Italy’s €10B VC Sector Grows, Faces Structural Barriers

Italy’s venture capital (VC) sector has seen strong growth, amassing nearly €10 billion in startup investments over the past decade, according to the latest "State of Italian VC" report released by VC firm P101. The country is now home to more than 14,000 innovative businesses—almost 12,000 of which are startups—accounting for about €10 billion in production value and employing approximately 62,000 people in 2025.

While Italy’s VC ecosystem has evolved from a handful of small operators to one with robust foundations, annual investment has risen significantly: from €363 million in 2016 to €1.4 billion in 2025, marking a fourfold increase. However, Italy still lags behind other leading European economies in per capita VC investment.

Andrea Di Camillo, Founder and Managing Partner of P101, highlights a critical shift within the global innovation landscape. "We are now facing a phase of deep technological discontinuity, with AI and critical infrastructure reshaping capital allocation, alongside a growing awareness that digital sovereignty is no longer a choice, but a strategic necessity,” he said, underlining the urgency for broader international perspectives and corporate involvement in Italy’s innovation sector.

In 2025, VC investments reached €1.4 billion—a 17% increase from 2024—despite a 35% drop in the number of transactions, indicating a preference for fewer but larger deals. The median deal size doubled to €1 million, and startup valuations rose from €1.8 million in 2016 to nearly €5 million in 2025. However, Italian startup valuations remain significantly below the European average and far behind the US, where median valuations approach €49 million.

Structural challenges persist. Exit opportunities for Italian startups remain limited; only 22 exits were recorded in 2025, down from 31 the previous year, and there were no IPOs for VC-backed firms. Over the last decade, only 22 IPOs for VC-backed companies were recorded in Italy, underscoring the lack of a vibrant local public market.

Fundraising in 2025 also faced headwinds, totaling close to €400 million across nine funds—a 13% year-on-year decline—with no single fund surpassing €150 million. Despite these hurdles, Italian VC has doubled its fundraising capacity over the decade, but it still accounts for a minor portion of Europe-wide funding, which fell to nearly €11 billion in 2025 from €25 billion the previous year.

Domestic capital dominates the Italian VC scene, with 71% of funding sourced locally. European investors provide 19%, North American 4%, and the Middle East 6%; Asian participation remains negligible. The country is notable for attracting relatively more capital from the Middle East than its European peers.

Institutional interest is rising—driven by investors like CDP, EIF, and Fondo Italiano, who have supported Italian funds 63 times over the past decade, as well as Azimut and supportive regulatory changes. However, corporate and insurance investment in VC funds lags compared to more mature ecosystems such as France.

Universities play a pivotal role in nurturing entrepreneurship. Between 2020 and 2025, startups founded by Italian university alumni raised over €7.3 billion. Bocconi University and Politecnico di Milano lead, together accounting for over €5 billion.

While Italy’s VC ecosystem signals maturity in investment volume and capacity, it remains constrained by its limited internationalization, the lack of significant public market exits, and minimal corporate participation. Strengthening these structural aspects—and integrating more fully with European and global capital flows—will be decisive for the future competitiveness of Italian innovation.

Source: tech.eu.