In the latest spark from its fast evolving tech ecosystem, Spain’s scale-ups are banding together to lobby lawmakers and press the economic case for their high-tech, high-growth business model more broadly.
The new lobby group, called EsTech (aka ‘Es’ for España), had its official launch last week — when it unveiled nine founding company members spanning a range of industries, including gig platforms, B2B software, energy, entertainment and health tech — namely: Cabify, Factorial, Filmin, Glovo, Wallbox, Holaluz, Neuroelectrics, Jobandtalent and Red Points.
The group wants to create the conditions for a new IBEX35 based in tech as EsTech’s president told local journalists covering the launch — so the idea is for it to grow substantially in size too.
The hope is that many more of Spain’s 400+ fast growing startups will soon get big and ambitious enough to join the program, according to Carina Szpilka, a general partner at the Madrid-based VC firm, K Fund, and president of the broader Adigital digital business association which is supporting EsTech’s launch, alongside another local trade group, Endeavor, and the Spanish VC association, Ascri.
Other fast growing Spanish startups Typeform, Travel Perk, Heura Foods and Wallapop are suggested as likely candidates to be next in line to join the club.
“We are convinced that the contribution of these type of companies, especially the scale-ups, is super significant to the prosperity and to the economic growth of the country. That’s why we started to talk to them, we started to approach them and we started to also share the vision that we want for our country for the future and this is how this initiative was born,” Szpilka tells TechCrunch.
Adigital expects Spain to have 20 unicorns by the end of the year. And, seeking to underscore the value to the economy of such high growth startups, Szpilka says that even just that handful of billion-dollar+ valuation tech firms would be contributing 1% of the country’s GDP.
The wider ecosystem of circa 450 scale-ups that EsTech intends to represent will have a goal of reaching 40% tech GDP in 2030.
“The [goal for EsTech] is to really facilitate the creation and the growth of these type of companies — becoming unicorns or not. I don’t care about the $1BN valuation; we care about job creation, sales, the ‘social cash flow’ that these type of companies can contribute,” she adds.
“Under the radar”
Spain’s high growth startups have been a bit “under the radar” domestically when it comes to positive perception of their impact, Szpilka suggests. “People really didn’t realize the impact that these type of companies are having. And which we are convinced is huge. Last year — in terms of sales — this group of [nine EsTech founding] companies were more than €4 billion in sales and in terms of job creation they employ currently 10,000 people directly here in Spain.”
She also cites job creation stats for the broader base of 400 or so scale-ups in the Spanish ecosystem which, in 2020, were responsible for creating 324,000 new jobs. “The expectation for 2021 — which is not confirmed yet — is going to be around 670,000 employments. So we are talking about a huge percentage already of the employed population in Spain.”
“It’s really impressive the impact and we are convinced that by sharing and making the society be aware of the contribution this will create a positive impact,” Szpilka adds.
EsTech’s three main objectives boil down to advocacy around 1) talent — both promoting talent development within Spain and attracting more international talent to the country (which means lobbying on related tax regimes); 2) regulation, seeking to influence domestic initiatives such as Spain’s new startup law but also at an EU-level where regional digital policy gets set; and 3) raising the profile of scale-ups on the global tech stage and also locally where entrepreneurs don’t always get the warmest reception from wider Spanish society.
On the regulation point, Spain’s first startup law — which was adopted in draft and presented to parliament in December — has been well received by the local tech community. But there has also been some grumbling that the thresholds for qualifying for the package of tax breaks and other benefits are drawn too narrowly — and will exclude all but very early stage startups.
EsTech seems likely to press that line of argument — although at the time of writing it was still preparing its policy plan.
“We are leveraging on the new startup law and also trying to bring to the floor some of the best practices around Europe — some of them have already been presented in the new startup law, others no. So we are going to take this as a base scenario and try to propose different improvements,” says Szpilka. “Particularly because there are some things around the startup laws that are just for very small startups but here we are talking about scale ups and here we also want to be listened to.”
“We need to work all around the different stages,” she adds — pointing to another draft law, called Crea y Crece, which is more focused on SMEs than tech businesses, and saying EsTech’s mission is therefore “more to make sure and make everybody aware of how important the contribution of the tech world could also be”.
“Many, many times I am complaining about the innovation capacity of Spain as a whole — the contribution to innovation around the percentage of the GDP in Spain is one of the lowest in Europe but at the same time we have this type of super innovate companies and this should also be an example for other companies in Spain of how you can innovate here and we would love others to see this as a mirror of the type of things that can be done here,” she adds.
On the third objective — raising the profile and perhaps burnishing the image of scale-ups within Spain — the always vocal and sometimes violent protests by taxi associations in cities like Madrid and Barcelona, demonstrating against ride-hailing platforms such as EsTech member Cabify, which are seen as encroaching on rights and livelihoods, look instructive vis-a-vis some of the challenges the group may face in trying to push a positive message of disruption.
“Sometimes in Spain the entrepreneurs — the empresarios how we call them — that are business people have a sort of a bad ‘image’,” says Szpilka. “The entrepreneurs are always looked at as super fancy and smart people but at the end of the day we are the same. So it’s trying to boost and trying to explain the role that entrepreneurs are playing and their capacity to impact, to transform and to change the society in which we are living.”
EsTech’s lobbying will presumably seek to establish and/or reframe the narrative around high growth platforms to one of opportunity, job and wealth creation.
Reframe because certain types of digital scaling in Spain have been fast-followed by negative stories — especially on the gig economy front, where public concern over issues like the rise of precarious jobs has already led to regulatory reforms.
The country’s center-left government agreed a labor reform targeted at delivery platforms last year which requires them to recognize couriers as employees — although, months on, many local gig workers still haven’t been brought in-house by the platforms they deliver for. And when the labor reform came into force, Glovo — another of EsTech’s founding companies — said it would only hire around 1,800 couriers of the ~10,000 active on its platform in its home market. (As of last October, the company hadn’t even hired that fractional amount yet.)
In just one example of synergies and aligned interests within EsTech’s club of scale-ups, another of the founding companies, the digital temping agency Jobandtalent, has seen its business valuation soar over the past decade — hitting $2.35 billion last December when it closed a $500 million Series E — exactly on rising demand for what it bills as a workforce-as-a-service platform that essentially offers a fresh legal workaround for high growth platforms like Glovo which want to keep scaling an on-demand delivery business without having to directly employ thousands of couriers as Spain’s labor reform intends.
The European Union also recently presented a platform worker reform — saying at the end of last year that it would establish a framework to tackle bogus self employment. The final shape of that pan-EU regulation is still pending the bloc’s co-legislative process so the opportunity for lobbying to influence the detail remains live.
In Brussels, other major pieces of digital regulation are being fast slotted into place too, with political agreement on an ex ante reform of the bloc’s competition regime (aka, the DMA, which will apply only to the very largest tech giants) recently secured via EU trilogues — and a broader update of the bloc’s ecommerce rules (aka, the DSA) now going through this three-way negotiation process.
The final shape of the DSA will certainly impact how Spain’s scale-ups operate in the future. While the DMA could bolster the chances of European tech giants being able to compete against global (i.e. mostly U.S.) Big Tech giants at the pan-EU level.
Albeit, any one of these Spanish scale-ups could — in theory — grow big enough to, one day, end up designed a gatekeeper themselves — and face being subject to the DMA’s fixed regime of operational ‘dos and don’ts’. Which introduces a new type of cap that scale-ups and their investors may need to consider.
“At the end, the EU has a lot to say in this economy,” agrees Szpilka, adding: “Of course we are talking to Spanish regulators and to the administration here in Spain but EU will be a focus for sure as most of the important things that are coming — Digital Markets Act and other regulations around Digital Services Act — are in Europe.
“Sometimes we think that these regulations only affect the big guys in tech but it’s more frequent than we think that they are also affecting these scale up companies.”
Super scalers?
As more scale-ups join EsTech the opportunities to align their respective growth-focused agendas to better amplify shared interests to lawmakers will surely grow — although it’s less clear how successful the domestic bid to re-pitch high growth, high tech businesses to a sometimes sceptical Spanish public will be if socioeconomic divides persist.
It’s notable that the government chain-linked its announcement of a 10-year “entrepreneurial nation” strategy to a very public commitment that no part of Spanish society would be left behind in the scramble to digitally transform its economic model. (Or “an ironclad principle that we leave no one behind”, as prime minister Pedro Sanchez put at his Web Summit announcement in December 2020.)
So it is perhaps not so surprising that a handful of the largest, fastest growing Spanish scale-ups have responded, fairly quickly, to the government coming with a long term, socially inclusive digital strategy by organizing among themselves — with the goal of ensuring their own interests don’t get put on the backburner.
Ana Meiques, founder of the health tech scale-up Neuroelectrics and president of EsTech, says the group wants to make sure the needs of these “new kids on the block” businesses are heard by Spain’s institutions and policymakers, while simultaneously shouting about scale-up successes internationally to raise the country’s profile on the global stage.
“I’m spending most of my professional life in the US. There is no connection between ‘Es’ — Spain — and ‘tech’ so this is one of the things that we really want to shout about. We want to show to the world that there is high tech and amazing technology companies being born and growing from Spain,” she tells TechCrunch. “We really believe that the trade associations that exist today in Spain may not represent this new model.
“Some societies — like my American colleagues — are really good on the selling and speaking and marketing side. I think that in Spain we are quite the opposite. There’s a lot of value, there is a lot of interesting things happening and we don’t speak enough about it — so this is also a recognition from my point of view to those hidden heroes that go under the radar but they are doing extraordinary things.
“If you think of an example like Wallbox, they weren’t even created six years ago — they are 1,000 people today and they went into the Nasdaq. First Spanish company to go into the Nasdaq. They have factories in Texas and China and they are revolutionizing these new electric car plugs. This is a super clear example that we should be proud of. Born and created in Spain. So we want our society to understand that these things are happening here and we want to be part of that community and play the Champion’s League at the world level. We are as good as others so now is the moment to be proud of what’s happening already here.”
“These companies regardless of who is in their cap table or who are their investors or whether they are at the Nasdaq or in the national stock market, they are bringing thousands of jobs into the countries,” Meiques continues. “So I think that’s one of our biggest social and economical impacts. I think we really have the power, these kind of companies, to transform the economy and the people we employ are high level employees, people with engineering degrees, highly technological.”
She also points to the EU’s commitment, over ten years, to put €10 billion into investing in scale up companies across the bloc as an opportunity for EsTech to lean out towards regional policies as well as inwards to make the case for disruptive business models locally.
“In these kind of associations you need to work both at local and global levels,” she adds. “We need to attract talent — which of course will be from Spain but it will be from all over the world because the war of this decade is going to be on talent.
“The other thing that we need is investment. Here the legislators and the regulation has a lot to say to make also the process more streamlined for investors to help us scale up companies. All the tax incentives. It’s difficult, currently, to invest in Spain compared to other jurisdictions like the U.S.”
The startup law recently proposed by the government as part of its “Spain entrepreneurial nation strategy” contains a package of reform measures aimed at attracting more tech talent, such as through changes to the visa system and tax regime, as well as interventions focused on pulling in more investment.
But EsTech evidently wants to see more and deeper support — support that stretches with startups as they scale.
“There are interesting initiatives — like the newest Next Tech Fund that the government launched [last summer] particularly for deeptech companies in Spain — but we need many more of these,” says Szpilka, suggesting Spain has major strengths and growth potential in data startups, clean tech and health. Connectivity is another area she highlights for further growth.
“What makes us very unique is we have a very diverse culture in Spain and very entrepreneurial,” adds Meiques. “And that builds a different kind of view into the world — we’ve got this very perseverant, passionate, fighter character… So I think, as a culture, we have the ingredients of creativity and perseverance to be fantastic entrepreneurs. And on the science side I also believe there is a lot of strong universities and labs in Spain which are also under the radar.
“So there’s this combination and I think that maybe what we are lacking is ambition — and a belief that we can be a player.”
In the short term, the mission for EsTech is to scale itself by growing its membership. The group will need to add many more high growth tech businesses than its initial cohort of nine to turn up the volume on its claim to being the voice of scale-ups in Spain — so local founders’ appetites for agenda-setting ambition (or at least coordination) are set to be tested.
“We already know there are at least ten more [fast growing startups] that are pretty similar to the nine founder members so those will be the first ones we’ll be calling up,” says Meiques. “And then of course we expect as companies grow and scale and comply with the association that they will join us. So as Carina was saying the idea is to grow our contribution to the economic model and the GDP of the country. The more the merrier.”
The criteria for scale-ups to qualify to join EsTech includes being at least post-Series B or C in terms of funding stage; with a consolidated annual growth rate of more than 25%-50%; and an “international approach” — so doing business outside as well as inside Spain, per Szpilka, although the main base of the company’s operations or founders’ must be located in the country.
An acquisition of an EsTech scale-up by a foreign giant wouldn’t necessarily cancel membership — hence Glovo, which was recently acquired by Germany-based rival Delivery Hero, can still claim a place as a founding member as it retains its local HQ and extensive operations in Spain.
Powered by WPeMatico
