Italy taps social network to nurture SMEs

MILAN, ITALY: Italy's stock exchange Borsa Italiana and Treasury are using social networking via the Internet to connect 30 small high-growth companies with private equity investors to expand abroad and help support the economy.

Boosting the average Italian company's size and equity capital is widely seen as a way of revitalising the country's economic growth to help it escape a painful recession.

Some of these small businesses are well-known to Italian consumers and have already made inroads abroad. Among them are high-end fashion sportswear maker Peuterey, menswear maker Harmont & Blaine and organic jam producer Rigoni di Asiago.

Others already have a solid business but are not well known to the public.

Thousands of small family-owned businesses make up the backbone of Italian manufacturing but they can struggle to get financing to compete in foreign markets.

It is also not easy for them get money from banks at the moment, because lenders are more risk-averse and keen to conserve capital to comply with new European regulations.

But these companies are not just looking for cash, they want private investors with a longer-term view.

The new project will offer these fast-growing companies with few resources but international ambitions a chance to attract new investments through a dedicated website.

The project, dubbed 'Elite', also includes training provided by Milan's Bocconi business university and the London Stock Exchange, which controls the Italian Stock Exchange.

"Elite aims to open the doors of capital markets to fast-growing small and medium-sized enterprises (SMEs)," Raffaele Jerusalmi, head of the stock exchange, said when presenting the project. "It is like a social network that creates a positive link between companies and investors."

Entering Its First Stage

The 30 companies were selected from more than 100 candidates and the project is now entering its first stage.

"The training session has just started and will last from four to six months depending on the needs of each manager," Barbara Lunghi, in charge of SMEs at Borsa Italiana, told Reuters.

Once trained, the managers will have to streamline the structure of their businesses, make reporting more transparent and have a clear development strategy.

Only those who get a "quality certification" will then move to the final stage which seeks to boost their company's value through deals with investors and/or stock exchange listings.

"While passing through these stages, SMEs will have networking opportunities with private equity funds, on a one-to-one basis or at group meetings" Lunghi said. "We have signed a deal with 16 private equity and venture capital funds which are hungry for new investment opportunities."

The 30 SMEs have annual revenues ranging between 9 million and 405 million euros ($535.62 million), but all share strong growth potential as, on average, they reported an annual growth rate of 20 percent in the last few years.

"Italy's government has few means to support the economy, but it can build frameworks to help companies grow," Italian Economy Deputy Minister Vittorio Grilli said at a mid-April presentation. "Our strategic objective is to help companies gain a bigger scale ... corporate size is a key factor to support growth in the whole Italian economy".

After growing barely 0.5 per cent in 2011, the Italian economy will contract by 1.2 per cent this year according to government's forecasts. Gross domestic product shrank by 0.7 per cent in the fourth quarter of last year, when the only growth input came from exports.