Siena is a medieval city in Tuscany, whose historic centre is a UNESCO World Heritage Site. In it, the traditional horse race named Il Palio takes place twice a year since 1633, in July and August. Ten horses and riders, who represent ten of the seventeen city quarters called contrade (contrada, in the singular form), compete in the 90-second race around Piazza del Campo. The contest is more than a competition as it is part of the pride of the city itself which relies on the rivalry of each ward.
Siena is also home to Monte dei Paschi. Founded in 1472, the oldest bank in the world has nurtured an exclusive relationship with Il Palio which is based not only on its philanthropic mission but also on a creditor-debtor link.
In fact, during the phases immediately before the start of the run, jockeys are involved in a sort of chaotic diplomatic negotiations in order to get cooperation from their peers to come in first. For reaching this goal, they have also a budget to manage and can eventually pay a sum comprised between half a million and a million euros.
The day after, the winner heads to the bank to ask for a loan and pay his creditors. Among the thousands of clients of the bank, the contrade have been the most solvent ones as the future political stability of the city itself relies on their ability to pay back their loans. To some extent, it could be argued that Il Palio represents a kind of ante litteram blockchain.
Unfortunately, one of the reasons why Monte dei Paschi was rescued by the Italian Government is the huge amount of bad loans owned by some most prominent Italian entrepreneurs. Also for this, Monte dei Paschi’s story has been seen by many as a sign of the decline of the country.
However, something new is happening and this comes from the alternative finance sector. Let’s consider, for example, the equity crowdfunding segment.
The Italian government, through the Stability Law for 2017, extended access to equity crowdfunding to all kind of SMEs in a move which has been considered to be one of the most innovative and game changing in the European Union.
One of its main elements is the strategic aim of funnelling capital into the real economy offering fiscal relieves to investors.
This is of great importance as there is an enormous market potential out there. In fact, when it comes to personal savings Italy can rely on approximately 50 billion euros according to the latest figures from Intermonte, a leading broker in Italy whose origins traces back to Monte dei Paschi as well.
This potential is confirmed also by the fact that the sector is still in its infancy and the margins to grow are massive. Indeed, compared to the global industry, Italian share of market counts just for 0.14 percent as capital raised over 2016 equalled 7.7 million euros against 5.4 billion euros on a global scale while analysts forecast a capacity of 67 million euros to be reached in the next future getting to a kind of tenfold increased market share worth 1.2 percent.
However, decision makers should still go the extra mile in order to simplify bureaucracy. For example, just taking into consideration freelancers (Partite Iva) they have about 89 deadlines a year to comply with in order to carry on their businesses. Not to mention the reform of the judiciary system which could give more safety nets to entrepreneurs to do business and investors to invest their money.
As a consequence of this, in Italy there are only 7,000 startups while the most entrepreneurial city in the United Kingdom outside London, Birmingham, counted 17,743 new businesses registered during 2016.
Nonetheless the number of new ventures created can grow thanks to equity crowdfunding. Since the introduction of web based capital raises, it has proved to be more effective than the traditional channels like venture capital with 57 percent of campaigns reached their funding target with an average of 277.419 euros of capital raised. From the investor perspective, one needs to also consider that traditional investments, nowadays, are not as remunerative as they were in the past.
In brief, Italy has been paving the way for a brighter future offering a disruptive tool to both entrepreneurs and investors. This is why experts claim that 2017 will be a turning point for the entire sector.
On the flip side, though, significant effort has to be put in to get people more aware of these new investment possibilities. In practical terms, this would mean transforming the potential of the market into reality. In fact, despite the innovation brought into the system by new regulations, other requirements and rules remain unchanged, which continue to act as obstacles for market to flourish. On top of this it should be said that investing in early stage companies is a high risk venture, for which a portfolio approach is needed, wherein diversification in a range of different assets mitigates concentrated risk. Finally, more clarity on exit strategies should be done for investors from providers to better design their investing strategies.
Nevertheless, what has been done until now confirms the interest of the decision maker along with the other players in the scene to support a sector which could trigger a new renaissance for the country as the wealth of nations is still made by entrepreneurs.
In fact, during the phases immediately before the start of the run, jockeys are involved in a sort of chaotic diplomatic negotiations in order to get cooperation from their peers to come in first. For reaching this goal, they have also a budget to manage and can eventually pay a sum comprised between half a million and a million euros.
The day after, the winner heads to the bank to ask for a loan and pay his creditors. Among the thousands of clients of the bank, the contrade have been the most solvent ones as the future political stability of the city itself relies on their ability to pay back their loans. To some extent, it could be argued that Il Palio represents a kind of ante litteram blockchain.
Unfortunately, one of the reasons why Monte dei Paschi was rescued by the Italian Government is the huge amount of bad loans owned by some most prominent Italian entrepreneurs. Also for this, Monte dei Paschi’s story has been seen by many as a sign of the decline of the country.
However, something new is happening and this comes from the alternative finance sector. Let’s consider, for example, the equity crowdfunding segment.
The Italian government, through the Stability Law for 2017, extended access to equity crowdfunding to all kind of SMEs in a move which has been considered to be one of the most innovative and game changing in the European Union.
One of its main elements is the strategic aim of funnelling capital into the real economy offering fiscal relieves to investors.
This is of great importance as there is an enormous market potential out there. In fact, when it comes to personal savings Italy can rely on approximately 50 billion euros according to the latest figures from Intermonte, a leading broker in Italy whose origins traces back to Monte dei Paschi as well.
This potential is confirmed also by the fact that the sector is still in its infancy and the margins to grow are massive. Indeed, compared to the global industry, Italian share of market counts just for 0.14 percent as capital raised over 2016 equalled 7.7 million euros against 5.4 billion euros on a global scale while analysts forecast a capacity of 67 million euros to be reached in the next future getting to a kind of tenfold increased market share worth 1.2 percent.
However, decision makers should still go the extra mile in order to simplify bureaucracy. For example, just taking into consideration freelancers (Partite Iva) they have about 89 deadlines a year to comply with in order to carry on their businesses. Not to mention the reform of the judiciary system which could give more safety nets to entrepreneurs to do business and investors to invest their money.
As a consequence of this, in Italy there are only 7,000 startups while the most entrepreneurial city in the United Kingdom outside London, Birmingham, counted 17,743 new businesses registered during 2016.
Nonetheless the number of new ventures created can grow thanks to equity crowdfunding. Since the introduction of web based capital raises, it has proved to be more effective than the traditional channels like venture capital with 57 percent of campaigns reached their funding target with an average of 277.419 euros of capital raised. From the investor perspective, one needs to also consider that traditional investments, nowadays, are not as remunerative as they were in the past.
In brief, Italy has been paving the way for a brighter future offering a disruptive tool to both entrepreneurs and investors. This is why experts claim that 2017 will be a turning point for the entire sector.
On the flip side, though, significant effort has to be put in to get people more aware of these new investment possibilities. In practical terms, this would mean transforming the potential of the market into reality. In fact, despite the innovation brought into the system by new regulations, other requirements and rules remain unchanged, which continue to act as obstacles for market to flourish. On top of this it should be said that investing in early stage companies is a high risk venture, for which a portfolio approach is needed, wherein diversification in a range of different assets mitigates concentrated risk. Finally, more clarity on exit strategies should be done for investors from providers to better design their investing strategies.
Nevertheless, what has been done until now confirms the interest of the decision maker along with the other players in the scene to support a sector which could trigger a new renaissance for the country as the wealth of nations is still made by entrepreneurs.
About the Author - Luca Sabia
Luca is a Doctoral Researcher in Entrepreneurship. Holding an MBA from Durham University Business School, he has developed his career in marketing working, over the past decade, with Fortune 500 companies across a number of industries. A former Financial Times blogger, he currently covers alternative finance on his brand-new blog, Oliver*.
Luca is a Doctoral Researcher in Entrepreneurship. Holding an MBA from Durham University Business School, he has developed his career in marketing working, over the past decade, with Fortune 500 companies across a number of industries. A former Financial Times blogger, he currently covers alternative finance on his brand-new blog, Oliver*.
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