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WORKING IN SPAIN

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

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.

spain success startups
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

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

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?

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.

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?

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WORKING IN SPAIN

How to understand your payslip in Spain

If you’re an employee for a company in Spain, each month you should receive a payslip from your employer, detailing how much you earn, deductions and plenty more. Here's how to read and understand your Spanish payslip properly.

How to understand your payslip in Spain

It can sometimes be confusing working for a company in another country. Even if you work in English, your payslip, or nómina as it’s called here, can be hard to understand.  

According to the salary platform EMT, more than 50 percent of people in Spain don’t know how to read everything on their payslip and don’t fully understand all the numbers on there.

It’s important to be able to understand everything about the amount you’re getting paid and what’s being deducted from that amount each month so that you can stay on top of your finances. Read on for our handy guide to help you out. 

There are essentially three sections to your payslip, which include the header, the middle section detailing your earnings and deductions and the footer, where you’ll see the rates applied for your calculations.

Here’s an example of what a nómina or Spanish payslip usually looks like. 

Header

According to Spanish law, each payslip must have a header that identifies both the worker and the company. It should include:

Information about the company
Name of the company
Registered office of the company
Tax Identification Code (NIF)
Social Security Registration number

Information about you (the employee)
Full name
Your DNI, NIE or TIE
Your social security number
Position with the company
Professional group
Seniority level
Date you started working for the company

Middle section 

Settlement period or Periodo de liquidación
A payslip is in fact similar to an invoice, so it should include a settlement period where it states the number of days worked for the payment being received. This is typically one month or 30 working days.

Revenues and expenses/accruals or Devengos
The revenues and expenses part of your payslip will state the gross amount of income that you have earned for a particular period worked. It will include your base salary, as well as bonuses and extra non-salary payments that are not taxed as part of your salary. These include compensation or payments for redundancy and must not exceed 30 percent of your salary payments.

Base salary or Salario base
Your base salary is the minimum amount you get each month. This will be at least €1,000 which is the minimum wage or SMI set for 2022, if you are working a full day of at least 40 hours per week.

This section will also include:

Supplements or Plus Convenio
This will detail any extra amounts received in relation to your work, such as extra shifts covered, working overtime and payments for extra training.

Extraordinary bonuses or Gratificaciones extraordinarias
If you work in sales, you may regularly get bonuses, but you may also get extra ones at Christmas for example. You may actually receive 14 payments but will receive them 12 times a year or once per month.

Remuneration
This part refers to extra payments to which income tax can be applied such as payments for private medical insurance, petrol for a company car or restaurant coupons to use when you’re working away.

Expenses
This refers the expenses you have incurred in order to carry out your job. It could be the cost of material or transportation if these have previously been agreed upon with your employer.

Social security and benefits or Prestaciones e indemnizaciones de la Seguridad Social
There may also be added benefits for suspensions or dismissals, as well as expenses assumed by the company, such as disability or unemployment benefits.

At the end of all of this, with everything added together, you will see your total gross salary. It’s important to remember though that this isn’t the amount you will get in your bank account each month as there will be several deductions to take into account first.

Deductions or Deducciones

This section of your payslip includes all amounts taken away from your total gross salary in relation to income tax and social security payments. These will include:

Social security or Seguridad Social

Your social security covers for healthcare, sick pay, accidents at work, maternity or paternity pay or temporary disability, and although your employer pays this, you will be responsible for paying 4.70 percent, which will be taken away from your total.

Unemployment or Desempleo
This is the amount that will cover you for potential unemployment or redundancy should the situation arise and varies according to the type of contract you have. It could be anything from 1.55 percent for a fixed-term contract to 1.60 percent for a full-time contract.

Overtime due to force majeure or Horas extraordinarias por fuerza mayor
This will include any extra hours that you worked involuntarily.

Overtime without force majeure or Horas extraordinarias sin fuerza mayor
These are the extra hours you worked voluntarily and can incur withholdings up to 4.7 percent.

Personal income tax or Impuesto sobre la renta de la personas físicas

Your income tax or IRPF will also be taken away from your total gross salary before it appears in your bank account. The percentage that you are charged will vary depending on how much you earn as well as your personal situation, your family (including if you’re married and have children) and the type of contract you have.

Salary advances or Salario Anticipo
If you are allowed to get any advances on your salary, this will also be reflected in your payslip and deducted here.

Value of products you received
This refers to the products and services you may get from your company received as wages, which are also subject to income tax.  

Other deductions
Other deductions on your income tax may include union payments or loan repayments for example.

After all of this is calculated, you will be able to know the actual amount that you should finally receive. If you need to question anything, you can refer to the footer section, which will state the specific rates applied for your calculations

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