Tuesday, May 20, 2008

Fostering the Entrepreneurial Mindset in Italy

In order to better understand the business environment in Italy, we attended a private equity conference where we had the opportunity to meet with the US Ambassador of Italy.

After a successful career at his eponymous named private equity firm (Freeman Spogli), Ambassador Ronald Spogli entered the US State Department where he believed it was in the best interest of the United States to help modernize the stagnant Italian economy. The embassy recently established an initiative called the Partnership for Growth, which is designed to help foster the entrepreneurial mindset in Italy through four main objectives: 1) stimulate the venture capital industry and promote Italian entrepreneurial role models; 2) modernize the country’s capital markets; 3) spur innovation by protecting intellectual property rights; and 4) send Italian students to US schools to learn the American way of doing business.

In fact, the Italian venture industry is really quite nascent. A major constraint is that the entrepreneurial mindset--which is quite common to most people here in the US--is a very foreign idea to most Italians. One of the reasons for this lack of entrepreneurial drive is the fear of bankruptcy. In the US, most new businesses fail… and it’s okay to fail and try again. But in Italy, if a new business fails, it’s not just the business that fails, the entrepreneur’s personal life might be ruined as well (e.g. no longer able to vote, never get another loan, social failure, etc.).

A second reason is that Italian investors are not typically comfortable with stomaching the risk required for PE/VC investments; they prefer to invest in more traditional asset class such as public equities and bonds. As evidence, consider this statistic: in the US, pension funds typically supply nearly 60% of the total capital invested in new private equity funds. In Italy, pension funds supply only 1% of such capital.

The Embassy is already seeing some good results. Last year, they sent several Italian investors to Silicon Valley in order to learn the American approach to venture capital. Within three months or returning to Italy, these investors have already established a formal angel network and have reviewed nearly 200 new business plans! There was a great amount of energy in the air at the conference.

One thing that makes Columbia Business School unique is the experiential learning model, which simulates the entrepreneurial experience. At Columbia, the idea of a business a plan competition (for example) is well understood, but in Italy it is a whole new concept.

Italian students attending Columbia Business School (and participating in organizations such as NOVA) will obtain a unique and well-fitted experience to help them serve as catalysts for change in the renovation of the Italian economy. They will not only learn new ideas, but will also obtain the skills and the network required to put these ideas into practice.

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