ITALY Law and Practice Contributed by: Silvia Bordi, Emanuele Bosia, Federico Dettori and Rodrigo Boccioletti, Gianni & Origoni
retail investors face further restrictions and obli - gations to ensure investor protection. Funds investing in innovative start-ups or SMEs may also qualify for favourable tax treatment or government-backed initiatives, subject to addi - tional compliance requirements. For example, funds targeting sectors relevant to national inter - ests might be scrutinised under Italy’s foreign direct investment (FDI) rules. Unlike mutual funds, VC funds are generally illiq - uid and operate with defined investment peri - ods and lock-up structures. Their governance framework often includes an advisory committee composed of investors to oversee conflicts of interest, valuation and major decisions. Overall, Italy’s regulatory environment for VC funds aligns with European standards but incor - porates specific domestic requirements reflect - ing the country’s efforts to promote innovation while safeguarding investors. 2.4 Particularities The Italian VC environment has matured in recent years, characterised by increased gov - ernment involvement, the rise of impact funds and fund-of-funds activity. Notably, the Italian National Innovation Fund ( Fondo Nazionale Inno- vazione ) and various regional programmes have significantly increased government-backed VC investments. These initiatives aim to stimulate start-up growth, particularly in strategic sectors like digitalisation, sustainability and healthtech. Impact investing is gaining traction, with sev - eral funds dedicated to ESG-aligned ventures or social impact projects, reflecting broader Euro - pean trends toward sustainable finance. Addi - tionally, fund-of-funds structures are increas - ingly used to diversify risk and broaden market
exposure, allowing institutional investors to par - ticipate indirectly in the VC space while minimis - ing concentration risk. Given Italy’s traditionally longer holding peri - ods and limited exit options – especially IPOs –, funds have adapted their strategies to maintain flexibility. Continuation funds or secondary sales to new funds have emerged as mechanisms to manage portfolio companies requiring longer maturation without forcing premature exits. Some funds also build in extension options, allowing the fund life to be prolonged to accom - modate delayed exits or market downturns. Moreover, government incentives have encour - aged pension funds to allocate capital to VC, fur - ther supporting fund growth and liquidity. As the market evolves, Italian VC funds are increasingly incorporating flexible exit strategies, impact- focused investments, and hybrid structures to adapt to longer investment horizons and the specific challenges of Italy’s venture ecosystem. 3. Investments in Venture Capital Portfolio Companies 3.1 Due Diligence In Italy, VC investors typically conduct a thor - ough due diligence across several key areas to assess both the potential and risks of a start- up. The standard due diligence process covers legal, financial and technical aspects, with each area focusing on different critical factors. Legal due diligence focuses on reviewing the company’s corporate structure, governance frameworks and contracts, including sharehold - ers agreements. A key area of concern is intel - lectual property (IP); investors assess whether IP rights are properly registered and whether any
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