The maturation of Spain’s startup ecosystem

The maturation of Spain’s startup ecosystem

Spain’s startup ecosystem is relatively young, with many critical supports like accelerators, incubators and local VC funds still maturing themselves but all signs point to an exciting future.

Director, Corporate Finance

KPMG in Spain

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2015 was a record year for investment in Spanish startups, surpassing $0.5 billion for the first time. This is exciting news, especially given how dire some reports were about the Spanish startup ecosystem even five years ago.

We are currently seeing growing activity in areas around the country, as well as in multiple sectors. The tech sector in particular is booming, especially cyber security, e-commerce, gaming and fintech. Madrid and Barcelona are tech hotspots, although other regions are also building strong ecosystems like Valencia, Basque Country and Andalucia. But the excitement is not limited to technology companies – we are also seeing strong activity in tourism, biotech, big data, food and more.

Spain’s startup ecosystem is relatively young, with many critical supports like accelerators, incubators and local VC funds still maturing themselves. That said, all signs point to an exciting future, with the number and quality of Spanish startups increasing year over year.

What is helping the development of Spain’s startup ecosystem?

  1. Growth in local venture capital. The past few years have seen an increase in the number of local venture capital firms investing in Spanish startups and in the total number of businesses being supported. Where challenges remain are in supporting larger funding amounts locally, in the order of €10-15 million and above. To address this gap, many Spanish venture capital firms are establishing ties with international VCs. While, long-term, we would like to see an increase in the number of local VCs able to support larger rounds, the presence and support of international investors can also be of great assistance to Spanish entrepreneurs, especially those that want to move internationally. Given that several VCs in Spain are also setting up second or third funds and moving towards supporting the larger funding series – and that several serial entrepreneurs have now become super angel investors – signs are very positive for future growth.
  2. Government support. While critics are quick to point out problems with the Spanish government’s handling of initiatives that impact entrepreneurial activity, such as the recently introduced “Exit Tax,” Spain’s government has also made efforts to increase support for startups. One such initiative is FOND-ICO Global, a €1.5 billion fund of funds that has provided significant support for the recovery of Spain’s private equity sector. There is also a range of direct support available for startups, including soft loans and subsidies for new businesses, as well as several tax incentives. Efforts have also been made to reduce administrative red tape for entrepreneurs. Despite what you might read elsewhere, creating a new business in Spain has never been quicker or easier.
  3. Accelerators and incubators. The past years have seen a considerable increase in the number of Spanish accelerators and incubators supporting startup activity. In fact, in recent years, we have been seeing accelerators fight to support the best and brightest of the new companies and an increasing number of success stories from across different portfolios. This is especially true in e-commerce, with several big names recently rising into the headlines with new financing rounds exceeding $100 million.
  4. Competitive skilled local talent. As in other areas of Europe, talent shortages often leave startups scrambling to fill key roles. In Spain we have a very competitive skilled talent, especially for critical technical roles such as developers and engineers. Pay rates for top-quality resources are a fraction of what startups pay in areas like Silicon Valley, providing Spanish entrepreneurs with a competitive edge.
  5. Leading multinational companies. Spain is home to global leaders in several sectors, like banking, telecommunication, fashion and infrastructures, not to mention its leading position in other sectors like tourism (more than 60 million visitors per year), car manufacturing (second largest in Europe), renewable energy and agrifood. Many of those multinationals, have established sound programs to support startups (corporate venture funds, accelerators). Just to give a flavour of how substantial this support is, a telco company currently holds stakes in more than 600 startups and a leading Spanish bank has more than 170 startups investments.

While 2016 may not be another record-breaking year for investment, I fully expect to see considerable activity across our startup ecosystem and a continuation of the trend for overall growth. As the market comes to maturity, expect to see many more Spanish success stories in technology and beyond.

 

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About the author

Mr. Guillermo Ramos has significant experience in the startup ecosystem, which he acquired in diverse C-Level positions in his career. Guillermo currently supports VC firms and startups with their Corporate Finance needs (includes M&A, fundraising & strategy) as well as large companies and Public Administrations in setting up programs to support startups.

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