Saturday, February 22, 2014

Starsup, the first Italian equity crowdfunding platform

StarsUp is the first platform in Italy for the equity crowdfunding authorized by Consob the Italian Securities and Exchange Commission. From now on Italian startups have, therefore, an alternative possibility of financing. Let's see how it works.

The legal framework:
As the ministerial decree "Decreto Sviluppo 2.0" (Development 2.0) approved in late 2012 by the Monti government, paved the way for the crowdfunding in Italy, the three founders of StarsUp have pricked their antennas. Last June 2013, Italy was the first country in the world to adopt the equity crowdfunding Regulation on the subject, drafted by Consob the Italian Securities and Exchange Commission. Only a few weeks after three founders (accountants) Matteo Piras, Carlo Piras and Alessandro Scutti that have always been interested in crowdfunding have thought that such an activity could actually open a little' space in Italy and did not hesitate to file their application for the appropriate register, accepted in October 2013.

But let's make some order since we are talking about a sector in which Italy, for once, has been shown to arrive before many others countries, like the U.S. and Germany for example. In practice, with the adoption of the Regulation for equity crowdfunding, Italian startups are now facing an alternative way to finance. How?
The mechanism, as it may seem complex rattling it off in financial terms, is actually very simple. A startup that wants to find alternative ways of funding, addresses a platform like StarsUp, and offers its own shares for sale online.

This is a revolutionary model, because since everything is done online this has a big significance for a country like Italy, but also because it is the very first time in which users "participate" in the venture capital.

The job for StarsUp the Livorno-based (Tuscany) began immediately since there is already a first startup that adheres to the platform,  Cantiere Savona, a Sardinian startup created by Andrea Columbu, Giovanni Vacca and Mauro Bandini in 2010, which needs 380,000 Euro for the development and testing of a 11-meter sailing boat prototype in hybrid-thermic and solar propulsion based on the future S.Y.T. Solar Yacht Technology, an innovative solar power electrical generator for propulsion and boat appliances, in line with the highest-standards of certified eco-compatibility. During the first day the StarsUp platform got 7 thousand visits and an initial funding below the 500 Euros threshold.
According to Matteo Piras, Managing Director of StarsUp, during the first year StarsUp aims to offer between 10 and 15 projects, to afterwards widen the offer also to companies not purely innovative whilst keeping up the name of Italian companies. The company gains by charging a fee ranging between 5 % and 7 % on the capital raised. In order to obtain the approval of the Consob the three founding partners have invested their own resources without using public funds.

How can a user who wants to participate help in the project, i.e. invest in the start-up? Since StarsUp does not exercises any intermediary role in this type of transactions, all the user can make is a bank transfer below €500, while for higher amounts users will need to go to the bank and for the moment are able to adopt this option only those who have a bank account at Banco Popolare or Credito Bergamasco. The company announced that soon it will be also possible to make transactions from other banks.

The potential of the equity crowdfunding version "Made in Taly" are those of a multiplier. On one hand, institutional investors, such as asset management companies, certified incubators or bank foundations, which guarantees the quality of the operation keep the role of a "guide". In order to successfully close the funding round they will need to subscribe to at least 5% of the share capital. On the other hand, private savings: big or small account holders who want to bet on a tech startup will be able to do it with a profound knowledge of characteristics, results and prospects: "with their contribution capital mobilized by professional investors can be multiplied up to twenty-fold times, from €100,000 to €2 million, a virtuous circle", said Piras. 

Some provisions of Consob are in fact very stringent in protecting investors, and the three founding members are trying to adapt without making the investment process too cumbersome. "I refer to the need to identify anyone who wants to invest digits above 500 EUR , in accordance with the European MiFID directive," says the accountant. "I mean to force users to go to a bank and get profiled."

Obligation that many in the digital world of entrepreneurship, ask Consob to delete. Even though this obligation were to be confirmed, however, according to Piras and partners the revolutionary range of equity crowdfunding still applies:" It is a seed of great potential: making democratic and participatory investments, really reward merit, but also correct typical limits of our industrial system as dwarfism of companies and the lack of transparency of entrepreneurs. All this in a country that today more than ever needs to give space to the technology."

There is therefore hope that this new opportunity will help extend even further the possibility of creating startups in Italy, also because for once, just in terms of equity crowdfunding, Italy can be deemed pioneer in this field. And even though awareness around these arguments has still to be raised, future developments will be already traceable in the short-run.