Issue link: http://endeavor.uberflip.com/i/1202586
C H A L L E N G E S : W H AT A R E T H E G R E AT E S T C H A L L E N G E S T H AT P R E V E N T F I N T E C H E N T R E P R E N E U R S F R O M S C A L I N G I N M I L A N ? 12 Access to capital was one of the highest rated challenges among interviewed entrepreneurs: almost half of the interviewed founders rated access to financial capital either as a major obstacle or a very severe obstacle. Interviewed entrepreneurs mentioned the following reasons. 1.Banks rarely make equity investments in the fintech sector. Equity investments and acquisitions in the fintech sector were uncommon among both banks and their corporate investment arms, even of the ones with the largest innovation budgets. This resistance to equity investments could be linked to corporate culture and organizational complexity. Further, such deals might not be attractive to founders due to valuation and potential operational limits in collaborating with other banks. 2.For many international investors, Italian fintech companies are overly focused on solving Italian problems. Italian investors interviewed for this study explained that international investors could provide additional growth capital for fintech entrepreneurs, but they act cautiously because they are unfamiliar with Italian financial consumer habits and the inefficiencies of financial markets that most fintech companies are addressing. Before they would invest in Italian fintech companies, they look for previous investment activity on behalf of domestic investors, but domestic investors have rarely invested in the sector. 3. The prospects of having a profitable exit are uncertain. One of the main drivers of venture capital investors is the likelihood of an exit. Fintech in Milan does not have a history of successful exits, with only six known cases of full acquisitions, of which only Neutrino, a cybersecurity company, sold for over USD 10 million to San Francisco-based Coinbase. 16 As Italian banks have a limited appetite for startup acquisitions, exits would be more likely to happen on the international market. However, as most fintech initiatives focus on solving problems that are specific to Italian markets, the appeal for international players is limited as well. CHALLENGE 1 ACCESS TO CAPITAL.