Recently, Spain has experienced a substantial increase in investment rounds and exits. According to Jaime Novoa, Spanish startups raised € 77million in the last quarter of 2014, which is a +315% increase compared to the previous year. There were also 5 notable exists, ranging from € 3million for Ducksboard and € 80million for Trovit. The Spanish entrepreneurial ecosystem relatively young compared to other European hubs however, these figures are excellent signs of growth and show a promising future.
Reading all the facts and figures is great, but it also important to also get a more complete understanding via qualitative insight from entrepreneurs on the ground. To do this I interviewed 13 CEOs of Spanish startups that are taking part in Lanzadera, the Valencian accelerator that we are also part of. Their startups range across apps, e-commerce, social networks, tech, SaaS, and fashion. To take a look at each CEO, scroll to the end of the article.
Do you consider Spain to be “entrepreneur-friendly”?
Bruno Munoz of Runator, "A social network for runners with aggregated workouts," currently in User Acquisition phase.
Yes, but the ecosystem is not in line with the politicians and government policies. Spain is full of good talent. More and more people want to be part of startups; it’s a trend. There are lots of accelerators and experts but there’s a big block from the legislative side.
The bureaucracy of setting up a company, being self-employed is quite expensive in terms of social security tax, and the laws aren’t prepared to adapt to new technologies. Spain is the only country that actually blocked Uber from operating here.
Pablo Martin Lozano of Meetizer, the social app for travelers an expats to connect, share plans, and craft unique experiences together. Meetizer was featured in Apple's "Best New Apps" in 18 countries, and is now in user acquisition phase.
I think that Spain is a good place in terms of the public and private support available to start a project (loans, grants, accelerators, etc). However, the major challenge continues to be, that the companies which have reached a certain size need to leave the country to raise the capital they need to be able to compete internationally.
Tibor Moes of ValorTop, which helps users discover the best tech products at the best price. ValorTop is acquiring users and expanding in Latin America.
The quality of life is very high compared to cost of living, which is pleasant for early-stage companies. It’s not that expensive to locate and hire great talent. For example, a developer with 5 years experience will cost 4 times more in the USA than in Spain. People are highly educated at a very professional level, and are actively looking for jobs.
As a foreign entrepreneur, I can say that the challenge is that English comprehension is low, and as a foreign entrepreneur you need the team to be fully capable in Spanish or you need to speak it yourself. The second option is far more practical.
Alejandro Sahuquillo of Languing, "The Language Social Network," currently in user acquisition phase.
With little money you can achieve a lot. There is an abundance of affordable talent and general expenses are lower such as office space, rent, and living costs. Also, we are a Mediterranean country and very creative by nature. An advantage for entrepreneurship.
Jorge Carretie of Acuerdalo, an eCommerce platform where buyers set the price of the goods they want to buy. Acuerdalo is scaling in Spain.
The ecosystem here is really different to the US when it comes to investment opportunities and how startups interact. In the US, people including the government are more familiar and open-minded towards startups and entrepreneurship.
In Spain it’s still a relatively new concept and not yet fully integrated into society. The way that the government supports startups in Spain is still in its early stages, there are still a lot of steps to make. I think Spain just needs a few years to get there.
Which Spanish cities have the potential to be a startup hub like London or Berlin? Why?
Helena García Soto of Madaish, "the largest social network for fashion and beauty," currently expanding in Latin America.
Madrid and Barcelona. They are Spain’s biggest cities and a lot of startups are already located there. Many prestigious business schools and universities also attract a lot of talent. We have 3 of the best 15 European business schools located in these cities: IE, ESADE and IESE. I think that Barcelona is more bohemian in the sense that many startups there are in the music, fashion, and art sectors.
Eduardo Serrano Carretero of Maruv, supporting designers with financing, production, marketing, and selling of their collections, currently in scaling phase throughout Spain.
Madrid due to its business network, its concentration of accelerators, and its central location in Spain. Valencia is also a great option due to the growth of existing accelerators like Plug and Play and Lanzadera.
Jesús Miguel Gutiérrez-Barquín of Mencanta, the "Tinder for fashion." The product is in user acquisition phase.
London has a lot to offer, but it lacks the great weather and quality of life that Spanish cities have such as Malaga, Madrid, Valencia and Barcelona. The lower living costs of these cities also make them great options to become European startup hubs.
Tibor - ValorTop
We’re located in Valencia. The city has a great environment with good accelerators, but still needs to develop a stronger connection with follow-up investment, otherwise teams will leave to the other major cities like Madrid or Barcelona.
Pablo - Meetizer
I think that Barcelona is in the best position in terms of its concentration of international talent, investment and the strong environment surrounding the mobile industry. However, Valencia is positioning itself very well with its numerous co-working spaces, accelerators. Especially considering the Marina de Empresas initiative, founded by Juan Roig, as its creating an ecosystem of startups and entrepreneurs in itself.
What improvements would you like to see for these cities to become entrepreneurial hubs?
Pedro Prieto Moreno of Friendkhana, helping brands to better understand their customers. The company is in customer acquisition phase.
Large Spanish companies need to participate more in the startup world to help the ecosystem grow. It would be great if more of these corporations would be interested in acquiring Spanish startups, which would lead to more successful exists within the country.
Diego Sáez de Eguílaz Cámara of MESbook, helping to scale manufacturing for less, and at better quality, currently in user acquisition phase.
Tax reforms, more subsidies and with less documentation required. Ease for startups in terms of all the bureaucracy around creating and maintaining a company in Spain.
Jaime Sánchez-Laulhé of geoblink, a SAAS solution for location intelligence aimed at companies with a network of physical stores. The geoblink beta launched in November.
First and foremost, the government needs to provide more fiscal incentives and reduce the self-employed tax quota because this is one of the biggest factors that affects us. Also, we need to instil the entrepreneurship spirit into people from a younger age, throughout high schools and universities.
Pablo - Meetizer
Within Spain, we need to build more awareness and visibility for our successful startups. It’s crucial for the public not to stigmatise the success of entrepreneurs. I also think that people here need to be more tolerant when it comes to risk and work towards developing a culture that strives to keep trying even after experiencing some failures.
Bruno - Runator
When the ‘unicorn’ startups reach a certain level of success they tend to leave Spain and settle in the UK or US where the legislative and administrative aspects are easier, which is exactly what Flywire did. If they stay here, a strong startup hub will naturally emerge around it; take Wallapop for example. Startups are attracted to other great startups. I mean, the tech talent is great and affordable so it doesn’t make much sense to leave if it weren’t for these complexities.
Helena - Madaish
A lot of Spanish entrepreneurs speak English very well, but the majority prefers to speak the local language. This is something that people here have to overcome, and should improve their English even more. We need to be more prepared to accommodate both international teams and investors. The numbers show that investment into Spanish startups is on the rise.
What is your opinion on the current investment environment in Spain?
Pedro - Friendkhana
Right now, it’s pretty polarised. There’s a lot of the pre-seed capital from institutions like ENISA or Lanzadera, and on the other side, a lot of opportunities for growth rounds (Series A). However, there is a lack of capital between pre-seed and growth: a grey area of Euro 100,000 to 300,000.
Alejandro - Languing
Spanish investors have been used to investing in the tourism and construction sectors, and expect much more stability than a startup can provide. The community needs to change their mentality and understand that investing in startups is high risk but even higher reward.
Jesús - Mencanta
Spanish investors prefer business models that are making revenues before investing. They would rather invest in a business that is selling 1,000€/month, over another one that is not making any revenue yet but has 1 million users and +10% weekly growth.
Bruno - Runator
Investment is a challenge, but it’s definitely increasing in Spain. There is now money for Series A investments, so Spain now needs more and more big projects. It’s a good moment for investors.
Diego - MESbook
I think the investment bubble is just starting. Some people will gain a lot of money and the challenge is to be smart enough to leave before the it bursts.
Do you feel that there are sufficient opportunities here to grow your business?
Maria Pocovi of EmotionResearchLab offers reliable emotional data to anticipate consumer behavior. The product is currently in beta.
I think so. We’re starting our first investment round soon. All of the events throughout Spain that unite entrepreneurs with investors have been a great advantage.
Jorge - Acuerdalo
It really depends on the stage of your business. For very big tickets above series A, I’d look outside of Spain because other markets are used to large investment rounds and are more willing to invest in riskier opportunities.
Jaime - Geoblink
There’s increasingly more access to funding from business angels and Venture Capital funds in Spain. In my opinion if you have a good project, there are sufficient opportunities to receive investment ranging from pre-seed to series A of 2 to 3 million.
Helena - Madaish
The good thing about Spain is that if you already have investors on board, there is a lot of aid available from governments and institutions, such as loans without personal guarantees. This can duplicate your investment.
How would you describe Spanish investors in general?
Alejandro - Languing
As far as I’ve been in contact with business angels, many don’t believe in projects that aren’t getting revenues, such as the Facebook or Twitter models in their earlier stages. They’re used to stable investments like construction.
Pedro - Friendkhana
They are very cautious, and have strong financial profiles. They are more focused on revenue, but they are very supportive and like to get involved you in your project.
Pablo - Meetizer
It is true that Spanish investors are increasingly more professional. However, their risk-averse attitude is still elevated compared with neighbouring ecosystems, and for this reason they tend to hold off from investing until the startups have reached a certain level of success. This isn’t necessarily a bad thing, but startups that are disruptive and innovative, or with business models based on growth, are yet to be sought after.
Jaime - Geoblink
It really depends because like any market, there are a wide range. There are very professional funds with a lot of experience in terms of investment and supporting startups at all stages, so these have a lot to offer. However, there are also funds that are quite new and still don’t have sufficient expertise to help startups grow.
Jorge - Acuerdalo
We have good quality investors and VCs that are doing great business here, but it’s not enough. They’re used to doing small tickets so we need investors that have more experience with big rounds.
Your one key piece of advice for entrepreneurs that are looking to expand or build their startup in Spain?
Tibor - ValorTop
Spanish people are very willing to help and approachable. This is true throughout various layers through Spanish society, so among entrepreneurs and investors people are very willing to make introductions and help you out. Social relations are very important here so it’s crucial to invest in growing your network. This is an advantage and disadvantage at the same time because the network takes time to build, especially if you’re not from here, and the preferred business language is Spanish.
Maria - EmotionResearchLab
The indications of a rise in investment are real, and we count on the entrepreneurship infrastructure here to support the distinct stages of entrepreneurship. And the climate is amazing!
Helena - Madaish
Focus on personal branding. Take care of your LinkedIn. Networking is extremely important in Spain, so it’s crucial to do this and go to events to meet other entrepreneurs and investors. Everybody is willing to help or recommend someone to you. There are many funds that only work with startups that have been recommended to them through other investors rather than those that apply directly to them.
Jesús - Mencanta
There is no better time to create a startup. Spain offers almost all the ingredients for making your startup grow: talent, lifestyle, good weather, cheap living costs… It is the best place to start! From here you can easily access several VC markets in Europe to finance your growth stage.
It seems like overall, Spain is emerging as an entrepreneurial ecosystem but has some leaps ahead to catch up with the other major ecosystems. It is clear that there needs to be a stronger alignment between entrepreneurship and the government, specifically regarding fiscal and administrative incentives, to encourage more startups to emerge, develop, and stay in Spain.
Do you have experience of being an entrepreneur in Spain or with investors from this region? Please share your experiences and advice!