Spanish Startups Charm Foreign Investors

2021 couldn’t have kicked off any better for the Spanish entrepreneurial ecosystem. During the first quarter, the volume of investment in spanish startups received equaled the total for 2020, at €1.08 billion. Besides, Q1 ranks as the second most active quarter in history, second only to the last quarter of 2020. The great international investors have had a lot to do with these numbers. 

The Q1 2021 Spanish investment Trends Report drafted by the Start-up Observatory of the Bankinter Innovation Foundation shows that foreign investment has hit a record high, with €683.7 million placed in only one quarter, 611% more than the last three months of 2020. However, the number of deals has decreased, at 18.3% of the total. This is due to its participation in high density rounds in growth stages.

Foreign investment has increased its relative weight in the Spanish ecosystem considerably, as it has participated in several mega-rounds this quarter and it has been present in earlier rounds: it has been involved in 10 deals under €5 million apiece, and even more extraordinarily, in five deals under €1 million each. 

Javier Megias, our Start-ups program manager explains that foreign investors tend to invest mainly “in series B rounds, although it is becoming increasingly common to see series A rounds led by a foreign investor. And in some rare cases they are present in seed stages”.

Besides, he highlights the fact that there are European and North American investors in rounds over €1 million, and that Asian investors have made their come back into the scene (Softbank being one case in point), from which they had basically disappeared in 2020. Megias ventures into the reason why foreign investors are making a comeback: they always focus on the sectors that appeal the most investment. Having investors return is a good sign. 

As stated before, the mega rounds have been a source of good news this quarter: rounds over €50 million, particularly the  Idealista, Wallapop or Job and Talent deals, which account for a sizeable part of this year’s volume. Megias highlights the maturity of companies such as Wallapop, with market expertise, ready to opt for this type of move: “when they get to a round this big, they have a lot of rounds and years of expertise under their belt”.

The Start-ups manager is confident that the visibility of Spain has heightened around the world and that international VC markets analyze it regularly. 

Besides, there is an increasingly powerful trend in the US, where investors are looking towards Europe as a source of big deals, where companies with huge potential are based. 

Despite the momentous kick-off of the first quarter of 2021, it is hard to make forecasts going forward. Megias considers that should this trend continue, “we will see increasingly more foreign investors participate in series B rounds going forward, and also entrepreneurs open to foreign investor-led first rounds”.

It is not easy to know what foreign investors expect from Spanish start-ups. But Megias concludes that, however difficult it is to find a common factor, “all of them are companies with huge markets, international ambition and a brilliant execution of a business model”.