The country has been badly hit by coronavirus, but as an event in Barcelona in February made clear, its fundamentals are strong.
The second Global Corporate Venturing Power Roundtable co-hosted by GCV and IESE Business School took place at the school’s Barcelona campus on February 27, following last year’s edition at the Madrid campus.
Delegates representing corporates such as financial services firm Banco Sabadell, energy utility Engie, electronics and consumer technology producer Honeywell, packaged food producer Kraft Heinz and pharmaceutical firm Merck were in attendance.
Barcelona is prepared to become an international hub for the innovation technology industry. The key players in the startup sector highlighted that the city had all the ingredients to establish a resilient ecosystem, but the lack of corporate venture capital (CVC) and global talent remained as its main challenges, according to corporate newswire iCrowd.
“Each startup ecosystem is unique, characterised by the type of entrepreneurs and the stakeholders it is composed of,” Suzanna Chiu, head of Amadeus Ventures, the corporate venturing arm of Spain-based travel technology provider Amadeus, told GCV.
Chiu continued: “For Spain, I think we are quite different in the sense that we have strong participations from corporations in financial, telecoms and travel industries looking to support startups and innovation in various ways.
“The dual hubs of Madrid and Barcelona is also something quite different from other countries where startup activities tend to concentrate on a single location.”
Madrid attracts innovation thanks to its qualified population, representing 20% of Spain’s university graduates. Local technology newspaper El Referente, which dubbed the Spanish capital the “nerve centre of entrepreneurship”, said that 65% of the companies listed in Ibex 35, a benchmark containing the 35 most liquid stocks traded on the Madrid Stock Exchange General Index, are headquartered in the city.
Comparing with Silicon Valley and Tel Aviv, where GCV held its annual GCVI Summit and GCV Israel conferences earlier in the year, Andrés Saborido, chief executive of Wayra Spain, an open innovation arm telecommunications firm Telefónica, said: “Spain is fortunate to have two cities, Madrid and Barcelona, in the top 10 European hubs, and the country has found the recipe to become a Startup Nation.
“We have a strong entrepreneurial spirit, great tech talent and huge growth potential that positions the country in the forefront to become a leading ecosystem of the same standard as Israel.
“From my point of view, Spain is unique, and I do not believe it is necessary to replicate other entrepreneurial ecosystems such as Silicon Valley or Israel. The formula to become a leading entrepreneurial ecosystem is to become strong leveraging one’s own advantages.”
Guenia Gawendo, managing director for Telefónica Innovation Ventures, a CVC subsidiary of Telefónica, who was based in Silicon Valley and the Brazilian city of São Paulo earlier in her career, agreed and said: “Spain is a talented ecosystem for startups and corporate venturing, and that is why it is a key market for Telefónica Innovation Ventures.
“The recent growth in the past few years – 17% year-on-year performance in 2019 – shows a promising ecosystem to focus our attention in the following years in order to bring the best value to Telefónica headquarters and the Spain business unit.
“Besides Spain and Latin America, we also have a presence in Silicon Valley through our own local office and through our limited partner (LP) commitment to Alter Venture Partners, while in Israel, we are also an LP for Vintage Investment Partners.”
According to GCV Analytics’ data, Spain-based corporate VC investments have grown exponentially from 2011’s $34m to 2019’s $979m, growing from three to 42 disclosed deals, concentrating on IT, media and services sectors.
In addition, Spain-based corporates are gradually shifting its focus from foreign to domestic deals when making venture capital investments, according to Amadeus’s Chiu, who noted: “Even though Amadeus is based in Spain, the scope of our business is in its majority from outside of Spain and so do our investments so far.
“Out of 16 investments we made, only two of them are Spanish companies, namely [ride hailing platform] Cabify and [interior navigation software provider] Situm. Over the years, we have definitely seen more entrepreneurial and VC activities in Spain.
“The fact that we have the first unicorn and a few successful startup exits also help to promote the fact that it is possible to grow a big business out of this country. This is the very first step of a virtuous cycle for capital and experience to be re-invested back to bring up the next generation of successful startup businesses. We are always on the outlook for the right team and right concept, and be able to invest more ‘domestically’.”
Cabify joins two other Spain-based unicorns from the past two years: last-mile delivery service Glovo and payment technology provider Flywire, according to Gawendo, who added: “We hope to see many others in the near future with the increase of venture investing from Spanish VCs but also foreign VC funds willing to invest in Spain. Marketplaces, business-to-consumer and business-to-business applications, bio and fintech are some of the core assets of this promising market.
“Telefónica Innovation Ventures has a long-standing and strong activity in the local ecosystem. We are LP in four Spanish VC funds – Kibo I, Kibo II, Active Venture Partners and Caixa Capital Risk – and we are investors in one of the most brilliant startups of the ecosystem, [cyber threat detection software developer] Blueliv, and we are also backing Flywire, invested directly by Kibo”.
Wayra’s Saborido added that Spain has an edge on information and communications technology, affirming: “Spain is a European leader in telecoms infrastructure and the deployment of optical fibre, ahead of Germany, France, the UK and Italy.
“In a rapidly changing world, the deployment of fibre is one of Spain’s main competitive advantages for the digital transformation of the economy. We are also leaders in other sectors such as tourism and banking.
“The latest Global Entrepreneurship Monitor report – the largest study linked to entrepreneurship in the world – stated Spain is ahead of Germany, the UK and Japan as the country with the best environment for starting up a business.”
The number of Spain-based startups receiving corporate money reached its peak in 2016 with 25 companies and then decreased, according to GCV Analytics data. That said, the funding amount grew steadily as $551m was logged in 2019, compared with $484m in 2018 and $295m the year before.
The key to corporate venturing success is co-investing and creating synergies with other ecosystem partners. Amadeus’s Chiu gave an example, saying: “Madrid is the home of UNWTO (United Nations World Tourism Organisation), with whom we have a strong collaborative relationship to guide and nurture more innovations in this sector.”
Wayra has encouraged an open innovation model where its portfolio companies are urged to work together since the unit began conducting venture investing in 2011, according to Saborido, who explained: “During these years, we have seen how the entrepreneurship ecosystem in Spain has grown, matured and strengthened to become one of the most promising ecosystems in Europe.
“About two years ago, we changed our model and went from being a generalist startup accelerator to an open innovation hub that invests in pre-series A and series A technological startups that have the capacity to provide innovative solutions to Telefónica in cybersecurity, data, internet of things, video and artificial intelligence, among others.
“Today, our goal is to help startups to scale through our network of seven hubs with teams in 10 countries in Europe and Latin America.”
Similarly, Telefónica Innovation Ventures’ Gawendo said her unit has participated in the organisation of startup conference South Summit, MWC-4YFN (Barcelona’s annual Mobile World Congress trade show’s Four Years From Now platform) and ASCRI (the Spanish Venture Capital and Private Equity Association) since the beginning of their activities.
Gawendo continued: “We constantly share best practices with other CVC arms of some of the most important Spanish companies.”
Apart from CVC peers, Amadeus’s Chiu added her team is in regular contact with Spain-based financial VCs and accelerators, saying: “We refer and compare notes when assessing investment opportunities. Given our sector knowledge, we are very happy to share our perspectives and provide some background info on startups working in travel and transportation.”
Wayra’s Saborido also stressed the importance of collaboration among the industry players and remarked: “For the startups, it enriches the strategic decision-making enormously, brings knowledge of the market and connects them with other corporations.
“In this model, VC funds also win because by investing together, we share vision, capabilities and – above all – deal flow with people and entities that are trusted and respected in the market. Many of the funds are partners in our more than 500 investments.
“Beyond investment, it is necessary for large corporations and public administration to work on joint projects with startups. This is a very important way of strengthening the innovation ecosystem in Spain. For example, Telefónica works with more than 130 startups of the total number of companies in which we have invested, which benefit from the company’s sales force to scale.”
Last year, Wayra-backed startups generated more than €32m ($35m) in Spain alone for Telefónica and its clients, said Saborido, who added: “In this sense, we collaborate with two types of companies: those that make improvements in the company’s internal processes that the customer does not see, and those that are integrated into the service offering of the brand.”
Saborido concluded: “We at Wayra bet on co-investment opportunities with other funds to promote new companies together, as we like to say: ‘never alone’. This bet represents a win-win for everyone.”
