1. A Questionnaire for the Italian Venture Capital Players IFISE Meeting A.I.F.I. Italian Venture Capital and Private Equity Association Roberto Del Giudice Pavia, 16 th October 2001

2. Methodology and Criteria Data referring to the period: June-September 2001. Double purpose: 1. Interview a relevant sample of Venture Capitalist operating in Italy; 2. Analyze problems engaged during the VC activity. Sample made up of 21 Venture Capitalist: 1. Stage of Investment: mainly start up. 2. Sector of Investment: High Tech focus. 3. Market Share: 80% of the total amount invested in 2000; 70% of the total number of operations in 2000. A.I.F.I.

3. The Questionnaire and Data Pooling A.I.F.I. A three sections questionnaire was used to conduct the mapping activity; First section: survey of the state of the art perception of VC st about the normative and institutional system in Italy; Second section: survey of the main barriers for VC investing in Italy; Third section: identification of possible solutions to create a favorable institutional context for High Tech Start Up investing. First step: VC st selectioned for the sample filled the questionnaire; Second step: data pooling and processing.

4. The Result: Question 1: Is your venture capital firm satisfied with the current Italian financial system? A.I.F.I. Completely satisfied0.0% Satisfied19.0% Not completely satisfied61.9% Unsatisfied19.0% No opinion0.0%

5. Some comments: The Financial Scenario About 62% of VCst feels not completely satisfied with the financial context; The remaining 38% is half satisfied and half unsatisfied; The major unsatisfactions seems to come from “New Comers”; Favorable events: A. the launch of “Nuovo Mercato” (1999) and the Star segment (2001), facilitates the way out for VCst; B. Italian Government is becoming more committed to promote tax and legal reforms for VC (in line with OECD/EVCA white paper). A.I.F.I.

6. Question 2: If Unsatisfied, please state which are the main barriers to a more flexible and satisfactory financial environment? The Result: Bureaucratic barriers57,1% Absence of specific incentives42,9% Fiscal barriers23,8% None of the above9,5% Political barriers0,0% A.I.F.I.

7. Bureaucracy related to enterprise creation is seen as the most relevant obstacle for development of VC; The lack of specific incentives for VC-especially lowering risk oriented-is the second barrier ; Result: Italy is behindhand in comparison with other EU countries; But: 1. simplification of red tape practices has been made; 2. number of the authorization and registration procedure for enterprise creation decreased (from 21 to 11 for commercial companies); 3. the Company Law is going to be revised in order to foster VC. Some comments: Barriers for VC investments A.I.F.I.

8. Question 3: Concerning high tech investments, do you feel that the Italian financial scenario is favorable to this kind of investment? The Result: Completely favorable0.0% Favorable57.1% Not completely favorable55.0% Unfavorable40.0% No opinion0.0% A.I.F.I.

9. Reason for the delay of institutional context: 1. Small amount of money committed by enterprises in R&D activities; 2. Absence of communication between University, VC and firms; 3. Absence of public incentives; 4. Absence of an efficient public incubation system. Some comments: Normative and financial context for High Tech A.I.F.I.

10. Question 4: If Unfavorable, please state which are the main barriers for the development of fast growing high tech investment market? The Result: Absence of a useful dialog between finance, enterprise and research centers 52.4% Absence of public incentives specifically destined to lower risk perception 42,9% Absence of a structured public Incubation system19,0% Absence of internal competencies to evaluate high tech investments 9,5% High risk perception4.8% None of the above14.3% A.I.F.I.

11. First: absence of efficient communication among VC/University/Firms Second: absence of public incentives to lower risk perception in NTBF investing; In particular: 1. VC vs. Researchers: different objectives to perform lead to difficult coordination and cooperation; 2. Researchers do not know how to set up a business; 3. Uncertainty in scientific discovery property attribution; 4. Lack of public incentives for VC activities for depressed areas/sectors. Some comments: Barriers for NTBF investment market A.I.F.I.

12. Question 5: Do you think that there are some measures to establish the right environment for a sustainable high tech oriented financial system? The Result: 90% said that new policies to support VC for High Tech are necessary. First: reform of the Bankruptcy and Company Law in order to take into consideration the high risk of default of High Tech VC investing; Second: civil board liability. VCst have a relevant role in the board of directors and often they are liable for “non controllable” company events. Third: Small VC funds regulation for High Tech and University spin off. A.I.F.I.

13. Question 6: Concerning High Tech investment selection, the assessment is made by? The Result: Local team62% Specialised consultants48% Parent organizations29% A.I.F.I.

14. Problems in technological audit: 1. lack of specific know how in emerging sectors; 2. different “language” spoken by VCst and potential entrepreneurs; 3. difficulties on “long term” forecast; 4. need of deep in itinere monitoring activity. Some comments: Business Idea Selection Process A.I.F.I.

15. Question 7: Concerning the High Tech investment activity, did you invest in enterprises that have received public financing? All the investors answered: NO, or I DO NOT KNOW. And that probably means that the information is considered completely NOT RELRVANT for their activity. A.I.F.I.

16. Question 8: Did you invest in these areas? The Result: Lombardia81% Emilia Romagna38.1% Sicilia9.5% A.I.F.I.

17. The data clearly show an high concentration in Northern Italy. BUT: there are not particular reasons for investment shortage in Southern Italy. LACK of capital for the South: 1. Small number of investor based in the South: VCst prefer to invest where they have their steady offices (i.e. North) 2. Lack of significant investment opportunities (shortage of research Centers); 3. Cultural and Infrastructural barriers for VC. Some comments: Geographical areas A.I.F.I.

18. Some comments: Geographical areas - The Vicious Circle The financial market does not seem to be so “Global”: 1. Absence of a financial culture in the South; 2. People looking for VC tend to move to the North; 3. Vicious circle: no demand – no offer! A.I.F.I.

19. Some final issues…

20. … concerning the high tech start ups: the main weaknesses 1.lack of a synergic dialog and relationship between the worlds of research, enterprise and finance; 2.lack of adequate human resources on the entrepreneurial side; 3.difficulties on technology auditing activities; 4.inadequate legal framework.

21. 1. Public/Private Co-investments schemes; 2. Small VC funds with regional focus for Start up; 3. “Rethinking” for public non profit incubators; 4. Technological Audit Centers made up of teams of researchers, investors, and legal professionals; 5. Entrepreneurship training activity for people coming from technical studies. Possible solutions A.I.F.I.

22. What are we going to propose ? A.I.F.I.