Venture Capital funds play a fundamental role in the financing and development of companies in the tech sector, accompanying startups towards the completion and success of the initial idea. Cybersecurity has also recently carved out a considerable space in the Italian panorama, but what drives a fund to take an interest in Cybersecurity solutions and related investment mechanisms?
Today we talk about these topics with Francesco Zambelli, a graduate in Economics, with previous experience in the field, who follows the dealflow and scouting process for new opportunities as well as the investment phase and portfolio monitoring for P101, an Italian Venture Capital Fund based in Milan and born in 2013, Italian born in 2013 and based in Milan, with focus on companies operating in the digital and tech sector. Among the most recent and well-known operations we can mention Musixmatch, Tannico, Musement and Keyless, the latter is a Cybersec company active in biometric authentication.
1) How was P101 Ventures born and how does it operate?
P101 was born in 2013 on the initiative of Andrea Di Camillo, Founder and Managing Partner of the fund. P101's investment thesis is simple: it is an agnostic fund, which means that it can invest in any sector and channel (B2B/B2C) as long as it is linked to the tech and digital world, secondly it searches for startups and opportunities belonging to the development stage Series A, therefore already a minimum consolidated reality, with paying customers, a functioning product and interesting metrics, who are looking for equity financing in the range between 2m and 10m. In terms of geography, P101 operates mainly in Italy but with an eye to the pan-European and southern European panorama.
2) What is your role in P101 Ventures?
I have been part of the Investment Team of the fund since 2018, in terms of duties, operations are very transversal and horizontal. We go from scouting new startups through research, participation in events, networks, etc. up to the analysis of the companies and the actual deals. Once the target company in which to invest has been identified, we delve into the opportunity in all its facets: from market analysis, benchmarking with competitors, study of the business plan, market multiples and so on. Finally we move on to the actual investment and subsequently to the monitoring and support of the company in its growth up to the potential exit.
3) How is Cybersecurity considered by P101 Ventures? Given the need that many start-ups or entrepreneurs have to refine their research, it is often necessary to incubate Research and Development projects on ideas that solve a Cybersecurity problem: how is an R&D project considered by P101? What are the characteristics it should have to receive your attention?
P101 has always been attentive to all the major current and future trends, one of these is certainly Cybersecurity. With the Programma 102 fund we had already focused our attention on this vertical, investing in realities such as Keyless, Cyberguru and Unguess (which has an ad hoc division on pentesting). Also with the new P103 fund (recently launched) we are evaluating and keeping an eye on various realities belonging to this sector, certainly it is very important to know and create relationships right away with startups and entrepreneurs and therefore already in an R&D phase, however it is then evaluated case by case the feasibility or otherwise of the investment. It is certainly very important for us to have tangible proof of the quality of the technological product and this can only happen thanks to active proof of concepts and a future pipeline of customers.
4) How is P101 evaluating a Cybersecurity, A.I., and Tech world project? What are the requirements?
As we anticipated, being a Series A investor we look at a series of metrics and KPIs which for us are a sine qua non for making a deal, for example MRR, ARR, churn, retention, ACV. Even more important are the product market fit, therefore the intrinsic nature of the product created by the company and the actual effectiveness and added value they can have for a customer in helping him solve a problem he currently has. The team that will guide the company towards growth and scalability is certainly also fundamental.
5) How does the investment process take place and what are the investment and development phases? Are venture capitals also oriented towards the possible creation of an IPO to make it liquid or do they prefer other strategies? How long does it usually take from the moment of investment to reach a sales exit on the market?
The actual investment takes place after a phase defined as Due Diligence. The company is analyzed under various aspects, such as business, tech, financial situation (current and prospective), market, labor law, ESG and legal. Once the goodness of the initiative is ascertained, the actual process begins. This phase is important because you interact a lot with the company and you begin to create the first fundamental ties to start a journey together that will subsequently lead to a potential exit. In this regard, there are different ways for a VC to exit, one of these is certainly the IPO, to date it is certainly more effective and common to exit through a classic M&A process, where the buyer can be a Corporate, interested to integrate a particular product or tech, or a Private Equity fund for example. On average, an exit can take place 5/6 years after the initial investment.
6) What are the differences between an Italian and an American Venture Capital?
The processes themselves are the same, the real difference, in my view, is mainly the ecosystems in which they operate. Unfortunately, Italy suffers from a significant backwardness in terms of VC and capital compared to the States, due to the fact that it has only recently begun to give real importance to investing in startups.
To date, Italy is slowly proving to be on the right path, as evidenced by the fact that several VCs are being born, investments are growing and many of the already existing VCs have managed to collect +2/3 additional funds, as in the case of P101.
7) How do you think the future of investing in Cybersecurity projects will evolve, will it be a field that will generate business?
The Cybersec sector will be one of the pillars as well as the future protagonist of the VC not only in Italy but worldwide also thanks to the fact that most companies, post covid, have implemented a digital transition causing in parallel an exponential increase in cyber attacks, always more aggressive and increasingly evolved.
However, cybersecurity is moving hand in hand with attacks and is also becoming an increasingly expanding area, just look at the investments of companies and governments that are looking for the best Cybertech technologies and solutions both in the military and in the field of protection data, now fundamental assets for the latter.
Even the VC in this sense is constantly looking for tech solutions that can respond and manage any type of new threat in an effective and resilient way.
