Start-ups in Three Steps
Entrepreneurs are not those who establish companies: lawyers are enough for that. The essence of entrepreneurship is not about founding a company, but being committed to its care and growth. So for those thinking about launching a start-up, the correct metaphor is not fatherhood, but corporate motherhood. That's why the debate about starting a business in a day or establishing a corporation with one euro rings hollow: it does not put potential entrepreneurs before their true challenge -- what happens on the second day of existence of their companies.
Even the lack of venture capital can become an alibi for young upstarts. Traditionally, you launched your own business because you had access to a known market base. And seed capital often came either from the company where you worked (it wasn't called corporate venturing back then) or from the cash flow of paying customers.
The keys to access to growing markets for Italian start-ups are: clearly identifying a contestable market on the demand side; choosing the right team; and tapping into a dynamic labor market.
The fundamental reason why Italian start-ups do not grow is because they lack customers, not shareholders. If the former are there, the latter and their capital will follow. But the opposite is not necessarily true. Thus, the first challenge is identifying accessible, real demand. Institutions can help in the process, by making contestable a larger share of GDP, by liberalizing sheltered industries and reducing the weight of services directly provided by public employees in many sectors, from social and health services to utilities, from cultural to territorial management. Then it will be up to start-ups to seek new markets abroad. It's an uphill struggle to start new successful firms in national markets blocked by monopoly rents, but an entrepreneur cannot wait for demand to materialize itself.
The second key to success is the right team. A business idea needs to be continually shared with one's collaborators. Leadership in the entrepreneurial team must go hand in hand with access to a pool of adequate professional resources, often depending on territorial and context dynamics. For instance, where you headquarter your start-up weighs significantly on the expected rate of success, especially in a professional market like Italy's where territorial mobility is low.
In general, what's fundamentally important for growth is labor, both in terms of costs, due to the incidence of the tax wedge, and for the legal constraints limiting its flexibility. The recent Italian labor reform was not designed with start-ups in mind, since it introduces barriers to entry in the labor market and greatly increases the scope for litigation and judicial discretionary powers on labor issues. Actually the reform is going to weigh on the balance sheet of new firms, which will have to cover themselves against the risk of litigation. Thus new entrepreneurs must be careful in choosing collaborators who share the peculiar and fascinating organizational challenge represented by the launch of a start-up.
What's positive about the crisis is that it has brought back onto the agenda the debate on economic development based on a new entrepreneurial culture. Other cultural shocks will be needed to reduce the spread between entrenched institutional practices and the new realities, so that the animal spirits of Italian entrepreneurship can manifest themselves again and lead the country back on a growth path.