Spain’s Startup Ecosystem Is Still Under Construction

Spain is an efficient and pleasant place for early-stage startups to get off the ground–startups in the “soft incubation” phase. However, the ability of entrepreneurs in Spain and their companies to grow beyond this phase is the real challenge, and is why Spain has developed a reputation as a good location to start a company rather than a location with proven and consistent scalability and late-stage growth.

Presently, the Spanish startup ecosystem mostly supports early growth. To some extent, this is a function of the size and makeup of the Spanish consumer market. With over 46 million people, Spain is by no means a small country, but in many ways it is not a big enough market to properly validate products and for its startup ecosystem to sustain itself independent of other markets. For reference, the populations of Germany, France, and the UK are 83 million, 67 million, and 66 million respectively.

Spain also happens to have a domestic consumer base that is at times demanding, conservative, and wary of new products. Additionally, the Spanish startup ecosystem’s difficulty in scaling is also a function of a lack of funding. At a glance, the ticket price for an early-stage investment in Spain is substantially lower than it is in other markets. For instance, a typical series A investment in Spain is in the €50,000-€100,000 (US$60,000-US$120,000) range, while in the US, it’s not unusual for series A investments to start at US$1,000,000 or above. These conditions are all indicators for the Spanish startup ecosystem, showing that even sizable domestic success is oftentimes not enough to generate or sustain profitability. This reality parallels many of the developing ecosystems in Southeast Asia, and is the dominant reality for the vast majority of individual global markets.

However, market size alone does not preclude startup success, as proven by considerably smaller markets like Israel and Sweden. Israel, with just over 8.5 million people, has had incredible startup success and has become known as the ‘startup nation’ by ensuring its startup ecosystem is open and welcoming to global attention and investment. Sweden, another small country with slightly under 10 million people, has also achieved remarkable startup success, and its capital city of Stockholm produces the second-highest number of billion-dollar tech companies per capita, after Silicon Valley. Apart from its own startup-friendly regulatory policies, the Swedish startup ecosystem instills in its entrepreneurs a global mindset–Swedish startups typically operate in English from day 1 ready themselves for the global market.

These nations demonstrate that it’s not only the size of a market that matters, but how its startup ecosystem makes use of it. For Spain to grow the impact of its startups, it must take a page from the Israeli/Swedish playbook, and encourage its startups to think global from day one.