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Massimiliano Magrini just wrote a post offering a panoramic view of the “State of the Union” in the Country of the Dolce Vita. He talked about the number of startups in Italy and suggested that a current lack of available capital meant big opportunities for investors in the country. Interesting perspective indeed, but maybe a little more context can help. First, while Italy is not lacking startups, it’s also not lacking capital; but that’s now true all across the world. Capital is being commoditized, and the cost for starting something (anything, actually) is at an all-time low.

But in Italy are there 33 institutional investors plus 1,800 startups that set up shop in the last 12 months? That’s impressive, particularly if compared to Silicon Valley, where, according to Mattermark, there are fewer than 100 active VCs and slightly fewer than 12,000 active startups. And according to a recent Forbes’s article, there are 51 new startups launched every month in the San Francisco Bay Area — 610 new startups every year.

So Italy launches three times as many startups compared to San Francisco and has a third of the institutional investors in Silicon Valley? Holy sh*t: Startup paradise! Well … not really. And while the numbers may be correct, quality and quantity are two very different things. I know something about it: Since January 2010 I’ve cofounded two startups and invested in 10 others, occasionally mentoring dozens more (mostly in the 500Startups network).

Three things go into the mix, with several angles for each one: the ecosystem, the founders, and the investors. Let’s take a quick look at the ecosystem first:

– Italy has one of the highest unemployment rates of Europe. It’s a staggering 43.3% for people below 25 years (yep, you read it right). That’s a scary figure, and it’s of course deeply connected with the political situation of the country. When startups are all the rage, “being an entrepreneur” is the new “being unemployed”. Easy as that.

– Italy is the least business-friendly place in Europe. Let’s face it: 68% taxes on businesses — as reported by Der Spiegel — is probably not only the highest in Europe, but worldwide. Plus you can’t really fire anyone because they’ll sue you a minute later. And how can the new incentives compete with U.S. law (in Delaware you pay less than $1k per year until you’re profitable) or the situation in the U.K. (which de-risks up to 100% of the angel investments made in tech startups)?

– Italy’s tech ecosystem is not there (yet). While Germany and the U.K. have vibrant tech communities recognized globally, Italy is nowhere near that. You can literally count the Italian success cases on the fingers of your hands (and you have to go back several years to do it). They’re exceptions. They succeeded regardless of the ecosystem, not because of it. How many Italians made 1 million users in one day? Or raised more than $50 million funding? Or exited for more than $250 million cash?

Then, of course, if you are an Italian investor, if the challenges above weren’t enough already, you face specific issues:

– Founders don’t have a real track record. It’s incredibly rare to find someone who’s done it already and is doing it all over again. Someone who knows how to make a buck, or — God forbid — sell a company. There are several reasons behind it, but the result is that the usual conversation is with a first-time founder, with all the implications that this brings to the table. How easily can you trust an inexperienced entrepreneur? It’s not about being risk-averse, it’s about getting your money back.

– Founders don’t have a specific background. Making a great product is not the same thing as making a great company. And while Italians have coding skills definitely comparable to the ones in the EU or the U.S., they usually lack the knowledge needed to put together a real product solving a real need. And what about customer development? Or user experience? Or fundraising? Ideally, they should be great at least at one of these, but they rarely are.

– Founders don’t have enough ‘war scars’. Not only haven’t the founders succeeded enough, they haven’t fail enough either. Or if they did fail, how is their failure predictive of success? While this is kind of the egg-chicken problem (failure is not seen yet as a necessary path to success), from the investor’s perspective the real question is, why should I pay for the education of these guys with my money, increasing instead of decreasing my risk of losing it?

And then, of course, there is the founder’s perspective. Their point of view of Italian investors is not flattering either:

– Investors do not make fast decisions. The average investor takes weeks, not days, to give you a meeting. And takes weeks, not days, to follow up with you. And you have to chase them, and they don’t answer email (or the phone either, for what it’s worth). And when you are able to reach them, there is always something else keeping them from being able to make a decision. That’s a deadly sin, as you’re wasting time that could be dedicated to other investors.

– Investors do not have an international network. In a world where money is commoditized and you can raise with the same ease/difficulty in Italy or in Australia, that investor is competing with the rest of the world. And the same dumb money is, well, dumb money. What you’re really interested in is if these guys writing you a check can also help you with specific expertise, finding clients, further funding. Everybody says they can, but usually that’s not the case.

– Investors ask for unreasonable terms. It’s relatively common to see a round of $250k taking 40% of equity in the company. Investors will try to do that because, well, they can; founders will accept it because they can’t afford better. But the result is that when the company tries to expand beyond Italy, every potential following investor will look at the cap table and run like hell. And both the investors and the founders will be screwed.

So, is it all doom and gloom? No unicorns or rainbows? Is there no hope for Italian entrepreneurs and investors? Not exactly:

– NETWORK: There may be no network in Italy yet, but there is already a network of Italians around the world, both investors and founders. They wouldn’t come back to Italy for all the gold in the world, but they’ll be more than happy to connect and help; they’re just a Skype call away.

– BENCHMARKS: While 20 years ago the industry knowledge was fragmented and not standardized, that’s definitely not the case anymore. Just turn on your laptop and study the best practices of the rest of the world. As they say: In the information age, ignorance is a choice.

– ACCESS: It’s not only about talking to the Italians around the world, nowadays everyone is just an email away. With the right hustle, you can accomplish a lot: access to more interesting deals, access to more interesting investors. Go for it, but know the rules of the game.

– TALENT: The hard truth is that Italy has talented developers that cost more or less as much as the Eastern-European ones. It’s cheap talent with low turnover. In the hyper-competitive world we live in, that’s actually gold. You can accomplish a lot more with a lot less.

– DESIGN: Finally, even if the typical developer costs as little as an Eastern-European one, Italian people do have a design sensibility than can be leveraged to give a personal touch to what’s being built. And design, nowadays, has become an unfair advantage that can make or break any company.

Bottom line: Italy is not — and probably will never be — a startup paradise, but in the globalized world, Italy can definitely find its new positioning with relatively low effort, turning its current weaknesses into strengths while providing cheap design-sensible resources and connecting more and more with the outside world. Opportunities are everywhere if you are just able to see and seize them.

Armando Biondi is cofounder and COO of AdEspresso, a Saas Solution for Facebook Ads Optimization. He lived in Italy until 2012, and while he has now relocated to San Francisco, he still spends 2-3 months a year in Italy. He previously cofounded Pick1 and four other non-tech companies. He’s also an angel investor in Mattermark and 10 more companies, is proudly part of the 500Startups network, and is also a former radio speaker.

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