- being acquired no longer the only exit-option?

"Spain + unicorn", this site gets a lot of traffic from people searching for that combination, maybe because they are unsure if Spanish unicorns indeed exist. Or, maybe because they have understood that Spain's tech startup and innovation ecosystem is now increasingly generating these types of elevated and magical valuations, compared to only a decade ago.

As we all know, the unicorn title is the reward for obtaining a valuation tag of over $1 billion. A term first coined by a venture capitalist in Palo Alto, California. For Spanish startup founders however, these valuations have been virtually impossible to obtain because of the lack of substantial, risk-willing capital from the home market to nurture unicorn ambitions. Forcing them to make every euro count, company building in the most cost-efficient way.

Foreign corporate acquisition only exit-option

The exit options for highly valued tech-companies made-in-Spain are changing. Not that long time ago, Glovo, one of Spain's most known, actual unicorns, with clear plans to become publicly traded in the next two years, had no choice but to try to raise expansion capital in London and other go-to-places for hefty venture cash.

Co-founder Oscar Pierre told the audience at Slush (Nov, 2019), that it wasn't exactly a smooth ride for them to raise series B money. They in fact got big NO's from 116 investors until they finally found interest from Japanese Rakuten, by then "only weeks from having to shut down".

During the last years, I have listened to many podcasts* in Spanish where seasoned Spanish founders have talked openly and generously about all the struggles and near-death experiences along their journeys, up until successfully being bought by a foreign corporate.

Though I sense a lack of choice, on the founders' part, of being able to have told the suitor: "No thank you, we will keep working and build the company". It seems that they in fact had no option but to sell, for different reasons, investor preferences being an obvious one.

By being bought by global, often foreign, corporates, the founders behind these Spanish tech companies have greatly been able to serve and motivate the Spanish tech founders starting up after them. Many of the first -now well established- locally based in Spain VC´s were in fact started by these known-from-being-acquired-founders, bringing a lot more, much needed venture cash into the ecosystem.

It just appears to me that many of these tech companies, selling to giants like Schibsted, Amazon, eBay, Telefonica and AT&T, could have grown much older and stronger, and been able to go public with an IPO, had there only been more investors willing to keep nurturing, as opposed to acquire and sometimes (all too often) shut down due to "failure to integrate".

*I'm hesitant to put examples here as podcasts are supposed to be a safe way to share with the community, without having to weigh every word with the risk of being misquoted.

International capital to the rescue

During recent years, the conditions have significantly changed. International investors, especially from the US and Northern Europe, have come to the "unicorn rescue" and are both able and willing to feed the Spanish tech startups showing signs of global ambitions, giving them a chance to keep building, to become solid scaleups, while still based in Spain.

The numbers for Q1, 2021 speak for themselves, setting a new record for foreign investment: €683.7M, accounting for 63.3% of total investment (national investors 36,7%).

And this time around these international investors make sure to nurture these "magic babies" right from the start as they join forces with a growing amount of based-in-Spain venture capitalists to support Spanish tech founder at seed and early-stage phases. Confirmed in the Fundación Innovación Bankinter's report for Q1 2021:

"In addition to its participation in many of the quarter's mega-waves, it is worth noting an increase in the presence of foreign investors in earlier rounds, with a presence in 10 operations of less than €5M, (5 operations of less than €1M, which is certainly atypical)."

6 Spanish unicorns in the making

GP Bullhound is one of these international investors, with presence in Madrid and HQ in London. When looking at 19 countries in Europe including UK and Israel, they, together with their equally well-known peers Accel, Balderton Capital, Idinvest Partners, Partech and Northzone, dubbed 6 Spanish tech companies as unicorns in the making. The weighed-in factors are growth, potential growth, raised capital, increase of employees and positive impact on society. Writes Spanish newspaper Cinco Días:

"Six startups, Codigames, Jobandtalent, Paack, Playtomic, RavenPack and Wallapop, have positioned themselves as the most likely companies to become the next Spanish unicorns, (..), according to the Viva Technology list."

Looking at some of the recent milestones and moments of glory achieved by these 6, the line-up seems right on target. In March 2021, the Jobandtalent employment platform, raised €100 million from the Japanese giant Softbank, an impressive feat all on its own and an obvious stamp for a future valuation of the $1 billion kind.

Yanni Pipilis, managing partner at SoftBank Investment Advisers, said in a statement:

“The company (Jobandtalent) has developed a data-driven platform that has a track record of providing high fulfillment and low attrition staffing for businesses with temporary roles to fill, while securing income stability and benefits for workers. We are incredibly excited to partner with Juan, Felipe and the team on the next phase of the company’s growth.”

There it is, the positive impact on society-proof that is getting more investor-attention post pandemic outbreak, as this is now a metric demanded by most limited partners.

As for Wallapop, they raised €157 million, (Feb 2021) leading to a valuation of €690 million. With this kind of monetary confidence and a CEO with a track record from American giant eBay, it is not surprising that throwing in the proverbial towel, in exchange for an exist, is not being considered.

“Not only did we not have to make any adjustments during 2020, but our revenues as I said increased by 50%. We are a strong and growing company, with a promising future, and being absorbed by another company is not in our plans”, says Rob Cassedy, CEO of Wallapop in an interview with Cinco Días. Boom. Those are the words of a future unicorn right there.

Further support for these “rainbowy” candidates is the Series C round of $53 million secured by Paack (Nov 2020). The words of a happy and proud international investor on LinkedIn:

"Heading-up the round, which marks the largest growth capital investment of its kind in Spain this year, the Bregal team are thrilled to partner with founders Fernando Benito, Xavier Rosales and Suraj Shirvankar, together with their ambitious, visionary management team. The investment is set to turbo charge growth, further enhance the software platform, and expand delivery coverage across Spain and Europe."

Covering the Growth factor, it became clear to me (wasn't obvious at first) why Codigames is part of these 6 nominees. By reading this success case in Spanish, it sorted it out for me:

"After seven years of working hard without making any noise, like a laborious ant, Codigames recently announced that, in a single year, during the financial year 2019, they had multiplied turnover by 40 , from slightly more than 1 million euros to 44 million. For 2020 it aims to double results to reach 80 million euros. And, moreover, they have bought back the company from its investors." (Edited to be comprehensible in English)

In May 2019 the mobile game Idle Supermarket Tycoon got a top 1 placement in the US in the genre strategy games, beating mobile games like Clash Royale and Clash of Clans. One hit wonder? These projections and glowing nomination definitely suggest otherwise.

More undetected unicorns in less known tech hubs?

2 of these named startups stick out more than the others in terms of regional location and the lack of international media coverage. RavenPack is based in Malaga and Codigames is based in Valencia. The other 4 are based in the leading tech hubs Madrid and Barcelona.

This got me thinking. Are there many more Spanish startups with unicorn potential in regions like Bilbao, Valencia and Malaga? Overall, compared to their European counterparts, my suspicion is that many Spanish tech startups of this caliber go undetected and/or are probably hugely undervalued, hence foreign investment breaking new records every quarter.

“Our expectation is that Spain will continue to gain weight in the coming years because of the quality of the projects we are seeing."

"In addition, we have representatives in the most relevant digital sectors, such as software, marketplace and gaming, with differential business models and global ambition,” says Miguel Kindelán, head of GP Bullhound in Spain.

Maybe these confirmations from international investors can evoke confidence and motivate more Spanish tech startups to think twice before selling, and instead strive to grow in Spain.

Adding that, being acquired while keeping all the jobs and the HQ in Spain, seems to have been made possible in the acquisition of Freepik, Malaga by EQT. Nothing is black and white of course. Personally I just think it would be exciting with an IPO done by one of these 6, or by other Spanish tech stars, unicorn status or not.

--> I would love for you to share your thoughts or opinions in the comment section.

By Caroline Lagergren, founder of Expand To Spain