“When I arrived at Confindustria I was seen as a sort of Martian but today, finally, industry moves at 360 degrees in Italy too and digital is the keystone of production processes”. The speaker is Marco Gay, forty-year-old president of the Young Entrepreneurs of Confindustria and executive vice president of Digital Magics, the most important hub for Made in Italy innovation and original startup incubator. And it is above all Digital Magics, of which he is also a shareholder with a stake of over 4%, that Gay proudly talks about in this interview with FIRSTonline. Since it was founded in 2004 Digital Magics has selected, grown and brought many startups to the market: today it has 70 shareholdings, created 500 jobs and made investments (together with third parties) for over 40 million and is listed on the Aim of Piazza Affari. With the entry into the capital of Tip by Gianni Tamburi, who is the first shareholder of the start-up incubator, and with the industrial partnership with Talent Garden, which is the largest European coworking platform for digital talents, Digital Magics has a qualitative leap and raised the bar of its growth objectives. Here are which ones.
Doctor Gay, Digital Magics is considered today the most important hub for Made in Italy innovation with more than 70 investments in startups in the portfolio: what was the secret of your success and where do you want to go?
“Digital Magics is the expression of a unique model in Italy of incubator of digital startups, in close contact with the talents distributed throughout the country and with companies that want to innovate. Its secret is all in the far-sighted vision of Enrico Gasperini, who sadly passed away, who, by founding Digital Magics in 2004 together with other partners, was very clear that doing business is not enough for business, but that an ethical depth and the ability to look to the future of the country system through the innovation ecosystem. Our job is to support the best digital startups, carefully selecting them and helping them to grow, and bring them to market and, after more than 10 years of activity, the results are now rewarding us. We have created over 500 jobs and made investments (of Digital Magics and third parties) for over 40 million in the last 5 years and we have entered into important industrial and financial partnerships, which push us on an ambitious growth path which foresees the application of our unique incubator model also at the local level. In fact, in 2016 we opened four new offices (Palermo, Rome, Padua and Bari) after those in Milan and Naples, with the aim of being even closer to talents and startups".
How do you select the startups to support in their development and which sectors do you focus on as a priority?
“Every year we receive an average of 1.500 incubation requests from startups from which we choose 15-20 after a rigorous selection process. We mainly look at the quality of the human capital, at the business idea and project they propose and at the sustainability of the business plan. The startup sectors we mainly focus on are: digital media, digital marketing, internet of things, fintech, healthtech, e-commerce, Made in Italy (Food, Fashion, Design) and b2b services for businesses".
Although all mass media experts maintain that online information and publishing are increasingly destined to represent the new media frontier, the presence of Digital Magics in this field is marginal: why? Do you have plans for web publishing in the future?
“We don't deal with online newspapers, but we have done more. From our incubator was born the startup Premium Store which developed and manages the Italian Newsstand, which brings together the main publishers, where it is possible to search, choose, consult and buy over 70 titles including national newspapers, local newspapers and magazines on smartphones, tablets and web. Among our participations there are also: Intertwine, the social network for storytelling – based on shared creativity and collaboration between writers, readers and talents – to create, share and publish collaborative multimedia editorial works; Buzzoole, which is an Influencer Marketing platform that connects brands with over 200 influencers on the Net; Leevia, the Italian platform for creating sweepstakes, contests, surveys and online initiatives in just a few minutes, with real dedicated mini-sites integrated with Facebook, Twitter and Instagram”.
What exactly does Digital Magics support the startups in your portfolio consist of, how is it implemented and how long does it last?
“It's a five-step process that shouldn't last more than four years because incubation isn't forever, but it's a bridge to generate value and a transition point that ends with the exit and, in the luckiest cases with the IPO or, in those that have not been successful, with the write-off. The five phases are: 1) entry into Digital Magics through a very rigorous selection, in-depth meetings and the definition of agreements with partners; 2) the acceleration of growth with the fine-tuning of the business model, the study of patents, team building and financing assistance or our entry into the capital; 3) actual incubation with market launch, business support and definition of the technological strategy; 4) the management and development of the business and any assistance in subsequent rounds of financing; 5) the exit and the sale of our stake. Basically, we help startups grow, we enter capital and management, and we exit when they "come of age", i.e. when they are able to compete and stay on the market on their own".
Among your participations, a particular place seems to be occupied by Talent Garden, which is the largest European coworking platform for digital talents: what role does it have for Digital Magics?
“Talent Garden is our flagship. We have invested together with Tamburi Investment Partners, which is our strategic partner. Talent Garden is today the largest European coworking platform for digital talents, with 18 campuses in 6 European countries and a 12 million euro investment plan with which it aims to increase its international presence over the next two years. For us it is also a strategic partner because it is the place where we direct our subsidiaries to start the contamination of talents and innovation”.
How is the team that leads Digital Magics formed?
“The team is the specific value of Digital Magics. It is made up of about twenty managers who all come from the digital world and who overall bring with them 300 years of digital experience. Furthermore, the team holds over 40% of the shares and is incentivized with an important stock option plan”.
Basically, is Digital Magics a public company?
"Exactly. Tip by Giovanni Tamburi has 18,15% and is the first shareholder and our strategic financial partner, over 40% is in the hands of the management, Garage Start Up by Danilo Iervolino has become a significant shareholder and 35% is on the market. The presence in the capital of an investor of the caliber of Tamburi, who renewed his trust in Digital Magics on the occasion of the recent capital increase, honors us and underlines even more the importance of innovation for the world".
Before talking about your future plans, let's take a look at the accounts: in the 2016 draft financial statements, the value of production and the EBITDA are up, but debts are also up and the net result is negative due to the write-downs of some subsidiaries: when do you plan to reach break even?
“Achieving break-even will essentially depend on the success of exits from some of our holdings, but realistically we expect to be at break even over the next three years. However, for a particular company like ours, which aims to develop startups, the income statement is less significant than the balance sheet and the quality of the portfolio with growing shareholdings, which attract the interest of national and international investors" .
Since the beginning of the year, Digital Magics has gained 51% on the stock exchange in the Aim segment: why, in your opinion, is the market rewarding you even though you are not yet making large profits?
“The rise in our stock on the Stock Exchange is recognition of the efforts we have made and are still making, of the originality of our entrepreneurial mission and of our business model. This authorizes us to focus on entry into the main list of the Italian Stock Exchange in the coming years, in line with our growth in both quantity and quality”.
In addition to upgrading the Stock Exchange, what is in the future of Digital Magics and what are its plans?
“We want to continue to grow on the national territory and we want to internationalize without ever losing sight of the quality of projects and investments and making the most of all the opportunities that our industrial and financial partnerships offer us. In particular, in addition to the opening of four new branches in Italy in 2016, in the second half of 2017, thanks to the partnership with Multiversity of Danilo Iervolino, which controls Universitas Mercatorum and Pegaso Telematic University, Digital Magics Startup University will be born which will offer academic aspiring startuppers, enriching our project for Digital Made in Italy. We will also focus heavily on our Open Innovation programme, which is based on tailor-made projects to disseminate innovation in companies with startup and scaleup agreements and which in 2017 will be enriched by another 15 programmes. In March 2017, the cycle of appointments launched by Gioin (Gasperini Italian Open Innovation Network) has already started, which enhances practical cases of collaboration between startups and companies that want to learn how to innovate and which in 2016 involved over a thousand entrepreneurs, and top managers: this year Gioin's appointments in the main Italian cities will become eight. The next one will be in Naples on April 6 and will deal with AgriTech and Digital Manufacturing. Finally, on a financial level, the strategic presence of Tip and the agreements reached with Innogest, which is one of the most important Italian venture capital funds, and with some members of Withfounders, will contribute to strengthening our leadership".
Doctor Gay, as well as executive vice president of Digital Magics, you are the president of the Young Entrepreneurs of Confindustria and you come from a Turin family that had a manufacturing company: how do you reconcile the digital business with the typically industrial and mainly manufacturing activity that Confindustria represents?
“We are now at a historic turning point and there is no longer any division between digital and manufacturing, between industry and advanced services. When I arrived in Confindustria I was seen as a kind of Martian, but today, finally, industry moves at 360 degrees in Italy too and digital is the keystone of the production processes that the government plan "Industry 4.0." certify and crown. We are experiencing an industrial and at the same time cultural revolution, in which the digital economy will be able to bring 110 billion more revenues over the next few years and represent 4% of GDP. I am sure that Digital Magics has the possibility, the will and the ambition to contribute to this objective”.
