Italy in 2009
  • 5 VCs represent 50% of all the deals and out of these, the most active were Innogest, Piemonte High Technology and Quantica
  • Some funds barely average 1 investment per year from 2004-2009
  • Italy is completely divided in North-South in terms of VC and no investments at all in e.g. Calabria, Puglia and Sicily.
  • Overall, Italy is a country of SMEs but not innovative SMS.
  • To put innovativeness in perspective, the 20 VC investments are out of 5000 new firms formed every year.

Overall, the picture is bleek and anyone who has tried to raise seed or venture capital in Italy knows that it is extremely difficult, however one can also look at in a more contrarian and positive way. Since so few innovative companies are founded in Italy you actually have a better shot at being funded if you offer something cool and innovative!  The start-up scene is not exactly Silicon Valley so if you do something original there are plenty of chances to get yourself noticed. One of the reasons I do not worry much about anybody copying our business idea is simply that most people Italians think it’s nuts and that it can’t be done.

So get started and don’t blame the bad economy, now is a great time to start a company!

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Posted: oktober 4th, 2010
Categories: Bocconi, Italy, startups, VC
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Survey for my telecom startup idea

The startup I am trying to launch is a cheap, simple and online mobile phone operator. Since there is little data available about this it would be a great help if you can fill out the survey below.

And if you find it worthwhile to answer please share and retweet it! :)

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Posted: september 28th, 2010
Categories: Italy, marketing, telecom
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Business Schools are the most Poorly Managed Institutions

It’s ironic that business schools, the places that are supposed to teach people management and leadership, always seem to be very poorly managed them selves. This was said by one of my former professors and I have found it to be surprisingly accurate.
Studying for my undergraduate degree at CBS there was a lot of bureaucracy and overall not a supportive administration. At Bocconi, the administration has been mostly helpful and cooperative, however my view has changes after I have had to register for graduation.
The process is mind-boggling complicated and very kafkaesque.

Here is what you have to do in order to graduate at Bocconi: It’s taken from the incredibly long guide to submitting the thesis and graduating.

  1. Access the thesis procedure online and enter the abstract
  2. Download and print an approval form in 2 copies
  3. Fill out and sign this form
  4. You now give this firm to your advisor who has to sign it
  5. Now hand in the signed approval form to the graduate secretary
  6. Now you’re finally ready to submit your thesis on a CD Rom and collect a receipt for having submitted!

Mind you that this is the very last step and before this you need to have handed in other signed forms and also have approved your internship which goes something like this:

  1. Bring internship documents to the internship office and get a signature
  2. Now get your program director to sign the same document
  3. Go back to the internship office and you can now sign it

It’s incredibly how poorly designed these processes are and they could and should easily change this to make it much less bureaucratic. It’s really a matter of trust and if Bocconi really trust their students they would not need this cumbersome bureaucracy and they could cut down on it and give their students a much better experience.

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Posted: september 25th, 2010
Categories: Bocconi, Italy
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Entrepreneurship in Italy from a non-Italians’ perspective

Following the interesting and lively debate about the Italia startup environment kicked off by he founders of Mashape and followed up by Stefano Bernardi, I want to add my point of view of the startup environment in Milan as I have experienced it. Particularly, I like a lot of the ideas and comments to the two blogs about an Italian eco-system and how we can improve the conditions for startups and entrepreneurs in Italy.

My perspective is after finishing a graduate degree at Bocconi and working on a startup idea in the Italian ICT sector for the past year. After two years at Bocconi it is hard to come away with any other conclusion that it is every young Bocconi students’ wet dream to either work in fincance, consulting or for a huge multinational corporation. That can be fine as well but it means that you’re an outsider if you want to start a business and while the US celebrates failure, it is scorned upon in Italy.

It is true that a major problem in Italy is the culture, and most Italians never fail because they never try. I had no contacts in the industry we’re trying to start a company in and yet I have received advice and help from Italian top executives and successful Danish entrepreneurs as well as been introduced to Italian VCs and angels. My experience has been that people are extremely helpful when you approach them as well-prepared and with an open mind.

First of all, there is only one elective in English at Bocconi focused on entrepreneurship and having taken that elective it leaves a lot to be desired. The ideas people had for startups and business plans were mostly very poor and showed the classical mistake to focus much more on the idea than the execution (Italian restaurant in Dubai anyone? Also we have no competitors were often considered to be a good thing).

The problem as Stefano pointed out, is simply that the pool of potential entrepreneurs is extremely small. Therefore the ideal strategy is to bring as man of these people together as often as possible.
What really disappointed me in my experience with the University here is the complete lack of interaction between the different universities. Why aren’t there common classed for CS students from Politecnico, business students from Bocconi and the Design students from Marangoni for example? Interesting things happen when people who think differently meet and I think this is vastly misisng in Italy! In a similar vein, the startup scene in Italy has seemed very un-international to me. Although it is silly and a waste of energy to dream of a Silicon Valley like eco-system there are nice things about Italy: People are friendly and helpful, the weather and food is good and the living standard is high compared to many countries. Certainly, Italy could leverage this to do much more to attract e.g Eastern European and South American talent but for that to happen the culture has to become more international.

Finally, Bocconi like many European business schools suffer from the problem that they view entrepreneurship from a very academic perspective and except for the interesting guest speakers students would be better off reading the list of popular startup and VC blogs. Instead of these courses being taught by accomplished entrepreneurs they are often taught by dry academics and it is easy to lose your hope if you only listen to this type of people. Our professor hated our idea and since it was the only idea that would require VC he also considered it far to risky and big for us to undertake.
This in many ways sums up my experience with entrepreneurship at Bocconi: An Italian restaurant in Dubai is considered a better idea than a business model with several successful exits in other European markets.

p.s a great and much needed initiative to encourage more startups is also to reduce bureaucracy. I particularly like David Welton’s initiative to reduce the costs of creating an SRL. Read about it here and sign the petition here

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Posted: september 22nd, 2010
Categories: Bocconi, Italy, startups
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Comments: 4 Comments.