10 years of growth: Spanish startups flourish as VC investment reaches new heights

- April 20, 2023

The global VC funding market is experiencing unprecedented growth, with record levels of capital flowing into startups worldwide. 

In 2022 alone, according to Bain & Company, VC funding hit an all-time high of $396 billion. 

Spain has been one of the beneficiaries of this trend, as the country’s startup ecosystem continues to attract significant investment. 

Despite the challenges posed by the COVID-19 pandemic, Spain’s VC funding market remained stable in the last quarter of 2022, and the country is poised for further growth in the years ahead.

In this article, we’ll explore why Spain is a hotbed of innovation and why investors are flocking to the country’s startup scene. 

We’ll also examine the factors contributing to Spain’s success, including its supportive government policies, diverse ecosystems, and talent pool.

The “running of the startups”

One of the key factors contributing to Spain’s stability is the country’s robust startup ecosystem. 

Spain has been actively promoting entrepreneurship and innovation over the past decade, and this has led to the creation of a vibrant startup scene. 

The country’s supportive legal environment has played an essential role in this, with their startup law since 2013, which included measures such as reducing the costs of starting a business, providing tax incentives for investors, and simplifying the bureaucratic process for setting up a new company.

Years later,  we are seeing the results. According to the Spain Ecosystem Report 2023, prepared by Dealroom in collaboration with K Fund together with BBVA Spark, Endeavor España, and GoHub Ventures, there are now over 8,000 startups in Spain, with the majority concentrated in Madrid and Barcelona.

While the majority of startups are concentrated in Madrid and Barcelona, there are also emerging ecosystems in Valencia, Malaga, and Bilbao. 

This diversity helps to reduce the concentration risk that is often associated with startup ecosystems, and it also ensures that there are opportunities for startups across the country.

Fiesta of funding: a record-breaking year

Another important factor is the availability of capital. In recent years, Spain has seen a surge in venture capital funding, with investors increasingly drawn to the country’s dynamic startup scene.

According to Tracxn, there are now over 130 active venture capital firms in Spain, providing startups with access to a diverse range of funding sources. 

Additionally, the Leaders League Private Equity and Venture Capital Ranking 2023 listed Spain among the top countries for investment funds in Europe.

 This trend is further supported by the presence of active venture capital firms such as K Fund, Inveready, and Seaya Ventures, as highlighted by Startupxplore.

 With more and more investors looking to back promising Spanish startups, the country’s startup ecosystem is poised for continued growth and success.

 In 2022 alone, Spain saw a record-breaking €5.5 billion invested in startups, according to the Spain Ecosystem Report 2023 prepared by Dealroom in collaboration with K Fund together with BBVA Spark, Endeavor España, and GoHub Ventures.

This represents a 28% increase from the previous year, and it demonstrates the growing confidence of investors in the Spanish market.

How a skilled workforce is powering its ecosystem

Finally, Spain’s pool of talent is another crucial factor contributing to the stability of its startup ecosystem. 

The country’s highly skilled workforce and abundant STEM graduates provide a solid foundation for developing innovative startups.

 According to Expand to Spain’s report, Spain ranked 7th in the world for global tech talent in 2022, with Madrid and Barcelona featuring among the top 50 global cities for tech talent. 

In addition, Spanish universities and research institutions produce a significant number of STEM graduates, further bolstering the talent pool available for startups.

The availability of highly skilled talent has also made Spain an attractive destination for tech companies seeking to expand their offshore hiring.

Wired reported that tech’s offshore hiring had gone into overdrive, with companies turning to countries like Spain for highly skilled workers.

This trend has been further accelerated by the COVID-19 pandemic, which has enabled remote work and opened up new opportunities for global talent acquisition.

With a highly skilled workforce and growing opportunities for remote work, Spain’s startup ecosystem is well-positioned to continue attracting top talent and fueling innovation in the years to come.

In conclusion, Spain’s stable startup ecosystem, availability of capital, supportive government policies, political stability, diverse startup ecosystems, and pool of talent all contribute to its position as a stable destination for VC funding. 

While there may be some volatility in the market, Spain’s fundamentals remain strong, and this bodes well for the future of its startup ecosystem.