Lorenzo Franzi On Putting Italy On The Map With Italian Founders Fund

With €50 million to invest in Italian startups, Lorenzo and his team are just getting started.

Robin: Can just start by telling us a bit about yourself. What's your background? How did you end up where you are now?

Lorenzo Franzi: Yeah, so I’m half Belgian and half Italian. I was born in Belgium and started working in London and spent some years in Investment Banking. Then, I left to do an MBA at INSEAD as I wanted to move towards a more entrepreneurial path. I felt like I’d fallen into a bit of a trap, getting a consulting job with McKinsey. But, thankfully, they let me have six months off before I started full-time, which I spent at a startup in Paris. That's how I fell into the venture capital ecosystem in 2012. That led to getting to know many important members of the French ecosystem in the last 10 years. It was also the beginning of my angel investing activities. After that, I went on to do two years with McKinsey and after those two years, I left to become a founder because that was always at the back of my mind.

How did you start your journey as a founder?

I had the feeling that I was quite late to the game, well later than I would have liked. So I started my founder journey with the German group called Rocket Internet because they were known for getting things going fast. We raised capital from them and built a company called Zipjet, which was basically like Deliveroo for household services. We picked up dry cleaning and laundry. We quickly raised more money from them and from many other funds and family offices in Europe. We launched in London, Berlin, and Paris with over €20 million in total funding. We made more than €12 million in revenue, but it was a very very difficult business so we ended up consolidating with a competitor..

What did you do after selling Zipjet?

After selling Zipjet, I had the opportunity to continue as an angel investor. I diversified and was busy in London investing in UK startups, but half of Zipjet was in Germany, so I started to invest in German companies too, and established great links with some new Berlin-based ventures. I also continued to invest in quite a few startups in France where I’d originally started.

Over the years that I was a founder, I became quite close to a few funds but also the Venture Capital operations of the Rocket Internet group. So after my exit from Zipjet, the founder of Rocket Internet asked me to join them. I helped, together with some great people like Johann Westarp, who’s now building Lucid Capital, and Christoph Gamon, who went on to co-found Razor Group, to build a new pre-seed activity called Flash Ventures and then also invest for their main Venture Capital fund at Global Founders Capital. There I was responsible, amongst other things, for southern Europe, which is how I got to know the Italian ecosystem and started to identify this big gap at the pre-seed and seed stage for founders.

What was this gap?

I saw that founders had very limited support, capital-wise but also in terms of experience sharing. At the same time, you had a lot of angels trying their best, doing a lot of tickets, and supporting startups, but it was a very fragmented approach. And so founders lacked the support and the structural approach of a fund. Then, my wife and I had the chance to move with her job from London to Milan. We have two kids, and on a personal level, we wanted to try to do something different by setting up a fund to close this gap in Italy.

How did your fund – Italian Founders Fund – come together?

So, with a few of my historical investors in Zipjet, some of whom were Italian, we started discussing and co-investing as angels and we decided “Let's do more.” We wanted to see if we could raise a dedicated fund to help us join forces. We wanted to see if we could change things up. I saw the current generation of founders, and there was the same trend as in France in 2012. You started to see a few exited founders come back into the ecosystem but they weren’t able to support the next generation of founders in a structured way. At the same time, we wanted to democratize access to funding and support and make it possible for the current generation of founders to hopefully, with as little capital as possible, be involved in systematically supporting the next generation rather than doing one angel ticket here, another angel ticket there.

That’s how the fund was born. We started the whole project in January 2023, talking concretely with founders about the approach, strategy, and unfair advantages we could build for the next generation of founders. We were lucky that a lot of them supported us. In May 2023, our first investment opportunity came along and with Exor Ventures we co-led a round in a company called Jet HR, which has become one of the fastest-growing European SaaS companies. That validated the other side of the equation, and everything went pretty quickly from there.

We incorporated the fund in June 2023 and started to onboard investors in July. We had our first close in November at €31 million and extended it to €40 million by the end of the year. On Monday (June 10th), we announced that we have raised €50 million from over a hundred VPs.

Congratulations! So you have raised €50 million from more than a hundred VPs with a minimum investment of EUR 100,000?

Yes. There is a minimum legal requirement in Italy, so we don't have any one VP investment below €100K, which is €25k a year if this is deployed over four years. Unfortunately, we haven't been able to go below that to bring on some profiles that we like, but those are the regulations. The other side of it is that we have no one person with an especially large ticket – the largest is €2.5million and we have two of those, the rest are all between €100K and €1 million.

Does this add more of a community feel to your investments, would you say?

IFF is very much a community project – it's a group effort. We have a professional management team and we're managing everything within a professional fund structure with an independent investment committee. So, all of that makes it super professional but it's a community that has decided to come together with money, as well as a willingness to support.

There might also be opportunities where this group approach might not be needed because we're able to source, let's say, foreign companies entering into Italy, or companies based outside of Italy, which might be global, or they started and grew in Italy but moved to the US, for example. But we will be able to make those investments.

We are excited obviously, but the core starting point is a real willingness to be able to deliver hands-on support, share experiences, and make it so that everybody can do what they think is best from their perspective and help new founders beat the odds.

What differentiates your fund from others?

For us, we have the founders at the heart of what we do. It’s all about putting the founders first, and the founder's experience with us is essential. I think that's what differentiates us a lot is that with historical funds, they often come down from being later stage managers and they've done an amazing job of being able to raise €150 million or more in funding. But that means they can’t go lower, they’ll do it occasionally, but we went a whole other way around. We started with angels who would do smaller tickets, brought them together, and built a fund from that.

Why did you choose to create this fund in Italy?

When I was in Paris in 2012, I saw the French BPI, which in Germany is the KFW, starting to invest. I saw some initial success stories like Criteo, Blablacar, and Algolia, there were a few founders who made money. So, for example, the founders of Vente Privé and other companies started to reinvest or even create funds. I've also seen, during the last 10-12 years, that the Italian ecosystem didn’t exist. When I started to invest with GFC in Italy, I couldn't find local relays, but I could find them in Spain the Netherlands, and many other places. This really isn’t normal. But then I saw some of those elements in Italy and I saw that we were starting to have a lot of capital from CDP, the Italian wealth fund, in the ecosystem, and we also saw some big exits.

Then I saw that repeat entrepreneurs were building big companies and doing well. I saw that the older generation, people who did online classified ads or real estate ads, for example, people running those 20-year-old websites, started acting like investors and wanted to do more of it. Then you started to see a young generation of 15 exciting companies raising between €10-150 million and getting out there and doing well. With all of this, I thought “Well, maybe I can do my little part.” It was a move that to me sounded almost too obvious, or too easy. But it wasn't happening and so I thought, “Let's just do it.” I had this period of 6-9 months from January 2023 to August 2023 when we moved countries and where I could be bootstrapped and that’s the founder-like mindset again, just doing it with a fund instead of a startup. We went for it and we’ve been received very well.

Tell me about that moment of just going for it, what was that like?

It was a bit naive. When I look back, I think “Wow” but I think sometimes you need to have that naivety and take risks. We had decided to move to Milan, and I was excited by what I had seen, I had done a couple of Investments in Italy with GFC and as an angel, quickly met some of the most relevant people and got to know them well.

So I thought, “I have all the ingredients – I have the experience, I have a lot of contacts and I have a few people who have a lot of goodwill for the project and will open a lot of doors.” I also had a couple of local relays, since I’d been out of the country for so long, and these relays knew the founders well. I also knew the recipe from other ecosystems close to Italy and I’d seen the inner workings of them.

It also resonated with my upbringing in Belgium. It’s a small country so you had to have that underdog approach, you had to open up. All of that convinced me to take this leap of faith. In the worst case, I would have spent a lot of time with great people, so I thought it was a risk worth taking.

So you grew up in Belgium and spent a long time in London, what was it like to return to Italy after having spent time outside of this country?

It’s a combination of two things: on the one hand, it's a great opportunity because you see certain trends have not taken off as fast as they did in other places. On the other hand, I’m bringing a certain playbook from working in Venture Capital in other countries and my connections with many funds. I was lucky that I had invested in Spain, the UK, and Germany. And therefore I ended up having a very complementary network to everything surrounding Italy. It was exciting, but Italy still has a relatively immature ecosystem and the admin takes a long time. There also aren’t the same level of management or compliance functions, which makes it a very different place to work.

Have you come up against any serious challenges since starting your fund?

No, I would say there's a lot of goodwill. There's maybe not so much experience, but there's a positive curiosity and a willingness to help, so I haven't encountered negative forces.

What do you hope that your fund will do for the Italian ecosystem?

Well, a mix of things. If we’re able to get more entrepreneurs funded with a significant amount of capital, we want to be relatively large seed investors. Therefore, we want to have more startups on board so we can build a portfolio of 25 companies. At the very least, that will be 25 more companies that have been funded and backed by a strong community than there would have been without us. So far, we've been able to fund quite a few entrepreneurs and be able to support them, and connect them to follow-on capital, both locally and internationally. We’ve also helped more talent have the confidence to move into venture and back to Italy. We hope to see entrepreneurs from diverse backgrounds and nationalities moving here because there is capital and support. Hopefully, we can help increase the number of venture capitalists and the diversity of investors too. We’ve been able to generate good returns for investors who see that it's an attractive asset class. And I think we've taken a small allocation of capital so that we can ignite the process of acquiring increased capital for this asset class. We are one small component in the greater acceleration of the ecosystem.

What kind of startups are you investing in? And how do you find them?

We are generalists as investors, but we've seen a lot of B2B SaaS companies. There's a lot to catch up on, so we’ve invested in all kinds of companies, from enterprise companies to SMEs. It’s exciting. We're still seeing a lot of Fintech models that might already exist in other places, like embedded finance models, or B2B marketplace opportunities. Due to the playbook and the fact that Italy has a lot of technical talent, we are also seeing a lot of AI thinking and technical people trying to apply their skills to the different sides of business models, which is exciting.

Where do you find the startups that you invest in?

A big part of our model is the community, so we source them from other founders and entrepreneurs. There's a natural outreach when you’re building a company in a certain sector, you tend to reach out to a famous founder in that category. So we have 40% of our deal flow coming from our community and another 40% coming from other co-investors like funds and angels, and desktop work, which is proprietary sourcing and desktop sourcing. And then I would say 20%, is more thematic. We see opportunities in certain verticals that are not as advanced and we dive into those.

What drives you to invest in a particular startup?

At the pre-seed and seed stages, it’s all about the founders and the ambition of the company, the speed at which they're able to learn, while progressing personally and as a company. That's what excites me about the few founders that we have already invested in. You sit with them, you speak with them, and then anywhere between one day or a week later you can see them executing the things you talked about. We want founders who are tackling big problems and they all have that underdog attitude – they want to go and get it and they’re really hungry. They want to make it but at the same time, they’re humble. So it's that passionate, ambitious founder who can listen, iterate, learn, and adapt very quickly.

What does the future look like for you and your fund, Lorenzo?

Professionally, we’ll deploy this first fund and hopefully have good markups, with great follow-on capital supporting our startups. I want us to build a bridge, making it less awkward or less scary for European or American investors to put money to work in Italy. What’s incredible in Italy is that there are amazing industrial companies, small and large companies doing fashion and furniture. There are amazing products. We haven’t seen that consistently yet in the tech industry. But when you look at the talent, we should be able to produce significant players that can win locally and internationally, companies that will be really, really amazing.

And then personally, I just hope my family will continue to be happy in Milan. We have a lot of great things nearby, you can go skiing, you can go to the lakes, you can go to the sea. You can live life better, there’s more to it than what we used to have in London.

What drives you?

I was born more than two months early. So I think I’ve always been a fighter. I have always taken on complex projects, and a lot of people have asked me, “Why have you taken on this lagging ecosystem and complex admin and stuff like that?” Well, I think it’s time to fight for it and make it happen. And when you get a lot of rewards for it, there's a lot of goodwill, and a lot of love for what we're doing. And I think that’s what gets me up in the morning, the fighting spirit against the admin, against the status quo, against the perception. That makes me really, really excited.

Thank you, Lorenzo, we wish you all the best with your fund!

Thank you.