Italy aims to close the tech-transfer investment gap with Europe

The European Commission (EC) and the European Investment Fund (EIF) launched the Plan for Europe in 2016 – also known as the Juncker Plan – aiming to deploy €315bn in three years across all member states.

As part of this programme, in December 2016, EIF and Cassa Depositi e Prestiti (CDP) christened their maiden fund-of-funds, ITAtech, targeting venture funds focused exclusively on the technology transfer process, which aims to translate business-relevant ideas originated in universities and other research institutions into the market. The vehicle aims to fill the void of seed vehicles and boost venture capital activity in the country. As part of the agreement, EIF and CDP committed equally to the vehicle, totalling an investment firepower of €200m.

ITAtech is not structured as a closed-ended fund and will not raise commitments from third parties, unquote" understands. The vehicle operates through a fiduciary agreement under Luxembourg regulation, with EIF as its fiduciary. Against this backdrop, EIF will perform the due diligence to select the investment teams the fund will back.

"Compared to other European countries, the Italian tech-transfer sector is relatively underdeveloped. ITAtech is keen on targeting the issue by stimulating the launch of a new generation of investment teams that could translate intellectual properties into the market" - Gabriele Todesca, European Investment Fund

Italy has no tech-transfer-focused GPs on its soil, while Europe is the second largest market for tech transfer globally, with a total of €2bn in investments deployed during the past decade. As part of this amount, EIF totalled €1.5bn of investments across the continent and currently has 32 tech-transfer-dedicated funds in its portfolio, unquote" understands.

"The vehicle aims to create a new investment environment in Italy," says Leone Pattofatto, head of equity investments at CDP. ITAtech targets first-time teams and first-time funds dedicated to catalysing and accelerating the commercialisation of intellectual property rights with technological content. It therefore needs to select investment teams with close relationships with Italy’s research institutions.

"In the Italian market there is, at times, a mismatch between quality and quantity of academic research on the one hand, and the amount of research actually used for commercial purposes on the other hand,” says Gabriele Todesca, an EIF division head. The country invests 1.31% of its GDP in research, below the European average of 2%, according to state-backed statistics institute Istat, and in 2016 was the fifth largest country in terms of volume of VC investments, according to unquote” data. Nonetheless, Italy is the seventh country worldwide for published research, according to ScienceWatch.

Mind the gap
"Compared to other European countries, the Italian tech-transfer sector is relatively underdeveloped. ITAtech is keen on targeting the issue by stimulating the launch of a new generation of investment teams that could translate intellectual properties into the market," says Todesca.

EIF and CDP aim to launch a talent on-shoring operation and expect several investments managers that already worked in the sector to repatriate from several geographies, including the UK, Singapore and the US, and launch new investment teams in Italy, unquote" understands.

The programme is designed to open the Italian tech-transfer sector and reduce the gap with other European countries. Steps have been taken to address this need across the continent, with examples including the Gemma Frisius Fund, a seed capital fund launched in 1997 by the technology transfer office of the Belgian University of Leuven alongside BNP Paribas and KBC Private Equity. In the UK, the Imperial College of London-backed Imperial Innovation fund span out of the university and rebranded to Touchstone Innovations in November 2016.

The first-time teams ITAtech targets will not only look for hidden gems among research institutions, but will also need to be able to deal with the academic environment and patenting regulations.
During the initial investment phase, ITAtech will be the only LP backing these teams, but with a strong track record the investors expect other LPs to join their target vehicles. According to a source familiar with the situation, this is a high-risk profile sector with expected double-digit IRR multiples. EIF and CDP are understood to be mainly looking at impact investing players, which are understood to be among the actors most interested in the new initiative.

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