The technological effervescence that emerged after the 2008 crisis led to the birth of hundreds of digital businesses willing to revolutionize the economy through disruption, although at that time, when anglicisms were hardly used to define these innovative emerging companies, the sector was still in the development phase and the usual thing was to move in financial scarcity. In the last decade, however, the Spanish startup ecosystem has taken a giant leap, multiplying its value by twenty, reaching 83,000 million euros this year, the equivalent of 14% of the share price of companies of the Ibex-35, according to a recent report by the consultancy firm PwC. Spain has broken stages very quickly and today has 11,100 firms of this type, employing 140,000 people, which places us as the fourth European power in number of startups, only behind the United Kingdom, France and Germany. International investors have also identified Spain as a priority geography, a source of possible success stories, and some of the most renowned funds in the world are already betting on our country.
The figures show the great moment that the national market is going through. 2021 was a record year, with 4,294 million euros, the best figure in the historical series, which almost quadrupled what was captured in 2020 and represented a year-on-year increase of 287.9%, above what happened in the rest of Europe, where the volume of investment grew by 200%, as stated in the 'Annual report on investment trends in Spain 2021' by the Bankinter Innovation Foundation. The growth of foreign investment had a lot to do with this sprint: foreign funds invested 2,170 million euros in national startups in 2021, 335% more than the previous year, which certifies the maturity of emerging companies in our country .
"The ecosystem is becoming more solid, with startups that have clear business models from the beginning and that are created with an international vocation," says Carlos Mateo, president of the Spanish Association of Startups. The evolution has been spectacular, the sources consulted agree. “He is in good health and is maturing significantly. A relevant improvement has been noted in the professionalization of the management teams and entrepreneurs have a clearer idea of how to use the economic and talent resources at their disposal”, supports Nacho Ormeño, co-founder and CEO of StartupXplore.
Experts used to moving in this sector speak of a 180-degree change. Juan José Güemes, president of the Center for Entrepreneurship and Innovation and Economic Vice President of IE University, the institution that co-organizes the South Summit, says that in the first edition, held in 2012, they had to make an enormous effort to bring together Spanish investors and, above all, to those from other geographies. «The only thing that was known about our country was the economic catastrophe and the startups barely had visibility, but the foreign investors who came, repeated the following years. Today, Spain is beginning to take its rightful place in the European context », he says.
Startups are an essential piece to build a resilient economy and respond to the demands of a society in continuous transformation, which has made large corporations set their sights on them. "An important part of its innovation comes from capturing what happens in the world of startups," says Güemes, citing Telefónica and its Wayra division as an example. "Others have also been collaborating with startups for years, either because they open their doors to them by offering them the possibility of becoming suppliers, or because they help them prove the concept... Corporations such as Ferrovial, Repsol or Iberdrola have had and still have an important contribution to the development of the ecosystem and at the same time benefit from its growth," he explains. A symbiosis with which all parties win.
As if that were not enough, our country has stepped on the accelerator and already has a good handful of companies that have entered the select club of unicorns, that is, they have reached a valuation of 1,000 million dollars without being listed on the stock market. eDreams, Glovo, Cabify, Idealista, Flywire, Wallbox or Jobandtalent are some of those that are part of the 'census'.
According to the data managed by the Atomico investment fund, twelve companies with a Spanish seal have flown to the territory of the unicorns, which makes us the place where the most startups of this type have emerged lately in southern Europe and the seventh in the world. continent. "These are success stories that serve as benchmarks and help Spanish startups attract the attention of foreign investors," says Mateo. The Bankinter Innovation Foundation report also highlights that if traditionally they only participated in rounds in mature phases and mega-rounds, during 2021 they have begun to invest earlier, being more common to see European and North American funds participating in Series A or even Seed operations. “The reading is very positive. It means that they begin to believe more in talent instead of in a consolidated company as such. When they invest in late stages, the risk is much lower, while in early stages, they are willing to take more risk, a sign that they trust the Spanish ecosystem. It is a trend that will continue to rise”, believes Hugo Arévalo, entrepreneur and serial investor of some of the most prominent startups in Spain, as well as co-founder and executive president of ThePower Business School.
The progress made by Spanish startups is also reflected in the existence of a generation of entrepreneurs who have created companies, sold them and reinvested. “They have become mentors of the second generation, a process that feeds back into the system and that the fabric of startups that follows is larger and more successful because it can benefit from the experience of those who came before,” he says. Kindelán, who points out that foreign interest in Spanish startups also responds to the fact that national funds tend to invest in companies in the 'early-stage' phase: «When they want to raise capital in advanced series they have to go to international funds. There is an opportunity that is not covered locally by almost anyone.
But there are other reasons that have whetted the appetite for international investment in Spain. Ben Marrel, co-founder and CEO of the French fund Breega, which has invested in five Spanish startups, points out that a few years ago there was little conviction that unicorns could emerge outside the United States and China. "The European ecosystem in general showed that it was possible, even in small countries like Estonia, and that opens up opportunities in different regions," recalls Marrel, who is participating in the South Summit for the sixth time, so he fully understands the evolution of the Spanish startup ecosystem. « There are quite a few entrepreneurs who have spent time in the US, whether in Silicon Valley or New York, so they know the startup culture well. In addition, Spain has a very high level of education thanks to its engineering and because it has the two most powerful MBAs in the world », he highlights.
The CEO of this venture capital fund considers that it is also in our companies' favor that they can attack both the Latin American market and southern Europe. «This potential to develop in other regions of the world gives it a very strong advantage that France, for example, does not have», he abounds.
Entrepreneur and investor Hugo Arévalo adds that valuations in Spain are lower than in France, Germany or the United Kingdom because our country has a lower GDP, lower population density and less purchasing power: "There are very good quality companies with better valuations, is another reason why the appetite has been whetted. For his part, Nacho Ormeño, from StartupXplore, mentions the cost efficiency compared to countries such as the United Kingdom or the United States, which allows more things to be done with less financing needs.
Despite the sweet stage that the ecosystem is experiencing, there are still obstacles to overcome to pave the way for foreign investment. Excessive bureaucracy is one of the recurring complaints. "It is a disaster. In France, the United Kingdom or the United States, an agreement is made with DocuSign and that's it. Here you have to go through the notary on several occasions, the papers have to be apostilled…” laments Ben Marrel, from the Breega fund.
The taxation that our country charges on stock options is another problem. “It has one of the worst tax schemes in the world, if not the worst, and this makes it necessary to find roundabout ways to make employees participate in the benefits of startups without implying an unapproachable tax burden for them at the time of delivering the options", explains Juan José Güemes, from IE University, who defends the need to review the support policies for companies: "At the EU and Spanish level, they are aimed at SMEs and, although there is a certain coincidence, those that create jobs are young companies, especially startups.
From the Spanish Association of Startups, its president, Carlos Mateo, thinks that "we need public policies and a regulation that, instead of putting sticks in the wheels of entrepreneurs and innovation, provides facilities". The quota of freelancers in Spain, for example, "means that only very few can undertake and leaves out drivers of change such as students or groups at risk of exclusion," recalls Mateo, who calls to look at the measures of the United Kingdom. "The first 50,000 euros that you invoice go without VAT and are giving tax incentives to both people and companies that are committed to this sector," says Mateo.
In theory, the Startups Law should address these pending issues, but it is still pending parliamentary processing. And the more time passes, the more money is lost and the more projects suffer the consequences. In the sector they celebrate that the step has been taken, although they fear that the norm falls short. “It is very positive and solves some of the problems, but we are missing a little more ambition. We will have to see what the final text is that is approved in Congress, but we would not like to stay at half gas, ”they say from the employers. Serial entrepreneur Hugo Arévalo is blunt: "It's a want and I can't." The room for improvement is wide, but the national ecosystem has taken off like a rocket and is flying higher and higher.