Venture capital is a form of investment characterized by a high percentage of risk towards potentially profitable new companies, such as start-ups.
The venture capitalist is generally a fund and, under Italian Law, it must be legally qualified as an asset management company.
As it is a special form of financing, in venture capital the investor is not remunerated with interests. Investors participate in the business and earn on the basis of the performance of this business. Other characteristics are:
In general, venture capital funds have a duration of 10 years and are closed when the amount needed for the established financing is reached. Each venture capital fund can choose a specific preferred business sector (e.g. healthcare, technology, etc.).
The venture capital fund is commonly made up of two categories of subjects: Limited Partners and General Partners. The capital is given by Limited Partners, institutional investors who can be both public (e.g. local public bodies) or private (e.g. banks), and who accept to activate the financing when required. General Partners are natural persons who are responsible for the management and administration of the fund. General Partners may also be Limited Partners.
Venture capital must be incorporated as an asset management company, by law. This consists of a special joint-stock company ruled by the Consolidated Law on Finance (Testo Unico Finanziario), which obliges the participants to meet the requirements of good standing and professionality.
Under Italian Law, the establishment of the asset management company requires the authorization of the Bank of Italy, which will assess the adequacy of the assets, the structure and the prudent management of the resources.
Being an imported institute, the venture capital market in Italy is still in an early stage, but it is increasing its presence over the market. Innovative startups are usually the most common target of venture capitalists, also because of the recent and favorable legislative framework that simplified venture capital management and international cooperation.