March 5, 2020

Coronavirus is hurting Italian small businesses — but tech startups are fine

For businesses whose customers are in the cloud, Milan’s virtual shut down has had little impact. But for those rooted in meatspace, it’s a struggle.

In Milan, the urban epicentre of Italy’s coronavirus outbreak, an eerie silence hovers over the city, which powers 10% of Italy’s economy. 

Airports have tightened controls, stymying the influx of new arrivals. Sightseers and reporters wearing protective masks roam largely empty streets. Schools have been shut and the city’s residents have marooned themselves in their homes. 

With more than 3,000 people in Italy hit by the outbreak — 50% of all cases in Europe — millions of Italian businesses are feeling the pain. Wanbao, a hardware company recently on the up, is now on the brink of insolvency. Pirelli, a large tire company, has projected a €30m hit from coronavirus.


But as conventional business suffer, startups in Milan’s thriving tech sector say they are adjusting comparatively well to the disruption. Their digital products are mostly immune to the downturn in high-street spending, while entrenched "smart working" practices have made it easier to adapt to working from home.

“We are very used to two things: working remotely and video conferences,” says Andrea Isola, the regional director at the Milan headquarters of N26, a popular European online banking startup. “Being a digital bank, we don’t have branches, we don’t have shops to open or to close, or have special physical precautions — we continue to do business.”

This comes as the spread of coronavirus has prompted most large businesses to consider supply chains and their working practices as they restrict foreign travel, cancel meetups and ban handshakes in an effort to mitigate the effects of the virus. To some, it’s a sign that the Zoom-calling, remote-working style favoured by startups will quickly become the new normal. 


Isola says that the first few days after the virus hit were fairly disruptive. User uptake dried up, events were cancelled, new Milanese hires were postponed. But already the company has adjusted. “It’s trending to normality already,” he says.

Others say the impact was negligible. “We’ve not really been affected by the situation. Everyone’s been able to communicate,” says a spokesperson at photography startup BOOM.

“As a company, we’ve been adopting ‘smart working’ practices since our foundation. Any time and always, all of our employees are able to work from home or from anywhere they need to, instead of the office.”

Elsewhere in Milan, Flavio de Laurentis, the Italian general manager of startup viacash, says that “daily life hasn’t really changed that much”. The only difference, he says, is that “most of my meetings have either been cancelled or will take place via video-call”. 

He adds: “All the rest is business as usual, just slower and with less traffic on the streets.”

Not all easy

But smart working has its limits. Viacash, for instance, builds point-of-sale solutions for supermarkets. “If people move less we also get marginally affected,” says Laurentis. “Not as much as a restaurant, but not as little as a pure license-based technology company — if people are afraid to move, they will wait to transact.”

And startups whose main product is physical, not digital, have already had a tough time — and few worse than those in the tourism industry. 

Sweetguest, a tourism startup resembling Airbnb, has felt the effects of the outbreak acutely. “Basically, for the first two or three days of the epidemic we lost almost 60% of our business,” says Rocco Lomazzi, the company’s founder. 


Although Sweetguest has “cash in the bank”, he says, the could well run dry after a couple months. 

“Everything is closed — the museums are closed, the cathedrals are closed, the cinemas are closed. In March and April we’ve not seen any bookings coming — it’s a problem.”

Italy’s tourism industry is worth some 13% of its GDP, and is imploding all across the country. Even in Rome, some 90% of tourist bookings in March have reportedly been cancelled, with millions projected in losses. The Vatican, typically crammed with thousands of tourists, is deserted. Souvenir peddlers stand idly, discussing “l’influenza” and selling nothing. 

Lomazzi and thousands of others are waiting impatiently for €3.6bn government stimulus that was recently announced. In the meantime, he’s cut overheads: consultancy fees, advisors, certain non-critical departments. But he’s not even sure if the company will survive: “We don’t have a solution right now.”

If there is a solution, he says, it’s certainly not “smart working”. Lomazzi hopes people will soon tire of working from home, especially now that the 6 p.m curfew has been lifted, and local authorities are mulling over reopening the Duomo. “In Milan, we are very active — after two or three days of smart working, people are starting to be bored,” he says. 

But, unless vacationers plan to start Zoom-conferencing themselves on holiday, for Lomazzi, and millions like him, the struggle will continue.