What Spain Can Teach the Nordics About Startups By @jdromberg

June 25, 2015

La TomatinaLa Tomatina 2014, by The Independent.


Having recently returned from AngelSummit in Madrid, I’ve grown increasingly optimistic about the future of the Spanish startup ecosystem. It felt as if an inherent characteristic of the Spanish culture has always been waiting for the digital economy to unfold. The more effective resource allocation that comes with it may be the missing link in the traditional laid-back Spanish lifestyle.


The Nordics, led by Sweden and Finland, are Europe’s undisputed startup champions adjusted to size. But Spain may be the country investors should fix their focus on, growing faster than any European country and already boasting as many deals as France this year.


While I may be biased towards rooting for Spain because of my doctoral alma mater IE Business School, I can’t but admire how quickly the tech culture has set root in the country. The South Summit, Madrid’s top startup conference, last year nabbed Google’s Eric Schmidt as keynote speaker, indicating that the world’s tech giants are increasingly looking towards the south when mulling over entering Europe.


What’s more, while there, Schmidt also announced the launch of Europe’s second Google for Entrepreneurs campus, not in Stockholm but in Madrid. And most recently, Amazon launched its first non-US development hub, not in Helsinki but in Madrid. Spain is mopping the floor with the Nordics when it comes to embracing foreign talent (amid accelerating net emigration).


But Spain’s startup story is two-faced. Despite increasing focus on entrepreneurship, the country has suffered from a chronic lack of internal funding which has resulted in Spanish startups not thus far meeting the high expectations. Unicorn success stories, such as Finland’s Supercell, the most valuable mobile gaming firm, or renegade industry rebels, such as Sweden’s music streaming app Spotify, are still to be unearthed in Spain. There’s no moonshot success that could breed further success. Yet.


With AngelSummit Europe, which took place earlier this week, the Spanish startup ecosystem is trying to help fix this. Focusing on private individuals makes sense, because while accounting for only half of the total venture capital pool in Europe, angel investors in 2013 added more money into the region’s startup ecosystem than what venture capitalists did. Also, Spain has more ultra-high net worth individuals than any Nordic country and their total weight as startup investors grew last year.


What’s more, through AngelSummit, Madrid is further increasing its international reach beyond that of Europe. Not to be confused with the European Business Angel Network’s annual meeting, AngelSummit is a U.S. initiative backed by well-known startup personalities such as Brad Feld of Fitbit and Zynga fame and Dave McClure, founder of 500 Startups.


As a result, the breakout sessions of the summit were heavily tilted towards cross-border investing, with the opening keynote being titled “Billion-dollar companies can come from anywhere.” Other sessions I found interesting were about the future of early-stage as an asset class, new investing platforms and the future of fintech. That said, as an investor, I hoped to see more about verticals that are strong in Spain and those that show the most promise.


What’s more, with the help of private investors, Spain may try and better hold on to its own stars. Although Spanish startups are increasingly attracting venture capital, the largest allocations continue to come from venture funds outside Spain. The biggest rounds last year, such as Scytl and Social Point, were led by non-Spanish VCs with the largest Spanish-led round being Jobandtalent.


This may be part because of Spain’s underdeveloped venture capital market — If Finland’s Inventure was Spanish, it would last year have been the country’s most active VC — and part because some local VCs see Spanish early-stage prices as frothy. That’s when Nordic VCs continue to see the Spanish market as attractive, as shown by a recent round into IE Business School incubated Tyba.



While some foreign investors may reflexively lean towards Spain’s stigma of being inefficient and laid back, the country’s startup community clearly is of a different breed, attracting investments from both north and west of its borders.


There, privately-held IE Business School has been one of the top proponents with its internal incubator and decorated hands-on faculty, such as my star advisor Cristina Cruz. Although already ranked the top business school in Europe by Bloomberg, I expect IE’s momentum to continue as it helps foster entrepreneurship further in the Spanish capital and beyond.


After all, it’s only in 2013 that Spain posted its first trade surplus on record as the country moves from a tourism-focused economy into a consumer-driven one, led by luminaries such as Inditex’ Zara, which is believed to have the world’s most effective supply chain. In fact, Spain is limiting its historic dependence on tourism while growing to become Europe’s consumer and lifestyle leader. It would hence surprise few if the country’s first moonshot startup would come from the marketplaces vertical.


Leaving Madrid for Helsinki, it felt as if Spain’s traditional laid-back way of living had from the onset been built for the digital economy. Until now, the world just wasn’t ready for it. Unless the Nordics will make themselves equally attractive to foreign talent, the scales of startup leadership may soon tip in favor of the south.


Jonas DrombergVenture Partner with @InventureVC. Doctoral candidate at @IEbusiness@Bloomberg alum. Helping renegades put a ding in the universe.