VENTURE CAPITAL

AND CAPITAL MARKET

Italian prospects of Venture Capital

SMEs Italian entrepreneurial world is becoming aware of the financial stimulus in the company development: merchant banking, LBO, securitization, mezzanine finance, project finance are known words nowadays.

In such a context the Venture Capital has a first rate role.

Financial Market

In order to develop VC completly Italy needs an efficient capital market (Stock exchange), but above all it needs a SME opening and an offer aiming their needs, and not those of big industrial groups.

The efficacy of VC has to include all the different phases of SMEs::

seed catipal (settlement)

start-up

development capital

The earning power of VC has been showed being higher than traditional forms of employment of debt capital.

In Italy this is the right time for VC as: EC cycle is positive; rates are low, the currency is stable; deregulation is in progress; new markets and sevices are opened; there is a higher efficency in European financial markets.

Industrial Sector

In Italy and Europe we can say that the sectors ready for VC are:

1) scientific research and technological innovation (e.g.: TLC),

2) energy sector

1) The earning power of VC in European PMI is widely proved by qualified studies.

Notwithstanding what already said, on 8 Mld ECU of VC in 1996, only the 24% was assigned to technologial development, the 5% in Italy.

The finacial requirements of PMI working on Innovation technology sector are brought about three different factors:

1) the project stage of development: development of a new tecnology; industrial and markets feasibility studies; starting industrialisation and marketing; international development.

2) Project Innovation Degree: extreme innovation which implies new products or processes;

increase of the range/use of the product; technological adaptation (to the sector standard).

3) Company development degree: new society incorporation; preexistant society.

In order to have a successful High Tech company the following three factors are essential:

1) Services: a consulting firm with specific competences;

2) financial Back-up: in order to find the indispensable capital for the start-up;

3) networks: industrial and commercial links useful for the development.

Forum Internazionale act to create a favourable environment for financial planning of investment projects, feasibility studies, urban development projects, M&A, project financing, venture capital, etc.

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Companies and capital market in Italy.

Because of the nowadays limited economical development, companies tend to improuve their economical efficiency: in such a context, the indebtedness cost becomes more and more an element of strategic development.

Why to quote

In order to: find capitals all aroud the world; find the investements; guarantee the company continuity; turn to account the firm image; reduce the companies indebtedness with banks; obtain the entrepreneur's estate liquidity; acquire better managers; for a greater managers' autonomy.

Who may quote

A developing company; a company in phase of generational passage, a company looking for a direct access to the capital market; a company intending to adequate its image to the favorable set up and market position reached.

Where to quote

An Italian company doesn't necessary need to choose to quote on the Milan Market, but shuold also consider the opportunities offered by foreing markets, which, from some points of view, are more qualified.

Milan Market - Necessary Requisites in oreder to quote:

- net worth > 10 Mld

- floating funds >/ 25%

- 3 financial statements

- certified balance sheets

Requisites may be more favorable on other Markets.

Foreing Markets - Atout: international credit; realiability of exchanges regulations; transparency; accurate finacial infornation; fully-developed capital market; big groups percentage of capitalization oriented to the proportioned capitalisation of the exchange list; political stability of the country; no elements of rigidity for the tendency of the monetary rate.

Foreing Markets - Why?

in oreder to be knonw in a new market; to get capital from that maket; for a wider market availability to capital increases; for the presence of institutional investors and market-maker; for the specificity of the companies quoted there.

Last modified: September 1999

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