Spanish Startups Left Money On The Table In 2012

Last Friday, Webcapitalriesgo.com released their annual report highlighting the details of venture capital activity in Spain.  In total, all of Spain’s 2012 venture capital investment amounted to €230.6 million dispersed over 1,063 transactions.  These figures represent a decrease of 18% in total investment and an 8% fall from the number of deals recorded in 2011.  

It’s important to note that more than half of the transactions were comprised of public loans granted by ENISA and CDTI where only 348 of the 1,063 transactions were carried out by a domestic or international venture capital firm.  Accelerators, incubators, and business angel groups made the remaining 182 investments.  This is a highly controversial trend as high-risk, early ventures are often times still searching for a sustainable business model and are in no position to pay back a loan, even with favorable, subsidized terms.  Outsiders often view this practice with disdain and many feel government loans have no place in early stage ventures.

Viewed from another angle, however, the ENISA and CDTI loans may jumpstart private investors to allocate more of their portfolio in early stage, high-growth investment opportunities.  From a volume standpoint, these government loans make up less than 27% of the total amount invested in 2012.  As many of these loan vehicles are coupled with a matching equity investment from a 3rd party, the ENISA and CDTI programs may be pulling in more private investment than otherwise would exist in Spain.  Only time will tell as we begin to see the statistics on the repayment of these loans and if they have a detrimental effect on agility and long-term growth.

It’s no secret that early venture investment activity in Spain is made up primarily of smaller transactions.  Last year was no different as two thirds of all transactions coming in at less than €250k, only 5 ventures receiving more than €5 million, and zero companies receiving more than €10 million.  Additionally, the amount of investments under the €250k threshold rose by almost 10% from the total transactions under that level from 2011.  This can likely be attributed to the rapid growth of business angel groups, accelerator and incubator programs in Spain, which has almost tripled from the number of seed stage investments that were made the year prior.

From a regional standpoint, Catalonia led the nation in number of transactions (114) while Madrid greatly outpaced the rest of Spain with more than 28% of the total venture capital invested in only 60 deals.

Perhaps the most interesting stat to consider is that while total VC investment in Spain fell by 18% year over year, the amount of funds raised by VC firms actually increased by almost 12%.  This can be seen as a positive sign that the economy is strengthening and more investors are placing their capital in high-risk, high-reward ventures.  Or it can be viewed as a missed opportunity.  The money was there, but VCs couldn’t find the projects worthy of investment.  Either way, optimists will be quick to point out that those funds are now available to the best projects of 2013.

For those with a knack for sniffing out interesting trends check out the full version of the report and let us know what you find.  You will also find the complete list of players, participants, and funded transactions here: http://www.webcapitalriesgo.com/descargas/2722_04_13_937614436.pdf