The Italian Job: The rise of co-op start-ups

Students at the ESSEC GBBA

Michele Caiati

Michele Caiati, ESSEC GBBA student and participant in the CoBS Responsible Leadership course delivered by Prof. Mario Aquino Alves at FGV-EAESP, delves deep into the co-operative scene of Italy to unearth what could very well be the latest phenomenon on the social innovation front: The Co-op Start-up.

‘Experiential tourism is the future of tourism.’ Or so thinks Vascitour, a startup founded by four individuals in Naples back in 2014. The company offers clients the opportunity to live among the locals and experience local culture as its unique selling point, creating international scope for the otherwise local businesses and citizens. H2Boat is another startup founded by engineering students and works for the development of zero emission energy. Or Consider ‘Citta Della Cultura- Cultura della Citta’ – A Ferrera-based Architecture startup from 2012 that repurposes under-utilized and abandoned spaces and develops works to retain the cultural heritage of a locality.

The one thing all of these have in common are that they are examples of a social phenomenon in Italy that is set to take the world by storm: The Co-op Startup.

A little of this, a little of that

Vespa and Italian social enterprise at the Council on Business & Society

Start her up

The Co-op startups, or Co-operatives startups as they stand for, are a phenomenon which integrate the principles of a Co-operative model with the benefits operating in a startup model. The Co-op Startups are the latest trend that is picking up in Italy, in newer fields of activities such as tourism, arts, culture, environment and especially research and new technologies. These fields are very different from a traditional Co-operative which usually revolve around sectors like banking, consumer goods, production and worker welfare, education and housing.

The core issue that these innovative startups are addressing is one which has become critical off late in Italy – the unemployment among youth and the difficulty to find work and start businesses. The current rate of unemployment among the young in Italy is 31.7%, which is almost double of that of Europe as a whole. Further, Italy also ranks 31st in the world in terms of competitiveness (World economic forum) and as such starting a new business can be a hassle in this country. One could point a finger at the crippling financial crisis as a causative factor. As such, the Co-operative startups are well suited in addressing this problem particularly due to the co-operative tag that they come with.

If you want to go far, go together

Cooperative social enterprise in Italy

Go far, go together

In the testing years right after the 2008 crisis, the co-operative model has resiliently stood the toppling economy and has even showed a 25% growth rate where several conventional models of business crumbled leading to the loss of livelihood for numerous hardworking employees in Italy. Essentially, a ‘Co-operative’ is a model of business which operates on the principles of mutuality, solidarity and democracy. They are businesses whose objective is not to earn profit, but to ensure the welfare of the involved members. Every member is usually given profit share and equal decisive power. Italy is particularly adept to this mutual model of operation, given its long history in association with it.

 The History of Co-operative Italians

Indeed, Co-operatives are a model with a long history in the Italian landscape and are, in recent years, also the outcome of the financial crisis of 2008.

  • The first Co-operative movement took flight in the first half of the 19th Century after the enactment of the Albertine Statute in 1848 which reaffirmed the powers of then king, Carlo Alberto. The main development of the movement was seen in the north of Italy which incubated the first Italian Co-operative called ‘Magazzino di Previdenza’
  • In the 1860s, Italian politicians, philosophers and activists fostered the growth of Co-operatives – in a time where the model was seen as an answer against the businessmen who chased after profits.
  • In 1893, a formal body of Co-operatives called the National League of Co-operatives was established which allowed Co-operatives a medium to voice out to the government on issues that affected them.
  • The rise of the Co-operatives continued into the beginning of the 20th During this period, Italy experienced tremendous economic growth under the leadership of Prime Minister Giolitti and Co-operatives were seen as one of the primary players responsible for this boom which was later dubbed as the ‘golden age of the Italian Co-operation’.
  • But things took a turn for the worse after the first world war, when Benito Mussolini rose to power as a dictator. Under his regime, the Co-operative movement was disbanded and in many cases, the protagonists were killed to assert control.
  • In the 1930s, Mussolini’s fascist wing did start implementing a form of Co-operative, although this new model was in many ways an expression of fascism and, as such, was significantly different than before.
  • The end of the world war two brought some stability to the Co-operatives, when the Italian republic was established and the Co-operatives were once again able to return to their original principles: that of Solidarity, democracy and Social Policy.
  • The period of 1950s- 1970s saw tremendous growth as Co-operatives started building networks and synergies for mutual benefit which eventually led to the formation of larger bodies.
  • These larger structures posed an issue and were at the centre of debate in the 1980s. Due to the sheer number of decision making members involved in the process, Co-operatives were becoming less and less efficient. Additionally, during the same time, it had become common practice for Co-operatives to overstep labour laws in order to win contracts.
  • At the end of the 1980s, a new model of Co-operatives spread throughout the country – ‘type B’ social co-operation which provided for its members who were socially marginalised: disabled individuals, reformed prisoners, former drug addicts, and single mothers. The formation of such Co-operatives empowered these individuals and helped them become contributors to society.
  • In the second decade of the 21st Century, the latest innovation was seen as an answer to the new needs of the people, arising as a consequence of the financial crisis. The new model of Co-operatives embraced new models of economy – sharing economy, green economy, sustainable economy. The 21st century also saw the 221/2012 law linked to articles 2511 and 2548 of the Italian constitution, which promoted the incorporation and growth of new businesses and startups.

In the spirit of the law

Social enterprise in Italy at the Council on Business & Society

Cooperative Italians

In 2012, the Italian government promoted law 221/2012, which talks of innovative start-ups. In light of the financial crisis of 2007-08, the purpose of this law was to promote sustainable growth, technological development and employment, particularly for young people. It was believed that this would lead to strengthening of links between universities and businesses and attract foreign talent and capital by establishing an entrepreneurial culture.

The law encompassed benefits such as no start-up costs, flexible governance, assistance for work discipline and consultation to overcome debt and financial losses. The law also brought into the picture equity crowdfunding. Moreover, these start-ups were not subject to bankruptcy rules and, as such, these favourable conditions provided a backdrop for the incubation of startups and their growth.

Almost like a cherry on the icing, the long history of Co-operatives in the country provided the infrastructure and right environment to integrate the Co-operative model into the startups. The possibility to obtain financial funding from veteran Co-operative funds like LegaCo-op and Co-opFund, institutions, lower starting capital requirements and certain tax exemption opportunities incentivised entrepreneurs, both young and old to venture into the Co-operative territory, from a generic Limited Liability Corporation.

Paving the way forward

Socent in Italy

An alternative route

Today, there are 85,000 Co-operatives in Italy. The innovative start-ups account for 6,745 in number and the Co-op Start-ups represent 3% of this population, which is around 200 or so. Although this number is fairly small, it also shows promise. The legislation is fairly young and recent, and as such, there is immense scope that this number will multiply fairly quickly.

In order to further propel this phenomenon, Michel Caiati has a few ideas in store. Caiati suggests that finding a synergy between more established, veteran companies and these budding startups could be a beneficial alliance for both the parties. The older companies could benefit from an influx of innovative ideas from the young minds and the experienced backing from the veteran managers could help the young entrepreneurs avoid many a failure.

Caiati also brings forth the need to revise corporate governance within the Co-operative model, which would better address the needs of these young entrepreneurs and encourage startups to increasingly take on the swanky ‘Co-op’ prefix.

As such, Italy shows great potential as an incubator and a propagator of this social innovation or alternative enterprise called Co-op Startup. And with the direction that we are currently headed in, the world might just need more Vascitours and H2Boats!

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