Growth Capital, in collaboration with Italian Tech Alliance, presents the Venture Capital Report for Italy Q1-26. The report outlines the main developments in the Italian venture capital ecosystem, with a focus on investment activity, sector trends, and financing dynamics, offering a view of the market's direction at the start of the year.
Q1-26: Fewer Rounds, Stable Capital
The Italian venture capital market opened 2026 with lower deal activity. In Q1, €367 million was invested across 53 rounds, the lowest number of deals recorded in the past five years. Total capital invested remains broadly in line with the quarterly average of the last two years.
The quarter included 12 Series A rounds, 3 Series B rounds, and 1 Series C+ round, alongside 6 exits. Capital continues to concentrate in later-stage rounds.
The market structure remains polarized. Pre-Seed and Seed rounds accounted for 58% of total deals but represented only 8% of invested capital. Series A and B+ rounds represented around one-third of deals and nearly 90% of total investment.
Sector Trends: AI Momentum and FinTech Leadership
Software remains the most active sector by number of deals, supported by continued investment in AI, machine learning, and cybersecurity. Interest in AI-focused startups continues to increase, although no large-scale deals were recorded. Smart City and Life Sciences also recorded steady levels of activity.
In terms of capital raised, FinTech ranked first, followed by Smart City and Software. Together, these sectors accounted for 72% of total investment. This reflects the impact of larger rounds, including including the rounds raised by Rent2Cash (€100M) and Newcleo (€75M).
Software’s position remains linked to the number of deals rather than average round size.
The Rise of Venture Debt
Across Europe, venture debt is becoming a more established component of startup financing. Founders are increasingly using this instrument to limit dilution, extend runway, and bridge the gap between equity rounds, particularly in a context where valuations remain depressed.
Despite this growth, the number of venture debt providers in Italy remains limited compared to the broader European market, leaving room for further development. Across Europe, venture debt transactions above €25 million have become more frequent and account for a significant share of total value.
Stability and Capital Concentration in the Broader European Context
At the European level, Q1-26 shows stable deal activity alongside higher capital deployment. A total of 2,805 rounds were completed, in line with recent years, while €22 billion was invested, marking the strongest quarterly result since Q2-22.
This result is largely linked to the presence of mega rounds, particularly in AI and natural language processing.
Outlook
The Italian ecosystem continues to show solid fundamentals, particularly in key sectors such as Software and FinTech. However, several structural challenges remain. The lower number of rounds reflects continued selectivity, while capital concentration in later stages highlights the funding gap for scaling companies.
At the same time, the increasing use of instruments such as venture debt suggests a gradual evolution in financing strategies.
Looking ahead, further growth will depend on institutional support, regulatory clarity, and the ability to attract international capital. As competition increases across Europe, particularly in AI and deep tech, Italy’s ability to scale innovative companies will remain a central factor in its development.
"A good start to 2026 for the European ecosystems, boosted by mega rounds," comments Fabio Mondini de Focatiis, Founding Partner of Growth Capital. "In Italy, despite fewer rounds, the VC market remains stable, with total capital invested in line with historical averages. Venture debt, widely used in advanced VC ecosystems, is expected to play a larger role in Italy as well, though its impact will grow over time."
Link to the full report here: https://docsend.com/view/gjmehstp2mjbrx9s
