Weekly paper - Can Italy Become a Startup Nation?

Italy, a country long celebrated for its art, fashion, and cuisine, is now seeking to redefine itself in the 21st century as a hub for innovation and entrepreneurship. While countries like France and Germany have made notable strides in cultivating vibrant startup ecosystems, Italy has lagged. Yet in recent years, there has been a noticeable shift. Government initiatives, rising investment interest, and a growing network of innovation hubs are beginning to reshape Italy’s economic landscape. 

Italy has the EU’s third-largest economy, but only recently has its tech startup scene begun to flourish. With roughly 60 million people and a rich industrial history, Italy long lagged in high-tech entrepreneurship. Only in the past few years has the “flywheel” started turning: in 2022, Italian startups raised about €1.54 billion¹ (a 30% jump over 2021), and by 2024, annual venture funding approached $1.9 billion.² Notably, in 2022, Italy saw its first-ever unicorns—privately held startup companies valued at over $1 billion—including fintechs Satispay and Scalapay, and Milan (Lombardy) has emerged as a major hub.

Italy’s startup landscape today includes roughly 15,000 officially registered “innovative startups” (young, high-tech firms under €5M turnover) as of late 2022.³ Lombardy (Milan) hosts the densest cluster, but other cities like Turin, Bologna, Rome, and even Naples have active tech communities.⁴ Key growth sectors are finance, health/biotech, and real estate tech. Overall, about 76% of Italian startups work in B2B services (especially software, IT R&D, information services).

As the entrepreneurial landscape is changing and we see a rising wave of start-ups, a question arises in the minds of all: can Italy transform its startup environment into one that rivals its European neighbors? This Paper attempts to answer this question by analysing various aspects.

Italy’s Current Startup Ecosystem

Italy’s officially registered “innovative startups” are companies under 5 years old, under €5 M turnover, meeting certain R&D criteria. According to MiSE data, Italy had roughly 14,000 such innovative startups, up modestly from 2022.³ Milan is by far the largest hub: it accounted for about 2,669 startups (~19% of the total) in early 2023, followed by Rome (1,667; ~12%), then Naples, Turin, Bologna, and others.¹ Lombardy (Milan being one of the start-up hubs) alone attracted about 64% of Italy’s Venture Capitalist (VC) funding in 2019-23, underscoring the north-south and metro-rural divide in Italy’s innovation landscape.⁵

Italian startup funding has risen sharply since 2020. Dealroom reports that total VC funding in Italy grew from about $768 million in 2020 to $1.67 billion in 2022, even though the number of deals fell. In 2023, the trend paused: Italian Angels for Growth (IAG) reports about €1.17 billion invested in 325 deals, down ~37% from 2022 (reflecting fewer “mega-rounds” even as early-stage deals grew).⁶ Sectorally, fintech is th e leader (Italian fintech startups raised ~€504 M in 2022), followed by health-tech (€348 M) and real-estate tech (€186 M).¹ Notably, in 2022 Italy saw its first unicorns: fintechs Satispay and Scalapay each reached ~$1 billion valuation that year.¹ Other recent Italian unicorns include Milan-based Bending Spoons and AI startup iGenius, though this still represents only a handful compared to dozens in Germany, France, or the UK.⁷

Venture capital figures highlight Italy’s limited scale: in 2023, there were 386 VC investment rounds—30% fewer than in 2022—amounting to approximately $1.2 billion.⁵ Almost all deals were early-stage (Seed/Series A); only ~6% were growth-stage or later.⁵ By contrast, in 2024, startups in Germany raised about €9.4 B and in France €7.1 B (France’s figure growing +3% from 2023), while UK startups raised ~€16.4 B.⁸ In short, Italy’s startup market remains modest – Europe’s 13th by funding and 21st per capita – despite Italy’s large economy.⁵ On the plus side, early-stage funding is becoming more vibrant: specialized seed funds and accelerators are growing, and IAG notes that the average size of pre-seed rounds rose ~20% in 2023.

Challenges Hindering Growth

Several deep-rooted challenges have stymied Italy’s potential as a startup powerhouse:

• Bureaucratic Complexity: Starting a business in Italy often requires navigating a maze of legal and administrative hurdles, discouraging would-be founders. Although the Startup Act and follow-up laws aimed to simplify rules (e.g., quick online registration, exemptions), companies still face permitting delays, rigid labor rules, and tax compliance complexity that hamper nimble scaling. For example, one trade guide - notes that even EU-level tech regulations (GDPR, upcoming AI Act) can impose heavy compliance burdens on Italian tech firms.⁹

• Limited Access to Capital: Access to capital beyond friends and family is limited. According to Scaleupitaly, nearly 60% of Italy’s innovative startups are funded by “Family & Friends” networks, compared to only about one-third that receive any corporate VC. Institutional investors (VC firms, CVC) have been slow to scale: only ~5,300 firms have ever attracted corporate VC (about 33% of all startups). Late-stage funding is especially sparse – Italy had virtually no “mega-rounds” in 2023. 

P101 reports that only about 13% of Italian startups that raise seed ever reach Series A funding, and less than 4% get beyond Series A.⁵

• Cultural Attitudes Toward Risk: One of the other intangible factors that is considered to be a hindrance to entrepreneurship is considered to be conservative business culture and aversion to risk. Traditionally, Italian society places high value on stability, job security, and family-run enterprises, which can discourage both entrepreneurial risk-taking and investment in unproven ventures. Studies show that fear of failure is significantly higher in Italy than in many other OECD countries: according to GEM (Global Entrepreneurship Monitor), over 50% of Italians cite fear of failure as a barrier to starting a business.

Opportunities and Institutional Support

Despite these challenges, several positive developments are signaling a maturing ecosystem.

Government Initiatives

A major boon is government and EU funding. Italy’s PNRR funnels nearly half a trillion euros into the economy, with a large slice for digital innovation.⁹ Tax and credit policies have been introduced to nurture startups: since 2012, the Startup Act has offered benefits like exemption from many fees, stock-option schemes, and even up to 27% tax credits on new investments (seed or early-stage). Startups can also access 80% government guarantees on bank loans.¹⁰ 

A startup visa program makes it easier for non-EU tech entrepreneurs to relocate to Italy. In late 2024, Italy passed a Scaleup Act, which, among other reforms, created “certified accelerators” and opened new channels of capital: for instance, it mandates that pension and social funds allocate at least 5-10% of their portfolios to venture funds to qualify for tax breaks.⁶ It also offers capital-gains tax exemptions for investors in startups (retrospectively 2021–2025). These measures signal a policy shift to unlock more funding, although experts caution that many complex bureaucratic issues remain.

Access to EU markets

As an EU member, Italy’s startups can tap large programs (Horizon Europe, Digital Innovation Hubs, Cohesion funds) and easily expand within the Single Market. Recent initiatives even aim to attract foreign tech companies; e.g., the planned CDP (public bank) “International Fund of Funds” (with €150M from SIMEST) is intended to lure global VC investors into Italian startups.¹ Italy’s strategic location as a gateway to Mediterranean and North African markets also offers export opportunities that purely US  or Northern Europe-focused ecosystems lack.

The New Talent Pool

While traditional entrepreneurship has been low, a new generation of Italian founders is emerging – more willing to take risks and start companies, especially in tech-savvy cities like Milan, Turin, Bologna and Rome. Many Italian engineers and scientists who emigrated are now returning or investing at home, often supported by digital nomad and visa flexibility. Educational reforms and new incubator programs in universities aim to instill a startup culture in students.

International Comparison: Italy vs. Leading Startup Nations

Compared to peers like Germany, France, and the UK, Italy’s startup ecosystem remains small in scale. In 2024, German startups raised about €9.4 billion, French startups €7.1 billion, and UK startups €16.4 billion, while Italy raised only €1–1.5 billion. The number of Italian unicorns - around 3 or 4 - is far below France’s 28 or Germany’s 26. This gap reflects not only a smaller venture capital base but also Italy’s later ecosystem development.

Government support is growing, especially with the Scaleup Act and investment from CDP Venture Capital, but it remains smaller than France’s Future Fund or Germany’s High-Tech Gründerfonds. Italy’s new policies show promise, but consistent implementation will be critical.

In terms of talent and entrepreneurial culture, Italy has a higher-than-EU-average share of STEM graduates, but continues to suffer from brain drain as many graduates seek better pay abroad. While German and French founders also migrate, those countries have higher tertiary graduation rates and more mature startup support systems. Risk aversion remains a challenge in Italy, although younger generations are increasingly open to startups, especially post-COVID.

Regulatory hurdles and infrastructure gaps are additional barriers. Italy ranks below France and Germany in the World Bank's Ease of Doing Business index, though all three face heavier red tape than the UK or the US. Digital infrastructure is improving thanks to EU funds, but Italy began from a lower base and still lags countries like Sweden or Germany in full fiber and 5G rollout.

In short, Italy is progressing, but still trails leading startup nations in capital access, infrastructure, and entrepreneurial culture. Closing these gaps will require sustained policy commitment, private investment, and cultural change.

Case Study: Milan – A Rising Star

Milan is increasingly viewed as Italy’s answer to Berlin or Paris. The city boasts strong university-industry linkages, especially through institutions like Politecnico di Milano. It also offers access to a skilled talent pool, growing investor interest, and a cultural shift toward innovation.

In 2022, Milan attracted over 40% of all venture capital raised in Italy and saw several startups, including Scalapay and Casavo, achieve significant valuations and international attention.

So, Can Italy Become a Startup Nation?

Italy has made real progress in building an innovation ecosystem, but it has not yet achieved the critical mass of a “startup nation.” Recent trends are encouraging: more venture funds (including public–private vehicles), successful exits, and stronger entrepreneurial networks have emerged.⁶ Government and EU initiatives have pumped unprecedented funding into digital tech (nearly €50 B through 2026), and new laws (Startup/Scaleup Acts) offer incentives that didn’t exist a decade ago.⁹

However, significant gaps remain. Access to late-stage capital is limited, bureaucracy is still a drag, and talent outflows continue. Italy’s young innovation ecosystem (still in many ways in its “renaissance” phase must prove it can scale up from niche successes to globally competitive enterprises.⁷ Continued reforms to ease regulation, strengthen education and research ties, and deepen investor pools will be needed. If Italy leverages its strong technical universities and industrial base while maintaining its new momentum, it could inch closer to startup-nation status. But as of 2025, it remains a work in progress – an “underdog” with promise, rather than a full-fledged European leader like France or Germany.

SOURCES

1. https://startupsmagazine.co.uk/article-italy-startup-ecosystem-report-2023#:~:text=According%20to%20StartupBlink%2C%20Italian%20startups,a%20reduced%20number%20of%20startups

2. https://www.b4i.unibocconi.it/news/the-starting-line-is-now-the-state-of-venture-capital-in-italy#:~:text=But%20what%20are%20the%20signs,employment%20and%20the%20national%20economy

3. innovationopenlab.com

4. sifoundry.com

5. p101.it

6. italianangels.net

7. tech.eu

8. sifted.eu

9. trade.gov 

10. mimit.gov.it

11. scaleupitaly.com

CREDITS

Author: Arashpreet Kaur - Editorial Area Associate

Editor: Alessandro Liberati - Editorial Area Manager

Graphics and layout: Simone Triozzi - Communication Manager