Financing innovation in Italy: an analysis of venture capital and private equity investments

Using a unique data set, this paper describes the main features of the venture capital industry in Italy. Operations by Italian specialised venture capitalists are only in part devoted to small, young firms from advanced industries, have a rather short duration and are weakly focused on a few firms or sectors. Furthermore, young innovative firms receiving private-equity capital � from both �venture-capital� funds and other private-equity funds � are usually also financed by banks, both at the start and the end of the investment, and the fund�s commitment tends to reduce the cost of credit to only a limited extent. Overall, an �equity-then-credit� sequence does not clearly emerge in the financing strategies of young and high-tech Italian firms, suggesting that funds play a weak signalling or scouting role vis-�-vis the banking system.