Advertisement

Working in Spain For Members

Which startups succeed in Spain (and which ones fail)?

The Local Spain
The Local Spain - [email protected]
Which startups succeed in Spain (and which ones fail)?
When it comes to startups specifically, nine out ten startups don’t make it past the three-year mark in Spain. Photo: Justin Sullivan/Getty Images via AFP

Foreigners thinking of setting up a startup in Spain should keep in mind that one in five new companies here doesn't last longer than 12 months. Here's what the data available says about the businesses that find success and those that don't.

Advertisement

There are various interpretations about the differences between a startup and a company but, broadly speaking, a startup is a company in its early stages that’s looking for an attractive and innovative business model, whereas a company already has a pre-existing business model and is focused on executing it successfully.

According to a study by the Spanish Tech Ecosystem, Spain has 10,500 startups and more than 300 scaleups, innovative and more established companies that are already growing.

The introduction of Spain's new Startups Law in early 2023 promises to make the country far more attractive for foreign entrepreneurs, investors and digital nomads.

READ MORE: Spain’s new law for startups and digital nomads - 15 things you need to know

Advertisement

But the road to success isn’t just guaranteed by less bureaucracy, tax cuts and special visas.

Twenty-three percent of new companies set up in Spain don’t survive past a year, according to the country’s National Statistics Institute (INE). 

Of those that do make it past the first 12 months, 45 percent are not in business after five years. 

When it comes to startups specifically, nine out ten startups don’t make it past the three-year mark, according to the Map of Entrepreneurship drafted by Spain Startups, but they do grow at faster rates than SMEs. 

Although these figures may not seem very promising for anyone considering setting up shop in Spain, the Iberian nation isn’t last on the list when it comes to the longevity of startups in the EU.

Lithuania, Denmark, Latvia, Estonia, Malta and Portugal all have lower rates of success than Spain, according to Eurostat data. 

Spain also lost 311,000 SMEs in 2020 as a result of the Covid-19 pandemic, so authorities are now keen to breathe new life into all types of sectors with foreign talent drawn in by the new startups legislation. 

Spain is also the fifth country with the most so-called ‘unicorns’ companies with a market value above €1 billion.

READ ALSO: What do the experts think of Spain’ new startups law?

Advertisement

Which startups and companies find the most success in Spain?

Insurance companies, reinsurance groups and pension funds are those with the companies with the highest survival rate, as 82.6 percent are still operational in Spain five years after their creation, INE data reveals. 

They’re followed by new companies involved in the supply of electricity, gas and air conditioning (80 percent survival) and those in the tobacco industry (75 percent).

Companies that offer financial services, assistance in residential matters, legal and accounting companies, pharmaceutical manufacturers and those that deal with the extraction of metals and minerals also have a good life expectancy in Spain.

That’s not to say that if you have a business idea in a different sector or that your startup is completely innovative you should get discouraged. 

According to industry specialists Meetwork, among the 50 biggest growing startups in Spain in 2022 are a travel management company, a copyright protection business, a language app for kids, a digital platform for freight transport, a vegetable-based meat manufacturer and other businesses from a wide variety of sectors.

The same applies to most highly valued startups in recent years in Spain; many are companies focused on innovation or the improvement of pre-existing ideas.

Self-employment and entrepreneurship website autonomosyemprendedor.es reported that the ten Spanish startups which have found the most success in Spain and abroad are Brooklyn Fitboxing International (gyms), Freepik (image downloads), Bigbuy (dropshipping), El Tenedor (restaurant bookings), Heura Foods (vegan food), eDreams (flight and holiday bookings), Clicars (online vehicle sales), Mr. Wonderful (an ‘online store for happy products’), Cabify (e-hailing) and Glovo (food delivery). 

And it’s not as if a startup that’s set up in Spain should necessarily have to cater to a Spain-specific market - fintech, tourism, logistics, mobility, cybersecurity, education, foodtech, energy, cryptocurrencies, gaming, employment, retail or health are all sectors with signs of growth potential in Spain and around the world.

Advertisement

Which companies and startups find less success in Spain?

According to INE, among the companies that struggle to survive past the five-year mark in Spain are leather and shoe manufacturers (20 percent success rate), maritime industry businesses (29.8 percent success rate) clothing companies (33.2 percent) and entertainment and artistic businesses (33.7 percent). 

Civil engineering companies are the ones that struggle the most to make it past the first year (30.2 percent survival rate), followed by those involved in arts and entertainment.  

The life expectancy of new companies in Spain has worsened since the pandemic, according to the latest report by Spanish business database Iberinform, who wrote: "The critical moment for any business project usually occurs after the third year, since the initial injection of capital allows the vast majority to complete the first 24 months of life without problems.”

Interestingly, during the pandemic, the sectors which saw the biggest increase in earnings in Spain but also the most businesses closing down were hospitality and retail, which together with tourism are the pillars of Spain’s service-based economy.

Iberinform’s general director Ignacio Jiménez told El Mundo newspaper that “the incomplete and uneven recovery that we are going through, marked by new challenges such as price escalations and supply problems" directly affect business survival in Spain.

"Companies, especially SMEs, which have less capacity to transfer these cost increases to prices are suffering a reduction in margins and loss of profitability,” Spain’s confederation of SMEs reported. 

READ ALSO: What will Spain's income requirement for the new digital nomad visa be?

More

Comments

Join the conversation in our comments section below. Share your own views and experience and if you have a question or suggestion for our journalists then email us at [email protected].
Please keep comments civil, constructive and on topic – and make sure to read our terms of use before getting involved.

Please log in to leave a comment.

See Also