Paola Bonomo screens investment opportunities in high-tech startups with Italian Angels for Growth, as well as serving as a director on several company boards. We asked her about the challenges facing investors & start-ups in financial technologies in Europe.
- Could you tell us a little about how you became an Angel Investor? What motivated you to go into this field?
The first venture where I put some money as an early-stage investor was, as often happens, with friends and family: we planned to reinvent a food product with a rich heritage, Traditional Balsamic Vinegar from Modena, for 21st-century audiences. That business ended up absorbing much more cash than it generated, so I stepped out of it a few years later. At the same time, I was working in the tech industry in fairly senior roles; I realized that I could both make myself useful to talented entrepreneurs and perform better as an investor. I decided to adopt a much more professional approach to investing and I did so by joining Italian Angels for Growth.
- When screening potential start-ups for investment, what qualities do you look for? Is it more about track record, business plan, or less tangible qualities, such as leadership and drive?
It’s always about the team, and I would definitely say the way I look at the team has evolved over time. I used to look for drive, determination, grit, and to try to estimate the ability to change course when needed; in most cases there was no entrepreneurial track record to look at, because we pretty much always looked at first-time entrepreneurs. In the last few years, it’s been more about: has this team worked together before? How well do they know each other? How successful have they been in their previous gig together? Have they been through a pivot together? Because, with more of an ecosystem developing in Europe over time, that’s become an important indicator of the chances of success. And of course we still fund first-time entrepreneurs, but serial entrepreneurship and serial team entrepreneurship gives me additional and very important data points to look at.
- You have emphasized how important mentoring and leadership are to being an investor. Why is this the case? What defines your personal mentoring and leadership style?
Mentoring and leadership are important both because you want to maximize the chances of success of the entrepreneurs you invest in, and because you want to make sure you don’t keep a doomed venture on life support indefinitely. My personal approach is to try to be not just a mentor, but a sponsor. A mentor gives you good advice (“here’s what I think you should do in order to be pitch on that stage”); a sponsor advocates for you with others (sits at the organizers’ table and says “you just can’t have this event if you don’t have this startup pitching on stage!”). An early-stage investor will often need to help the team raise later rounds; the more personal credibility I bring to the table, the better I can support the team as the company scales.
- Fintech is currently attracting many new start-ups. Are there any pitfalls of investing in fintech start-ups that investors should be aware of? What advice would you give to start-ups looking for investment?
Regulation is always a factor in fintech, no matter which obscure corner of the industry you’re thinking of disrupting. I would advise early-stage investors to look for teams who have a strong grip on compliance and risk management matters. And I would advise both investors and entrepreneurs to be realistic in terms of timing: no one can tell you when you will, for example, get authorized by the FCA or whoever your local regulator is. I have very often seen plans that were way too optimistic on regulatory approvals, and it’s frustrating to all involved if expectations aren’t managed correctly.
- What do you think are the main problems women face getting businesses off the ground? As a society, what can we do to change this?
Researchers at Columbia and Harvard have shown that women and men entrepreneurs get asked different questions by VCs — and it affects how much funding they get. This is, of course, exceedingly frustrating. Even worse, the researchers believe that both men and women who evaluate startups appear to display bias in their questioning, inadvertently favoring men over women entrepreneurs. As a society, we need to educate ourselves, and educate our children, to keep bias in check: one would hardly believe it, but in many countries we still see traditional gender roles pictured in grade school textbooks, so this bias has very deep roots.
Another Harvard study showed that VC firms at which senior partners had more daughters than sons hired more women partners and performed better than their competitors. Clearly, requiring men who are in power to have daughters is unfortunately not an actionable policy lever. We cannot require male top managers or VC partners to have daughters. So, I am in favor of symbolic measures – such as affirmative action for balanced gender representation in corporate boards – even while being aware that they don’t go do enough to address deeply systemic issues. I admire the efforts of women investors who have decided to focus on women and other underrepresented investors. We sometimes have to drag ourselves kicking and screaming towards a future where both women and men invest in both women and men.
- Finally, what are your future plans? Do you have any new project you’d like to share with our readers?
I’m spending more time these days in corporate governance, which I think is fascinating. People often underestimate the impact of good or bad governance: and yet, if you look at some of the frontiers of fintech – such as cryptocurrencies – you very quickly realize that successful projects have a governance setup that fits the purpose, while, for most of the projects that fail, failure is first and foremost the product of flawed governance.
Interviewed by Erin Taylor, Senior Researcher
Paola Bonomo – Non Executive Director and business angel
Paola Bonomo is a Non Executive Director, angel investor and advisor in the digital technology space. She started her career at McKinsey & Company where she was an advisor to top management teams at leading international companies on strategic positioning, growth, new markets, alliances and acquisitions.
She then worked in leadership roles such as Senior Director, European Operations at eBay International; Head of Online Services, Commercial Operations at Vodafone Italia; and Regional Director, Southern Europe at Facebook.
Since 2009 she has invested in technology startups with Italian Angels for Growth, where she focuses on investments in the digital space.
Paola serves on the Boards of Directors at AXA Assicurazioni S.p.A., Piquadro S.p.A. , Sisal Group S.p.A. and Stefanel S.p.A.. She is also the President of Stanford Club Italia, the local Stanford University alumni chapter.
In 2015 and in 2016, Paola was recognized as one of the Inspiring Fifty, the fifty most inspiring women in European Technology. In 2017, she was recognized with the Business Angel of the year award in Italy and the Golden Aurora award for the best woman business angel in Europe.
Paola holds an undergraduate degree in Business Administration from Bocconi University in Milan and an MBA from the Stanford Graduate School of Business.