What is the best country for startups? Believe it or not, it’s Spain

No country for old economy. Beyond the sluggish economy, the real state cracked up and the 20% unemployment rate Spain is doing his homework very well in terms of creating new companies in Bio-tech and IT.

Let me make the case 🙂

Imagine that you create a company and you raise 500.000€. Here below is what you can get is you base your company in Barcelona:

  • 500,000€ loan from ENISA.
  • 400,000€ grant & loan from CDTI.
  • 100,000€ loan from Plan Avanza for your IT Systems
  • and you can get between 100,000€ to 300,000€ from other public institutions

That means that you can raise almost to 1.5 million Euros at no dilution !!! Any other place in the world where you can get it? Please, give me ideas.

In detail:

From ENISA, you can get a maximum of 1M€ if you have another 1M€ invested in the company. The loan is long term, between 5-10 years with grace period between 3-5 (It means you start to repay your loan after 3 years).

From CDTI, if you are a brand new company: for start-ups (at the time of applying for support, the company must have less than two years since its creation) and in need of funding to demonstrate the business feasibility of their innovation. CDTI provide in these cases and after careful evaluation, a credit “seed”, called Help NEOTEC, which generally have a maximum of 350,000€ (400,000€ when technological breakthrough) at zero interest rate without additional guarantees, which may not exceed 70% of the total project budget. The repayment of the aid will be in annual installments of up to 20% of the cash flow of the company when it is positive.

For older companies:  innovative companies with a length of between 2 and 6 years. Refundable aid will be granted up to 1,000,000€. Should have previously received help for creating Neotec the company, will be deducted from this amount of aid received previously. The repayment of the aid will be in annual installments of 20% of the cash flow of the company when this is positive.

Anyway, if you have any other technology project you can apply what is called “Fondo Tecnologico”: a combination 15% grant 85% loan with good repayment terms and grace period.

Do you have to set up you IT Systems? Then you have Plan Avanza. They will help with a loan at 0% rate and up 200,000€ in order to implement your ERP, ERP and other business information systems.

In the «others» section we have many grants & loans. You can get them from the local governments in every “Comunidad Autonoma” (similar to a state in the US). The most active communities so far I know are Catalunya, Extremadura and Navarra.

Here you have some local help that you can get in Barcelona:

In addition, if you base your company in a place like Barcelona Activa. You will get an office and other facilities almost at zero cost or very, very low.

Do you have to travel to open offices, sign distribution agreements or partnerships? The Barcelona Chamber of Commerce will help with many programs in order to do market research; pay you travel expenses; find partners and pay set up fees.

Hey, I want to open an office in the states! Well, you have several options here. Use the Plug&Play program of the Barcelona Chamber of Commerce. Or you can apply to some of the loans that Instiuto de Credito Oficial – ICO.

Furthermore, if you need to open in different locations around the globe, you can use the network of offices of the Catalan Government. They also help in with some grant and loan when you set up new international offices. The have a wide range of programs that you can apply for at ACCIO.

On the private side, we have a promising Venture Capital landscape. Caixa Capital Risc, Debaeque and Inveready are investing actively in new companies. Moreover, we have day-by-day more international VC investing in the international companies based in Barcelona such as Kennet, Atlas, Amadeus, TA, Elaia…

Above all, we have a super active Business Angels investment network called SeedRocket. They help, train, mentor and invest in new start-ups with promising business models.

In Spain there are a lot of people at management level in public and private institution doing the right thing. Zapatero & Rajoy; Montilla & Mas,  Hereu & Trias… please learn from the people that you have below they are getting things done!

Definitely, Barcelona is one of the best places in the world to setup a new company. We have the talent, the quality of life, the weather and the money.

23 comentarios

  1. Hey LLuis,
    Wish you were right! I read this http://www.doingbusiness.org/economyrankings/ a while ago from the IFC, it puts Spain for starting a business at 146th place and 62nd overall for doing business. Another issue I see is that after the start, there’s nothing really in place to assist businesses like mentoring programs from successful leaders as there are in other countries, it’s all aimed at the start-up.
    Please feel free to prove me wrong, I hope you do!

    1. Hi Peter, it’s true that regarding legal procedures and other issues is still a lot to do, and that main efforts are made on start-up support, but in Barcelona you can find quite a lot of services for growing businesses for free: contacts with decission makers of big players, investment contacts, coach on strategic planning with IESE (next edition in English), landing at Silicon Valley, and also mentoring… I’m responsible of these business growth programs at Barcelona Activa, so please, feel free to contact me if you need further information: [email protected].

  2. Nice article, thanks!

    I am a Barcelona entrepreneur and agree Barcelona is a great place for a start-up but the easy funding you have mentioned is true mainly for scientific R&D projects. Companies like Facebook or Mint would not have had any government support in Barcelona and probably little VC support, especially in the early stages.

    Keep up the good work!


      1. Thanks for the reply and for correcting me.

        What I meant was projects with an important R&D component (technology companies with a strong R&D element). These institutions usually award the grants and financing to innovation in the scientific/technology/R&D area, not innovation in the Internet or Consumer area (I even heard one of the directors say in a public presentation «We will not finance Internet companies»).

        Please correct me if I am wrong and if you think so I will be glad to discuss this online or offline but this is the impression I get after almost a year of analysing the different options available.


  3. Spain is a wonderful country for the spirit and soul however when it comes to business forget about it! Absolutely impossible to launch and build a successful technology start-up (i.e Facebook or Twitter).

    On a positive note we:
    • Start work at 10am (if you’re a morning person this is great!) and finish after 7pm
    • Public transport and general cost of living is extremely cheap
    • Have secured some amazing angel investors
    • Have a dedicated, passionate small team of 6 (3 of us are in Barcelona)
    • Proximity to MBA schools (IESE, ESADE, etc) for interns and advisers
    • Are huge fans of Barcelona Activa and the bridge tours they offer start-ups
    • Love the spirit of the people, the food and the sunny days
    • Benefit from the lack of distraction of industry events and endless opportunities often found in US technology cities

    On a not-so-positive note:
    • The manana mentality is very frustrating. Trying to secure commitments is challenging. One major institution have postponed their meeting for the 4th time now due to their disorganization and people tend not to respond efficiently to communication.

    • I know only very few start-up companies who have managed to secure the loans and capital you mention. They sound extremely attractive and we were also lured to Spain based on these opportunities. We had 1 person focused for 18 months at least 1-2 days per week preparing submissions and we even engaged some consultants to secure a total of €16,000. Go figure.

    • Last week I waited for 35 minutes in a banking queue with one attendant at Deutsche Bank to pick up a cheque book whilst 25 other employees shuffled papers. And what’s with banks closing at 2:45pm???

    • Any real talent you have to import at great expense and existing talent are typically here to ‘experience the Spanish culture’ or take a break from being burnt out.

    • One fellow entrepreneur was approached by the almost bankrupt state of Catalunya to hand over an exorbitant amount of money to cover ‘suspected VAT’ on international business dealings and would only be returned the money after an extensive audit which he was told by another entrepreneur could take 3 years. In other words your guilty until proven innocent.

    • In addition to paying high social security on employees, they are entitled to close to 2 months holidays per year and if you let them go you need to pay 1 month per year of service as severance. Multiply that by 100 employees and that’s serious downtime and liability.

    • Sure there’s a certain environment to get your business to a operational level however anything greater in scope for a foreigner is almost impossible to scale.

    I would highly recommend Barcelona for a start-up to incubate an idea with a clear transition plan to a greater opportunistic city.

    1. Maria. I am afraid you haven’t had luck in your ventures here. It is true that you can experience the problems described but I don’t think it is the rule.
      – Yes there are some lazy people. Nevertheless, there are also good committed people able to deal with dead lines. To be honest I had the same problem in the UK and France. This is a stereotype. Talent and hard working people are hard to find everywhere.
      – I cannot disclose the list but I know more than 15 companies that got loans and grants from CDTI & ENISA in 2009
      – You can attract good professionals from around the globe here. For instance, here you are 🙂

      1. I’m afraid I have to agree with Maria. As an entrepreneur and as someone running a tech accelerator program I fulley agree with what Maria just exposed. 15 companies with ENISA don’t qualify as a lot I’m afraid 🙁

        Being someone that goes back and forth between Spain and Silicon Valley I can tell you that we aren’t even close to be a great country to start a startup.

        Talent in Spain is scarce because they usually work outside Spain, VCs and Angels lack a minimum of tech culture for investments, VC and bank soft loans are extremely abusive, most workers won’t work in exchange for equity, the local market sucks big time, the legal corporate framework lacks the basic principles in which to operate a company to compete in a global market plus a 30% tax isn’t exactly cool for a startup… I could keep on and on…

        I do agree with you in that Spain does has potential, but we’re still years behind and we need to keep working to improve this.

        1. Alex, fully agree the best concentration of the world of talent and VC money is in Silicon Valley. However, if you have an international business plan, you can be funded by VC in other places. Venture Capital companies like Kennet, Atlas, Amadeus, TA, Bessemer, Insight,… Do not care if your company is based in Palo Alto, Madrid, Milan, Amsterdam or Malta… If you have a good business model, international and scalable you can get the money.

          Some company names based in Spain with international investors: NTRglobal, BuyVIP, Privalia, OpenBravo, eDreams, …

          I don’t know what happened with this 15 companies and ENISA but I know another 15 that got the money last year. You need to play with certain rules.

          Talking about taxes, I can suggest a good tax advisor, yo can be far below 30% 🙂

          Forget about the old economy crappy environment in Spain and take advantage of the benefits:

          EQUATION = easy to gather talent from everywhere (I moved many people from Europe and US to work for NTRglobal) +++ good system to fund a company with a mix of Investment, grants and loans +++ high quality of life — no everybody have sense of urgency (agree with JC & Maria)

  4. hi lluis
    great article, completely agree.
    there is only one place in the world where facebooks, googles and twitters are born.
    ok. it is not barcelona.
    and not all startups get funded in barcelona. Neither do they in silicon valley.

    But i have invested in 28 startups, and everytime we have presented a serious, plausible, and documented business plan, we have obtained enisa, cdti, and received the support from other institutions like barcelona activa.

    Just an example: if a startup receives funding from a business angel of the IESE network, enisa will automatically match the amount with a soft loan. Starting in january 2010 they have committed to do so in less than three weeks.

  5. Hi Lluis.. thanks for the article & follow-on knowledge that has been shared by others here through their comments.. I have the following observations..

    @ Peter – Mentoring programs «from successful leaders» are available, (1) but I haven’t been impressed with available «free programs», as they are less practical & more theory based.. I’m talking about the availability of people who have actually «done it».. hopefully several times over (2) if you have access to a «good network».. and by that I mean that you are «social» vs. a pure networker.. and you are able to tap into a relatively small circle of very generous & giving «experienced» people, like Lluis 😉 and others, you can learn more practical & immediately implementable actions in a 60 minute coffee, than you can in most of the events that I’ve witnessed in Barcelona

    @ Maria Sipka – I don’t think she was referring to people as «lazy» when she wrote «mañana», but rather that there is just a general «ineffective/inefficient» work culture, which is very parallel to a lack of «customer service» (internal & external clients) culture.. I’ve worked with start-ups & corporates worldwide for +25y & the most common missing element I have found in Spain (Iberia) in general, Barcelona specifically, is lacking «sense-of-urgency» from the workforce.. which is mission critical in any organization, more so in a start-up or entrepreneurial environment. I mention «Iberia» because having founded a company in Portugal & running several others, the «social» challenge in Barcelona is the same of most European countries.. our history & social security/protection labor legislation is a root for lack of productivity. Yes, it can be overcome, but with allot of hard & «smart» work based on knowing how to get buy-in form the committed few(+) that you mention.

    @ Lluis – The biggest challenge I’ve seen for Barcelona, in addition to the sense-or-urgency previously mentioned, is the «language». If we’re talking about attracting international talent, international money, or internationalizing a business, the lack of literacy & fluency beyond Castellano, but more specifically Catalan, is a huge draw-back. I’m fluent in English, Spanish & Portuguese, with a combination of the latter two helping me understand about 50% of what most «natives» are trying to express. I know you too are a big advocate of local talent getting «out & about» & improving their language skills, I’ve heard you at various events & I congratulate you for getting out the need to «internationalize».

    Bottom line.. «it’s just not easy» 😉 but it can be done.. there are indeed shining examples like yourself, Privalia & others… Thanks for the format!

  6. Lluis definitely, I’m not saying you need to go to Silicon Valley, I do think Spain has potential and I my startup is based here for that reason. But that being said, it’s much harder to do it here than elsewhere. That’s my only point to the original post, that Spain is still a hard country to do business in.

    Oh come on. BuyVIP & Privalia (clones of other French startups), eDreams? That company was created and funded in Silicon Valley 😉

    I’m not saying you can’t get money in Spain, not at all, I’m always saying the opposite, and I do agree about a good business plan, BUT, it’s much easier to find funding in the US, and that’s a true fact too 😉

    About taxes hehe talking about the 20 – 25% tax for special pymes? Or the special SLNE regimen with the tax exceptions? 😛 Well, it’s not even close to the 6.5% you pay in Florida, to name one example 😉

    But I can go on and talk about the obligation to pay social security even when you’re an administrator and pay Autonomos too 😉

    Look it the way you want, truth is, that it’s harder to start a company here. Again, I do think that Spain has a lot of potential and that’s the reason why we have our tech accelerator program here 😛 But we need to fix plenty of things in Spain before it becomes the best country to start a company.

  7. This post and ensuing discussion has been whirling around in my head and I wanted to share same additional thoughts. Thanks Luis for bringing this conversation into the open. I think it’s very important.

    Depending on the personal experience of every entrepreneur who’s had the courage to start a business in Spain, we’ll see plausable arguments representing why it’s the best and why it’s also not the best.

    I admire greatly the many entrepreneurs I’ve met like Luis who champion Spain and in particular Barcelona to be the entrepreneurial hub of choice in Europe. If we don’t have these champions who are truly passionate and dedicated to fulfilling on this mission, then nothing would ever change. It’s a tough mission they’ve taken on and will take many years to address some of the basic needs and challenges that have been shared through many forums.

    I’ve promoted Barcelona extensively as a great place to incubate an idea where focus is possible. I’ve shared with VC’s and the investment community globally – that innovative, great ideas are born in this country. Here’s even a video on youtube: http://www.youtube.com/watch?v=Hl1-Pad07hU

    It’s critical we take responsibility when recommending to non-Spanish entrepreneurs to set up their business in Spain. It’s a significant responsibility and unless you’ve already done it before, and are willing to hold this person’s hand until they firmly set their feet on the ground, they will undoubtedly find the conditions very, very extreme – hence why Spain was rated so low (146th place) in a global study.

    Start-ups are delicate and vulnerable to so many risks. Time means everything. Timing to market and timing to get your business off the ground. As entrepreneurs, we cannot afford to loose time on anything but our core business concept.

    The attention needed to refine a start-up’s business concept, build a team, develop the product, source clients and suppliers and continue to grow takes an incredible amount of energy, passion, drive, finance and resources. To then expose an entrepreneur to extreme business conditions – having to navigate around complicated company creation processes, a unique language, understand fiscal responsibilities, source valuable team members where it’s like finding a needle in a haystack (and not every entrepreneur is a great networker), get your head around employment laws, setting up basic infrastructure such as internet, renting an office, sourcing reliable accountants, lawyers and other professionals.

    Spain and in particular Barcelona is challenging, just like the rest of southern Europe, let’s just be very transparent about it.

  8. I would like to thank everyone who has contributed to this thread. Some fantastic insights into doing business in Barcelona / Spain. We have begun to expand our operations into Spain over the last year as well as a number of other European markets. One part is service based and global but another new line is helping internet businesses from the US launch in EMEA.

    Right now EMEA / Europe is crying out for a Silicon Valley type environment as a launch hub. When you are a virtual business and you can be anywhere the personal / social factor increasingly becomes important aside from time-zones. This feels like it should be Southern Europe for me. Despite the many issues noted here compare Spain to Italy or anywhere else and you still have an advantage when taking a work life balance.

    I would be very interested to hear of any other cities beyond Barcelona that should be looked at. I’ve heard Valencia is a good option for tech focues business but I’m not aure that includes Internet focused operations.

  9. Been there, done that.

    Don’t get me wrong, I love Barcelona, was born there, lived for almost all my life, great food, great weather, great city.

    But when it comes to enterpreneurship, it’s sadly not the best place. Taxes are high, you need to pay taxes even if you’re not making money (cuota de autonomo), access to funding is difficult, despite what you just mentioned on your article. While you’re talking about raising 500k euros, in Silincon Valley you would be talking about raising $10 million.

    Of course, salaries of developers in Silicon Valley are upwards of $100k a year while salaries of developers in Barcelona don’t go much higher than 30k euros, office rent is much more expensive in Silicon Valley, as well as general cost of living (renting an apartment can easily go above $3k monthly), so in Silicon Valley, with $500k you won’t get much… At least you got a great sunny weather…

    But even in the UK or Ireland, or Germany or the Netherlands, IMHO the conditions to startup a new company are much more favorable (except, you don’t have the weather).

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