Telcom Italia’s not so Capital idea


Telecom Italia, the former monopolist telecommunication giant, announced in the first week of March a corporate venture capital programme called Working Capital. Its aim is to promote Italian startups in the tech field.
Italy is a market with almost no venture capital funding. Its ecosystem has grown up without a strong tradition of entrepreneurship.

The Silicon Valley is a winning model because it aggregates in one place lots of money coming from large companies willing to invest in young, brilliant entrepreneurs. There are venture capital funds capable of making serious investments to support those startup companies.

Moreover, the academic world and the business universe are bonded together there. Let’s not forget that the now-ubiquitous Google was born at Stanford University.

Italy, on the contrary, is a place where the academic world exists completely detached from the real world. Professors still teach Roman Law (and lots of Latin) in law school. Outmoded economic theories are preached from the lectern in business school. Our graduates are, in my opinion, completely unprepared to meet the business world’s demands. This results in waste of time and talent.

Besides, it is large companies that dominate the market scene, playing by anything but the rules. They are constantly helped by the government (which usually owns them) while the tens of thousands of small enterprises struggle month after month to pay bills and salaries.

It’s indeed clear that in this stifling environment a programme of corporate venture capital coming from one of the world’s largest telecommunications carriers was welcomed by the entrepreneur’s community with enthusiasm and hope.
Working Capital is a two-year investment programme, in which 5 million euro (0,01 percent of Telecom revenue) will be invested in 30 projects. Looks good, until you find the catch: there’s no capital.

Despite the name, Telecom Italia is only giving “factual capital” like phones, offices, lawyers, developers etc. Anything you need… except for a single penny.

This total absence of real cash unfortunately ruins the whole project. Still, the initiative itself is important for the Italian market. It sets a precedent for other large companies that may consider the same path.

It’s also fun to notice the marketing campaign Telecom launched to promote Working Capital. An event was held in the centre of Milan. Large ads running in national newspapers cost the equivalent of nearly one more year of investments (2 million euro).

It’s rather soon to judge this operation, but at first sight it does seem more of a marketing ploy than a real commitment towards innovation. Its premises are simply not encouraging.

Flickr photo from user EverJean