European Entrepreneurship
The third company over the €100m in annual sales mark is Destinia, founded in 2001 by Australian Ian Webber and current CEO Amuda Goueli. With 120 employees at offices in Madrid and Cairo, the plan is to generate 70% of sales outside of Spain with China and the Middle East seen as the new markets with the most potential.
NASDAQ
Even though China has now overtaken it as the leading provider of firms from outside of the US on the NASDAQ stock exchange, Israel has a quite astonishing record for a country of only seven million people. Since the 1980, some 250 firms have listed there and there are upwards of 60 currently listed, including two on the NASDAQ 100. Nothing attracts venture capital to a country like exits and while regulations like Sarbanes–Oxley have made it less attractive to seek a listing, this is where Silicon Valley continues to see as the eventual goal for any startup. Spain has a poor record when it comes to the NASDAQ. Grifols, based in Barcelona, who are the third largest global producer of biological drugs from blood plasma have a dual listing on the NASDAQ and the IBEX35. As a family run company, founded in 1940, with a home monopoly, they are very typical of large businesses in Spain. Telvent, a maker of IT infrastructure solutions, which had a NASDAQ listing from 2004 until it was acquired by Schneider Electric in 2011, has a very similar profile. However, Spain has never had an organic, fast growth, “garage to NASDAQ” story, which for the twelfth largest country in the world by GDP is underwhelming.
Admittedly, this is a European wide problem. Research from the Bruegel think-tank found that Europe has only three big new listed firms founded between 1975 and 2007. Only one company in the eurozone, Spain’s Inditex, has made it to the FT Global 500 since 1996. This in a nutshell is Europe´s unemployment problem, best encapsulated by Schramms´s Law: “the single most important contributor
Spain has never had an organic, fast growth, “garage to
NASDAQ” story, which for the twelfth largest country in the world by GDP is underwhelming.
to a nation’s economic growth is the number of startups that grow to a billion dollars in revenue within 20 years.” Politicians remain suspicious of unleashing internet startups, even calling them job destroyers. It’s true that while a company like Facebook is not a massive employer, the ecosystem they create enables many other jobs to be created.
So are there ‘NASDAQable’ companies on the way? The place to look should be the Mercado Alternativo Bursátil (MAB), an alternative stock market for growth companies modelled on London’s Aim junior board. Inaugurated in 2008, there are currently 22 companies listed there. Some are well known brands such as the Imaginarium chain of children´s shops and Zinkia, the company behind Pocoyo, the children´s TV character. The star performer is wireless Smart City provider Gowex, whose shares have risen over 350% in three years. CEO Jenaro García is openly talking about a NASDAQ listing within two years.
Also on the way to the
NASDAQ is Barcelona based Softonic, a software download portal. Earlier this year,
the Swiss fund Partners
Group paid €82.5m for a 30% stake valuing the shares of Tomás Diago, the company’s 38 year old founder, at between 55 and 60 million Euros.
This ranked as the third biggest deal in Spanish internet history after the acquisition of
ya.com thirteen years ago by Deutsche Telekom for €550m and the purchase of eDreams by Permira for €250m in 2010.
Six Types of Startups
In a September 2001 blogpost titled “Why Governments Don’t Get Startups” Steve Blank argues that an underrated issue is that the words “Entrepreneur” and “Startup” mean different things to different people. He lists six types of startups, all of which require very different types of ecosystems. These range from a lifestyle startup, something to just pay the bills to a scalable startup, which he calls “the ultimate capitalist exercise.” The issue in Spain is that while some businesses are comparing themselves to Google, in reality they are closer than they want to admit to Dave’s Surf Shop. To be fair, the majority are nearest to another of Steve Blank´s six types; that of a “buyable” startup. Their goal is not to disrupt and replace the incumbent but to be acquired.
With Dragons Den (“Guarida de
Dragones”) due to begin in September on TVE and another channel Telecinco looking for contestants for ‘La Incubadora,’ a reality show based on startup accelerators, entrepreneurship has never been more visible. Unfortunately though it´s the wrong type. To attract capital and talent from overseas what Spain needs are more high profile exits. Instead of congratulating startups with €2m, €3m and €4m in annual sales, the bar for achievement needs to be set nearer €50m or €100m. It won´t be easy and not everyone will get there, but at least that is what they should be trying to do.
Joe Haslam was born in Ireland but now lives in Madrid. He is an Associate Professor at the IE Business School, Chairman of Hot Hotels as well as a mentor in the Wayra, Lisbon Challenge and IE Venture Lab Accelerators. You can follow him at @joehas
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