How Italian And Spanish Startups Are Taking Advantage Of European Funding And Innovation Programs14 July, 2016 / Articles
Unemployment rates in Spain and Italy have improved in recent months, but are still among the highest in the eurozone: 19.8% and 11.5% respectively in May, according to the latest Eurostat data. Youth unemployment is also definitely significant in those countries (43.9% and 36.9%), suggesting that the younger generations are the ones who are still paying the higher price to the economic crisis.
This help explain why so many of them choose to migrate: thousands of young Italians flocked to London or Berlin, in search of opportunities. For those who stay, setting up their own business (often called a “startup”, when dealing with innovative projects) might be the only choice.
“Startups are the ones that are creating jobs. We have evidence from a recent OECD report that startups that survive the first five years are the ones creating 21% to 55% of all new jobs, depending on the country,” Isidro Laso, who heads the Startup Europe initiative of the European Commission tells me.
Alas, the two southern startup ecosystems are not the hottest around. Italy’s, in particular, seems to struggle to gain traction: while the number of startups is constantly increasing, few of them are able to scale, due to the lack of capital (in 2015, VC funding hovered around 100 million). Spain is doing better, thanks to money collected from international investors, but is still lagging behind more developed ecosystems, like UK or the Nordics.
Support from the European Union could come handy in helping Italian and Spanish entrepreneurs overcome the gap with more developed parts of Europe, both in terms of funding and networking opportunities. Indeed, as for the former, both nations are among the first beneficiaries, in the last two years, of the funds earmarked by the EU for innovation and technological research in the Horizon 2020 program.
Spanish companies performed particularly well, getting the relative majority (38,6%) of the overall 1.100,8 million euros received by the country, and being very effective in collecting money from the “Innovation in the SMEs” initiative, which was specifically launched to support SMEs and startups.
Such instruments, however, while helpful, are not by any means perfect. “I think there is a lot of European money getting lost in the process between the people who is getting the grants and the entrepreneurs,” the vice president of the Spanish Startups Association, Carmen Bermejo, says.
“The ones who know how to apply and get the European grants are sometimes not the same ones that know how to help the startups and deliver value. This is even worse if we speak about the European funds for regional cohesion, that depend a lot on personal contacts and relationships,” she adds.
As for networking opportunities, the Commission is trying to build through the Startup Europe Initiative what Laso calls “a digital single market of entrepreneurs”. There are several initiatives, which, though not tailored specifically to Italy or Spain, could be especially beneficial for these less connected countries.
Events like the Startup Weeks, roadshows, knowledge exchange projects aimed at connecting startups operating in the continent. “Some people in the Commission has criticized this, saying ‘what do you want to do, turn the Commission into a travel agency?’”, Laso says, “but maybe our role is not to compete with the venture capitalists giving free money, but to ensure that entrepreneurs get to know each other.”
The main drive behind this approach is to mimic in Europe, on a different scale and with a continental twist, the density of talent and capital that made Silicon Valley unique so far.
Fighting fragmentation is, indeed, the raison d’être of specific programs, like Welcome, or Twist. The first is aimed at connecting five startup hubs, including Milan, Madrid and Salamanca. Rome is one of the four other cities to which Twist is addressed.
“We’re helping the start ups to internationalize. To get new contacts. To get new customers,” Matevz Gantar, Welcome’s project manager in Salamanca, tells me. Think of an Erasmus for startups, and you’ll get the idea. One positive feature that distinguishes these from similar EU programs, is the real-time feedback provided by independent experts.
“In the past we heard from Bruxelles only when the projects were over,” Valentina Diana, a manager for Twist’s Italian partner Lazio Innova says, “now, external advisors appointed by the Commission are constantly monitoring what we do, and giving us inputs.”
Clearly, all that glitters is not gold. One issue is the relative sluggishness of the procedures. “Between when you apply to a program and when you start to participate, it can pass quite some time. Also in terms of activities, they are can be spread from spring to fall,” Gantar admits, “But half a year is like the whole life time for a start up: it could be either make it or go bust.”
Sometimes, also, mentors do not have the qualities needed, or offer startups things they don’t really need. But Laso believes the overall approach is correct. “In the Nordics, entrepreneurs understood from the start importance of being part of global networks. In Spain and Italy, people have a tendency to work more locally.”
Hopefully they’ll change their minds and realize that, in an interconnected world, too much insularity is the quickest path to failure.