Italian Startup Act

Italian Startup Act
Wednesday, 02/11/2016
2012
Fully assessed
  • Start-up firms
  • Scale-ups
  • Non-financial Support
  • Direct Financial Support
  • Indirect Financial Support
  • Entrepreneur-level
  • Firm-level
  • Environmental-level
  • Access to information / networks
  • Fiscal policy / tax incentives
  • Immigration / startup visas
  • Innovation policy
  • Access to markets
  • Access to capital
  • Cutting red-tape
Italian Ministry of Economic Development
Italy

As stated into d.l. 179/2012, art. 25.1, the goals of the policy are to promote sustainable growth, technological development and new entrepreneurship and employment, with a particular attention for young people.    
Contextually, the policy aims for contributing to shape a new entrepreneurial culture, a business ecosystem more conducive of innovation, enhancing social mobility and attracting foreign financial and human capital.   
The task of practically assessing such effects is conferred to a permanent system (Committee) of Monitoring of Evaluation, composed of members of the Ministry, the National Institute of Statistics and other actors involved in the policy.       
The Committee periodically meets to discuss evaluation methods and findings: the details are published once a year in the Annual Report to the Parliament of the Ministry of Economic Development on the policy (disposed by d.l. 179/2012, art. 32.7). The main metrics to be assessed are the impact of the policy on economic growth, employment and innovation.

More than 6,500 innovative startups were listed in the special section of the Registry of Companies at the end of October 2016 (data updated weekly on http://startup.registroimprese.it/report/startup.zip).

Overall, innovative startups employ approximately 35,000 people: 25,000 registered working shareholders and 10,000 non-shareholder employee. 22.3% of them are composed of a majority of people below 35 years of age, a ratio more than three times higher than other shared capital companies. Gross value of production amounts to € 585 million, about €152,000 on average per company - a 33% increase since 2014. 

Innovative startups invest more and have a far higher share of intangible assets than regular shared capital companies; only 43% of them were profitable in 2015, but those that registered a profit vastly over-performed profitable shared capital companies in ROI (0.11 vs 0.03) and value added (32 cents vs 22 per euro).

Among the measures part of the Italian Startup Act, the simplified access to the Public Guarantee Fund for SMEs has had a noteworthy impact: 1,268 innovative startups have activated the procedure to get a guarantee on their bank loans, for 1,987 operations overall. Of these, 1,413 were successful, for a total sum guaranteed of € 292.358.000.

All data updated on 30 September 2016: see http://startup.registroimprese.it/report/3_trimestre_2016.pdf and http://www.mise.gov.it/images/stories/documenti/sintesi_finanziamenti_fg_startup_pmi_%20incubatori_settembre_2016.pdf

In February 2017, the Directorate General for Industrial Policy of the Ministry presented the third edition (2016) of the Annual Report on the Italian Startup Act (Annual Report 2016). Among the most relevant innovations displayed in the Annual Report is the new incorporation procedure for innovative startups. Since July 2016, Italian innovative startups can draw up their first statutory acts entirely online and free-of-charge. This disruptive normative innovation – a wholly justified adjective, given the fierce corporatist resistance we have met – has already resulted in more than 180 new companies being set up with the new procedure between August and December 2016.

Another measure reported on is intercultural vocation and its forward-looking approach, the Italia Startup Visa programme. This is the fast-track process through which innovative entrepreneurs who intend to set up an innovative startup in Italy can get a self-employment visa. During 2016, ISV received a record-breaking 99 applications, more than twice the grand total of the previous two years; the pace has been even faster in early 2017, as we are rapidly approaching 200 applications (report in English).

As defined in decree-law 18 October 2012, n. 179 ("Decreto Crescita 2.0"), art. 25.2.
Innovative startups are companies with shared capital (e.g. s.r.l. and s.p.a., equivalent to British llc's and plc's), unlisted, which fulfil the following requirements:
- to be less than 5 years old;
- to have their HQ in Italy, or in another EU country as long as one production site is in Italy;
- to have a yearly turnover lower than 5M euros;
- not to distribute profits;
- to produce, develop and sell high-tech innovative goods or services;
- not to result from a merger, split of sell-off of a company or a branch;
- their innovative character is further specified by one out of the three following criteria:
a. R&D expenses are more than 15% of the annual costs of the company;
b. 1/3 of its workforce are researchers, PhD holders or students, or 2/3 of it hold a Master's degree;
c. the enterprise is the holder, depositary or licensee of a registered patent relatable to the core business of the company, or is the owner of a registered software.  

Existing SMEs

There is a distinct policy for existing SMEs with significant innovative content, whose instruments are very similar to those targeted to innovative startups: innovative SMEs. For more information  see the summary of the policy for innovative SMEs here, available on the website of the Ministry: http://www.sviluppoeconomico.gov.it/images/stories/documenti/Executive_summary_policy_on_innovative_SMEs%2026_05_2016.pdf

The main challenges subtending to the Italian Startup Act regard:

- the measurability of certain measures of the legislative package,

- the involvement of traditional businesses and business associations in the enactment and communication of the policy, which still neglect the importance of startups,

- the coordination of policies carried out at a local level,

- the overcome of deep-seated prejudices concerning the Italian business climate. 

The “Italian Startup Act” is a comprehensive legislative package that has drastically changed the normative environment in which Italian innovative enterprises operate. Drawing from the “Restart, Italia!” report redacted by a task force composed of private stakeholders and experts, Decree-law 179/2012 (so-called Decreto Crescita 2.0, “Growth Decree 2.0”) introduced a legal definition for newly-established, technologically innovative companies with significant potential for rapid growth, “innovative startups” (startup innovative). The definition is presented in detail in point 4.   
Upon request, if in possession of the characters set by law, innovative startups are registered in a special section of the Italian Registry of Companies, freely accessible to the public in digital form: this “publicity regime” intends to work as a transparency and a promotional device (#ItalyFrontiers). Registration in the special section of the Registry automatically expires when 60 months (originally 48) have passed since the incorporation of the company.        
With the accession to the special section of the Registry, innovative startups can benefit from a fairly large set of targeted legal facilitations, which cover each phase of the life-cycle of the company.
-   In the early stage, innovative startups can be incorporated by using a digital, standardized model, available online, with a massive reduction of transaction and intermediation costs. Innovative startups are also exempted from many duties and fees, enjoy a flexible corporate structure and labour law – e.g. they can use stock options and work-for-equity schemes – and are given more time to recover from early losses.    
-   For the growth stage, innovative startups can raise capital in unique ways among Italian companies, such as making use of equity crowdfunding portals – Italy was the first country in the world to enact specific legislation for this instrument. Both equity and credit market financing are incentivized: the first through a 19% tax break for individuals (and a 20% deduction for companies) investing up to €500,000 in innovative startups; the latter through a fast-track public guarantee on bank loans up to €2.5M, for a maximum of 80% of the sum borrowed. In addition, the Italian Trade Agency supports the internationalization of innovative startups offering free-of-charge participation to selected fairs and a discounted price for its consulting services.    
- Lastly, innovative startups can “fail fast”: they are exempted from the standard procedure for liquidation, in order to reduce to bare minimum financial and reputational costs and to enable a quick restart for the entrepreneurs.

 

The main responsibility for the policy stands with the Italian Ministry of Economic Development, in particular with its Directorate General for Industrial Policy, Competitiveness and SMEs, which carries out most direct tasks and all coordination activities. Being a very broad policy with systemic relevance, many different institutional actors are involved in some of its areas:
- The Italian Chambers of Commerce, a decentralized system with over 100 local chapters, manage the Registry of Companies and carry out direct administrative control on innovative startups registered in its special section;  
- InfoCamere, the parent IT company of the Chambers of Commerce, is in charge of all the technicalities connected to the special section of the Registry, and set up the web-service by which startups can be incorporated online;       
- Consob, the Italian Securities and Exchange Commission, has the responsibility for equity crowdfunding;   
- Istat, the National Institute for Statistics, has a prominent role in policy evaluation, set into decree-law 179/2012, art. 32;          
- The Italian Revenue Agency (Agenzia delle Entrate) oversees tax-based incentives such as the 19% break for equity investments;    
- Invitalia, the national agency of the Ministry of Finance for development and attraction of foreign investment, manages the direct financing initiative Smart&Start Italia and other communication activities; its parent company Invitalia Ventures manages the first public venture capital matching-fund, Italia Venture I;
It must in addition be recalled that Italy has a partly devolved government and that Regions also offer targeted support to innovative startups as identified by the national legislation. The type and the extent of this support varies from Region to Region: special tenders and local corporate tax breaks are commonplace.

Policy timeline 
- The core elements of the Italian Startup Act reside in decree-law 17 October 2012, no. 179, then validated by Law 17 December 2012, no. 223;    
- The first modification on the core normative came with decree-law 76/2013, which broadened the pool of eligible startups;    
- A significant development was decree-law 24 January 2015, no. 3 (“Investment Compact”), then validated by Law 24 March 2015, no. 33. The law extends the duration of the special regime to 5 years and introduces a new, online procedure for incorporation. In addition, it applies most of the advantages previously attributable to innovative startups to a broader category of companies of innovative character, regardless of their maturity stage and size: innovative SMEs.

Decree-law 179/2012 came in the midst of a deep economic and political crisis for the country, when the employment situation was dire, the business climate dismal and the confidence of the public towards the Government as an institution low. The policy had thus a very strong symbolic component, aiming at a reorientation of the Italian entrepreneurial community towards technological innovation and smart growth.  

Executive summary of the Italian Startup Act (in English): http://www.mise.gov.it/images/stories/documenti/Executive_Summary_Italy_Startup_Act_02_05_2016.pdf

Summary of the key elements of the policy, in ppt form (in English): http://www.mise.gov.it/images/stories/documenti/Slides_innovative_startups%20ENG_website_02_05_2016.pdf

2015 Report to the Parliament on the implementation of policies in support of innovative startups and SMEs (in English): http://www.mise.gov.it/images/stories/documenti/Relazione_Parlamento_startup_e_PMI_innovative_2015-ENG_01_03_2016.pdf

Official website of the Italian Chambers of Commerce for innovative startups: http://startup.registroimprese.it/index_en.html

 

- The core elements of the Italian Startup Act reside in decree-law 17 October 2012, no. 179, then validated by Law 17 December 2012, no. 223;         
- The first modification on the core normative came with decree-law 76/2013, which broadened the pool of eligible startups; 
- A significant development was decree-law 24 January 2015, no. 3 (“Investment Compact”), then validated by Law 24 March 2015, no. 33. The law extends the duration of the special regime to 5 years and introduces a new, online procedure for incorporation. In addition, it applies most of the advantages previously attributable to innovative startups to a broader category of companies of innovative character, regardless of their maturity stage and size: innovative SMEs.

- In February 2017, the government presented the third edition (2016) of the Annual Report on the Italian Startup Act, which is also available in English (Annual Report 2016). Beyond offering a great overview to discover what has been done to support innovative startups and SMEs in the last few years; on the other, it also represents an exhaustive data resource on the almost 7,000 Italian innovative startups.

- The Budget Law for 2017 has enshrined several new policies in law to support innovative entrepreneurship and to bolster the attraction of foreign investment. Many of these measures adopt the policy guidelines of Italy’s new national plan for digitised manufacturing, “Industria 4.0” (presentation in English). Others are entirely new, such as a project for a new two-year “investor visa” to reward non-EU citizens who invest substantial amounts in the strategic assets of our country, such as government bonds, startups and SMEs, and cultural heritage.

 

The “Italian Startup Act” is a comprehensive legislative package that has drastically changed the normative environment in which Italian innovative enterprises operate. 

The main responsibility for the policy stands with the Italian Ministry of Economic Development, in particular with its Directorate General for Industrial Policy, Competitiveness and SMEs, which carries out most direct tasks and all coordination activities. Being a very broad policy with systemic relevance, many different institutional actors are involved in some of its areas:
- The Italian Chambers of Commerce, a decentralized system with over 100 local chapters, manage the Registry of Companies and carry out direct administrative control on innovative startups registered in its special section;   
- InfoCamere, the parent IT company of the Chambers of Commerce, is in charge of all the technicalities connected to the special section of the Registry, and set up the web-service by which startups can be incorporated online;       
- Consob, the Italian Securities and Exchange Commission, has the responsibility for equity crowdfunding;  
- Istat, the National Institute for Statistics, has a prominent role in policy evaluation, set into decree-law 179/2012, art. 32;  
- The Italian Revenue Agency (Agenzia delle Entrate) oversees tax-based incentives such as the 19% break for equity investments;       
- Invitalia, the national agency of the Ministry of Finance for development and attraction of foreign investment, manages the direct financing initiative Smart&Start Italia and other communication activities; its parent company Invitalia Ventures manages the first public venture capital matching-fund, Italia Venture I; 
It must in addition be recalled that Italy has a partly devolved government and that Regions also offer targeted support to innovative startups as identified by the national legislation. The type and the extent of this support varies from Region to Region: special tenders and local corporate tax breaks are commonplace.

- Corrado Passera, Minister of Economic Development at time of enactment of the decree-law 179/2012;    
- Stefano Firpo, head of the Technical Secretariat of the Minister 2012-2015, now DG for Industrial Policy, Competitiveness and SMEs;         
- Mattia Corbetta, former member of the Technical Secretariat (2012-2015), now with DG for Industrial Policy, main contact-person and operative responsible for innovative startup policy since 2012. 

The “Italian Startup Act” is a comprehensive legislative package that has drastically changed the normative environment in which Italian innovative enterprises operate. Drawing from the “Restart, Italia!” report redacted by a task force composed of private stakeholders and experts, Decree-law 179/2012 (so-called Decreto Crescita 2.0, “Growth Decree 2.0”) introduced a legal definition for newly-established, technologically innovative companies with significant potential for rapid growth, “innovative startups” (startup innovative). The definition is presented in detail in point 4.            
Upon request, if in possession of the characters set by law, innovative startups are registered in a special section of the Italian Registry of Companies, freely accessible to the public in digital form: this “publicity regime” intends to work as a transparency and a promotional device (#ItalyFrontiers). Registration in the special section of the Registry automatically expires when 60 months (originally 48) have passed since the incorporation of the company.
With the accession to the special section of the Registry, innovative startups can benefit from a fairly large set of targeted legal facilitations, which cover each phase of the life-cycle of the company.         
-   In the early stage, innovative startups can be incorporated by using a digital, standardized model, available online, with a massive reduction of transaction and intermediation costs. Innovative startups are also exempted from many duties and fees, enjoy a flexible corporate structure and labour law – e.g. they can use stock options and work-for-equity schemes – and are given more time to recover from early losses.    
-   For the growth stage, innovative startups can raise capital in unique ways among Italian companies, such as making use of equity crowdfunding portals – Italy was the first country in the world to enact specific legislation for this instrument. Both equity and credit market financing are incentivized: the first through a 19% tax break for individuals (and a 20% deduction for companies) investing up to €500,000 in innovative startups; the latter through a fast-track public guarantee on bank loans up to €2.5M, for a maximum of 80% of the sum borrowed. In addition, the Italian Trade Agency supports the internationalization of innovative startups offering free-of-charge participation to selected fairs and a discounted price for its consulting services.   
- Lastly, innovative startups can “fail fast”: they are exempted from the standard procedure for liquidation, in order to reduce to bare minimum financial and reputational costs and to enable a quick restart for the entrepreneurs.