The annual highlight of this bustling internet and technology scene is the South Summit, an international conference that draws to Madrid business leaders and investors from around the world. The 2016 edition took place from the 5th-7th of October. During these three days the conference hosted Niklas Zennström (founder of Skype) and Allen Blue (co-founder of LinkedIn) and over 100 investment funds. In addition, special panel discussions focused on how technology will impact sectors as diverse as Financial Technology, Media & Entertainment, Food and Travel.
Katharina Lueth, a former Mckinsey & Co. consultant and Head of Europe at Raisin participated in a panel discussion on how APIs will revolutionise the banking system. One of the participants in the panel discussion was Raúl Lucas Alcáraz, Spain Country Manager for Open APIs at the BBVA bank. This bank has set aside a $ 250 million fund devoted to investments in fintech startups.[1]
Indeed, unlike in other European countries, where venture capital (VC) investment has grown very moderately, VC investment in Spain has surged significantly. It has doubled over the last 9 years, rocketing sharply in the last 2 years. The finalists of the previous editions of the South Summit have raised about 500 million euros in funding since 2014. Funded startups include CartoDB, Job & Talent, Cabify, and Typeform.
What are the investment sources for Spanish startups? Public funds constitute 27% of all VC investment in Spain. Private investors contribute 25% of the total amount. The situation, according to Javier Ulecia, president of the Spanish Association of Venture Capital is owed to three key factors: “Since the VC industry in Spain is relatively young, there are fewer institutional investors investing in Spain; thus, we will have to have a consolidated track record and build interesting investment funds to attract larger institutional investors. It would also be necessary to introduce tax incentives for VC fund investors, as in neighbouring countries, in order to attract more private investors to the sector”.
The relative disadvantage of Spain relative to other countries in term of investment funds, should not dampen expectations about this country’s potential to spawn successful startups. Indeed, historical evidence suggests that there is an uncertain correlation between total investment figures and the number of highly successful startups. in the USA, the unchallenged leader in venture capital funding, $1.7 billion have been invested in VCs in order to give birth to a unicorn (a startup with a market value of at least $1 billion), whereas in Europe the corresponding figure is only $741 million.[2]
[1] https://www.bbva.com/es/noticias/ciencia/bbva-amplia-fondo-fintech-250-millones-dolares-2/
[2] Adapted from Report into VC investment in Spain 2016.06.09, South Summit Press Office.
