Mapping Milan Fintech with Endeavor

Mapping Milan Fintech is a unique study, carried out by Endeavor Italy, which analyzes not only the presence of fintech in Milan but also the relationships that entrepreneurs have with each other and with the territory and institutions. Gloria Seveso, Manager – Entrepreneur Selection & Growth of Endeavor Italy, illustrates the key points

What are the distinguishing features of this fintech study compared to other similar researches? Who are the main recipients?

This study deploys a methodology developed by Endeavor Insight, with the support of various research institutes and universities including Kaufman Fellow, The World Economic Bank, and Columbia University. The focus is the network analysis, which offers an overview of main actors and the connections between them. Besides using pre-existing sources, the study is based on primary data, collected through surveys and direct interviews with entrepreneurs and representatives of support organizations. Therefore, the study captures the perceptions of the main players in the fintech ecosystem, hence highlighting qualitative aspects that are generally overlooked by other reports. With this regard, our goal was to raise awareness of those subjects who play the role of enablers to the challenges that fintech faces in our Country.

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Which one of the results surprised you the most and why?

The most obvious result is that Milan is struggling to launch fintech companies that are capable of scaling-up. Indeed, this is not surprising since it is a common characteristic of many sectors and at the Italian level. Among the over 80 fintech companies born in Milan in the past 5 years, only 5% have reached or exceeded 50 employees. This is a significant limitation considering that the effective growth of the ecosystem is proven to be driven precisely by these companies able to scale.

A more interesting result concerns the perception of meritocracy and the criteria needed to succeed. Less than 10% of respondents believe that gender (i.e. female or male) is a critical trait to be successful in fintech. Yet, less than 10% of companies in the sector have female founders.

Fintech that are struggling to scale-up. What are the three main reasons identified and, for each of them, how to make a change?

  1. Access to capital – Most venture capitalists look at fintech as a difficult sector to invest in, mainly due to the need for large set-up capital due to compliance with the regulation. Furthermore, international investors are often held back by a strong focus on the local market of Italian fintech startups. What can be done, is to create structured opportunities to interact with international investors and to increase the attractiveness of the local ecosystem.
  2. Access to non-banking talents – Companies in the startup and scale-up phase struggle accessing talent, especially with technical and managerial skills with previous experience in the scale-up space. This applies for instance to crucial positions, such as HR. To turn things around, institutions need to invest in attracting foreign talent, which includes encouraging the bring-back of Italian talents abroad. Both economic and legislative incentives are needed, yet these are not enough. We need to think about programs aiming at communicating the attractiveness of Italian companies.
  3. Regulatory compliance – Over 50% of respondents pointed-out regulatory compliance as the main challenge in the sector, mainly due to the uncertainty of the regulatory framework. Organizations like Italia Fintech are doing a brilliant job by bringing the fintech startups’ needs to decision-making tables. It is essential to create windows in which regulation is lighter, so as to respond to legislative needs without stifling innovation.

In this scenario, what role does Endeavor play / could play?

Endeavor is an international organization that supports high-impact entrepreneurs in the Countries in which it operates. Our core activity is to help companies that have passed the selection process through mentorship, support in fundraising and international expansion. The value of an ecosystem is recognized above all by the presence of so-called unicorns. Therefore, the role of Endeavor is to encourage their birth and thus generate a positive impact on the country’s economy.

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Author: Tudor Sava

13 Febbraio 2020