The merger of Digital Magics and LVenture Group
Digital Magics e LVenture Group, two of the most important players in Italian venture capital, have decided to merge. The announcement of plans to join forces may have gone quietly, with current events and the first US and then Swiss banking crises diverting the attention of markets and commentators. But from this operation will be born – explain a Truth&Business the managing director of LVG, Louis Capello and the executive chairman of DM, Mark Gay – “a leading player in Italy that will also have international ambitions”.
When and why does the will to unite arise?
Capello: “About two years ago we talked about it for the first time, with an acceleration and a concrete start of the study of a possible marriage six months ago. It is a choice that came naturally, also dictated by the growth of the Italian market. We have gone from a market with 200 million investments per year to one with 2 billion. In such a context, size starts to count if you want to be an important player. And there are two ways to do this: find a shareholder or join forces to create a company capable of creating value. We chose the second way”.
Gay: “I would add that the decision to unite in a country that is often divided like Italy is, I think, a good message: we have always been convinced that creating a system is necessary for growth. In this way, then, we become an Italian point of reference in venture capital with international ambitions, also because the ecosystem now allows us to compete with other countries”.
Talk about landing on the international market: have you already identified some areas of interest?
C: “We will have the opportunity to be aggregators, both in Italy and abroad. The idea is to look and have connections with the rest of the European market, the United States and Israel”.
G: “In Southern Europe we will become a significant player. I think we will also look closely at the Gulf countries. What we are convinced of is that there is space and that the Italian ecosystem can be attractive. Our country has a great tradition in the history of innovation and we can carry it forward. We will continue to look for entrepreneurs who have the right ideas, with an innovative spirit and who are able to implement them quickly”.
Is it already possible to talk about the firepower that the new reality will have?
C and G: “The strategy is still being defined, so we believe it is too early to give figures on the investments we will make. What is certain is that the new entity will start with a portfolio of over 200 startups and the goal of integrating 50 to 70 of them every year”.
In the announcement of the agreement you speak tentatively of an operation to be completed by the end of the year.
C and G: “After this period of checks and in-depth analysis, we will realistically arrive at the final balance around June. The new entity will be operational towards the end of 2023”.
The Italian venture capital ecosystem has grown a lot in recent years. Is the sector adequately supported?
C and G: “The Italian ecosystem theme is crucial for the continued growth of a market which, despite its start a few years late, is catching up with that of other European countries. The average investment ticket in Italy fluctuates between 750,000 euros and one million. In Europe the average is around one million euros. Culturally, Italy has overcome the cultural block on startups, we have overcome the phase of the kids in the garage (laughs, ed). It is clear that now the ecosystem must be supported, with policies that help and encourage investments. But there is attention for the sector, just think of the work of Cdp Venture Capital. We are in the moment of enthusiasm, so much so that we are also starting to attract startups from abroad”.
Do you believe that what happened to Silicon Valley Bank could have negative consequences for the world of European venture capital or, as with any storm, there may be opportunities to be seized?
G: “Clearly what happened to Svb is not good news, but they are different markets and with a different degree of maturity and attention. There will certainly be some change in perception, but it should not be forgotten that we are talking about the real economy, businesses and the creation of value. And surely opportunities will present themselves, because innovation will not stop”.
C: “I stress that there are no Italian startups that have money blocked in Svb and in any case the customers have been protected. From a financial point of view, it is certainly a serious fact that will have consequences”.
Net of the jumps in shares caused by the news of recent days, how was the merger project received?
C: “In an extremely positive way, even beyond my expectations. It was understood that with a growing market it is necessary that the subjects within it also grow. And the road to aggregation is an intelligent road”.
G: “The response from investors and the world of innovation has been very positive. The project of creating a system in a market that is growing in size has been understood and appreciated”.