Looking at the Spanish tech ecosystem from an international perspective in 2021 🇪🇸 🌍
Tags: Spain, Startup, VC, Tech

Looking at the Spanish tech ecosystem from an international perspective in 2021 🇪🇸 🌍 specht.p Follow May 20 · 8 min read

Creandum recently announced Abacum’s seed round, which marks the fund’s second investment in Spain after Factorial 💚 🇪🇸. We are optimistic about the Spanish tech scene and think the ecosystem is on a great path to becoming an important hub in the European startup landscape.

Two years ago, we did a deep dive into the Spanish tech ecosystem from an international perspective. In this piece, we will revisit this and further explore the role of local and international investors, key geographic hubs, and the startups emerging within them.

Recent development

We have seen very positive developments in the Spanish ecosystem over recent years, such as:

Increase in the availability of Spanish early-stage capital, especially for seed rounds. In recent years, Spanish VCs have been raising their second or even third funds, and early-stage fund sizes are growing. K Funds, 4 Founders Capital, Big Sur Ventures, Kibo Ventures and Samaipata’s latest funds are great examples of that. First-time fund All Iron raised the largest debut fund in Spain to date last year, and Target Global opened an office in Barcelona. It’s safe to say that the early-stage VC scene is booming and we have been lucky to invest alongside great Spanish funds.

especially for seed rounds. In recent years, Spanish VCs have been raising their second or even third funds, and early-stage fund sizes are growing. K Funds, 4 Founders Capital, Big Sur Ventures, Kibo Ventures and Samaipata’s latest funds are great examples of that. First-time fund All Iron raised the largest debut fund in Spain to date last year, and Target Global opened an office in Barcelona. It’s safe to say that the early-stage VC scene is booming and we have been lucky to invest alongside great Spanish funds. International investments flowing into the market

Next to local early-stage capital, international capital plays a key role in the ecosystem, and more international investors have been keen to make bets in Spain. Over 80% of the seed and series A rounds in 2020 included international investors. This indicates international investors’ confidence in Spain and VCs investing via zoom only has increased accessibility. But we’ll touch more on international investors later.

Next to local early-stage capital, international capital plays a key role in the ecosystem, and more international investors have been keen to make bets in Spain. of the seed and series A rounds in 2020 included international investors. This indicates international investors’ confidence in Spain and VCs investing via zoom only has increased accessibility. But we’ll touch more on international investors later. Strong development of Spain’s key hubs — Barcelona and Madrid

Unlike many other cities in Europe, the startup landscape in Spain is not dominated by one hub, rather there is a co-existence of hubs. Barcelona and Madrid are at the center of the tech scene and attract entrepreneurs, talent, and local and international investors. We also see other tech centers develop next to these two key hubs, such as Valencia and Andalusia.

Unlike many other cities in Europe, the startup landscape in Spain is not dominated by one hub, rather there is a co-existence of hubs. Barcelona and Madrid are at the center of the tech scene and attract entrepreneurs, talent, and local and international investors. We also see other tech centers develop next to these two key hubs, such as Valencia and Andalusia. Role models leading the way

With the first Spanish unicorns, the floodgates are starting to open; Spain is slowly breaking out its €100M status quo exits. Glovo, Cabify, Idealista and Spanish-rooted Flywire lead the way to billion-dollar valuations. Together with companies like JobandTalent, TravelPerk and Typeform, they serve as a breeding ground for entrepreneurial talent and strengthen the local “halo effect”. We increasingly see former employees of these scaleups choosing to go on to found their own ventures. For example, Sifted recently wrote about the Glovo “mafia”, Abacum’s co-founder Jorge was previously at TravelPerk and Wallapop, and Teo and Pedro from Circular worked together at JobandTalent. We’ve previously seen this halo effect in European hubs like London, Stockholm and Berlin, and are excited to see a similar development in Spain. Moreover, joining or founding a startup has become a serious possibility for students after leaving university.

With the first Spanish unicorns, the floodgates are starting to open; Spain is slowly breaking out its €100M status quo exits. Glovo, Cabify, Idealista and Spanish-rooted Flywire lead the way to billion-dollar valuations. Together with companies like JobandTalent, TravelPerk and Typeform, they serve as a breeding ground for entrepreneurial talent and strengthen the local “halo effect”. We increasingly see former employees of these scaleups choosing to go on to found their own ventures. For example, Sifted recently wrote about the Glovo “mafia”, Abacum’s co-founder Jorge was previously at TravelPerk and Wallapop, and Teo and Pedro from Circular worked together at JobandTalent. We’ve previously seen this halo effect in European hubs like London, Stockholm and Berlin, and are excited to see a similar development in Spain. Moreover, joining or founding a startup has become a serious possibility for students after leaving university. Fundamentals in place: a) low cost of living with attractive costs for great talent b) good technical and business universities (ESADE, IE, IESE, Politècnica Madrid/Catalunya etc.) c) vibrant tech hubs and scene (BCN/MAD)

Despite considerable progress, the number of unicorns and success stories are naturally not yet at the level of Europe’s major hubs. But we’re confident that companies like Factorial, Onna, Paack, JobandTalent etc. are on a great trajectory and will serve as role models for young entrepreneurs.

🧐 What’s still missing?

From the perspective of an international investor, we have a observed a few challenges that the Spanish landscape faces:

Lack of local growth capital

Similar to our conclusion two years ago, there is still a lack of local growth capital available. Although local early-stage capital has become more widely available, growth capital for series A, B or C+ is still highly dependent on international investors. We believe that for the Spanish ecosystem to truly mature, more local growth capital needs to be available.

Laggard copycat behavior

A multitude of Spanish startups have been known to replicate business models originating from the US or Northern Europe. We see a triangular movement; starting with innovation in the US, then startups in Northern/Western Europe apply the business model to the European landscape, which gets replicated for the Southern European or LATAM market by Spanish ventures.

Below are a few examples of this triangular movement:

Robinhood was founded in the US in 2013, in 2015 Trade Republic brought the model to EU, and copied in Spain in 2018 by Ninety Nine. We see a similar pattern for neobanks: Chime launched in the US in 2013, Revolut in Western Europe in 2015, and Bnext and BNC10 in Spain in 2016 and 2018 respectively. In delivery there is a clear triangulation between Grubhub, Delivery Hero and Glovo.