Spain's Startup Plan: A 10-Year Vision for Economic Growth

Spain's Ambitious Plan to Become an 'Entrepreneurial Nation'

Spain is actively preparing to implement new legislation designed to foster a thriving startup ecosystem. A comprehensive transformation plan has been revealed, aiming to establish the country as ‘Spain Entrepreneurial Nation’ by the year 2030.

Announcing the Startup Act

Prime Minister Pedro Sanchez announced the forthcoming Startup Act during the Web Summit in December. He also introduced a newly appointed high commissioner, responsible for orchestrating a nationwide economic shift towards entrepreneurship in collaboration with all relevant government ministries.

Strategic Objectives

The core objectives of this strategy encompass several key areas. These include increasing investment in startups, attracting and retaining skilled talent, facilitating scalability for growing businesses, and integrating innovation within the public sector to accelerate Spain’s digital advancement.

A Landmark Legislation

The Startup Act represents the first dedicated legal framework for the startup sector in Spain. It is designed to streamline the process of launching a business and offer tax benefits and incentives to attract foreign investment. This legislation is expected to be a significant milestone for the country’s entrepreneurial landscape.

Addressing Existing Challenges

Local founders frequently cite administrative burdens, tax complexities, and difficulties in fundraising as major obstacles. Cultural factors also play a role, with some startups lacking ambitious growth strategies, investors exhibiting risk aversion, and a degree of societal skepticism towards entrepreneurs. Spanish investors are particularly eager for administrative reforms and improved stock option schemes.

Insights from the High Commissioner

TechCrunch interviewed Francisco Polo, Spain’s high commissioner, to gain insights into the plan for expanding the startup ecosystem and identify the initial initiatives entrepreneurs can expect.

Coordinating a National Mission

“The high commissioner for Spain entrepreneurial nation is a new body operating within the presidency. This allows, for the first time, an institution to coordinate efforts across different ministries towards a single goal: establishing a national mission,” explains Polo. “This mission aims to transform Spain into the entrepreneurial nation with the greatest social impact in history.”

Key Areas of Focus

The commissioner’s role involves coordinating with all ministries and establishing internal objectives. These objectives are categorized as “impacts” – a collection of measures outlined in the Spain entrepreneurial nation strategy. Furthermore, the office focuses on building alliances and raising awareness about Spain’s commitment to becoming a leading entrepreneurial nation by 2030.

“Our job is to ensure everyone understands that Spain has made a firm decision to become an entrepreneurial nation that leaves no one behind,” Polo concluded.

• Key Goal: Transform Spain into a leading 'Entrepreneurial Nation' by 2030.
• Focus Areas: Investment, talent, scalability, and public sector innovation.
• Legislation: The Startup Act aims to simplify business creation and attract investment.

Building Upon Existing Successes in Spanish Entrepreneurship

While Spain may not currently experience the same volume of startup funding as nations like the U.K., France, or Germany, it demonstrably exceeds expectations regionally. Cities such as Barcelona and Madrid are consistently recognized as appealing locations for founders, largely due to comparatively lower operating costs and the allure of a Mediterranean lifestyle.

The concentrated urban environments within Spanish cities, coupled with significant youth unemployment rates and a culturally sociable atmosphere that readily adopts digital communication, create a favorable environment for consumer-focused, app-driven businesses. This potential for disruption has been evident throughout the last decade, particularly following the substantial economic impact of the 2008 financial crisis.

Several Spanish startups have garnered international recognition for their rapid growth and ambitious goals. These include companies like Badi, Cabify, Glovo, Jobandtalent, Red Points, Sherpa.ai, TravelPerk, Typeform, and Wallapop, among others.

Spain’s current coalition government is now actively seeking to bolster the startup landscape, aiming to stimulate a wider digital transformation of the economy and its production base. This initiative will be undertaken with a strong emphasis on social inclusivity, guided by the principle of ensuring no one is left behind, as stated by Sanchez in December.

Consequently, the policy measures developed by Sanchez’s government to support and expand the ecosystem—following extensive consultations with both public and private sector stakeholders—prioritize social impact. A key objective is to address existing disparities, including those related to territory, gender, socio-economic status, and generational differences, which could be amplified by a solely growth-focused approach to the digital sector.

“We represent a new generation within government. Our generation believes that fostering a new innovation or industrial-economic system necessitates a concurrent consideration of its social consequences,” explains Polo. “Therefore, inclusion policies are fundamental to our model. This strategy aims to bridge the gender gap, the territorial gap, the socio-economic gap, and the generational gap, ultimately establishing Spain as the entrepreneurial nation with the greatest social impact by 2030.”

Financial resources are being allocated to this endeavor. Spain will direct a portion of the “Next Generation EU” coronavirus recovery funds towards this “entrepreneurial” initiative.

“In 2021, we’ve designated over €1.5 billion to the primary measures we intend to implement. For 2023, this figure exceeds €4.5 billion for the remaining measures. Essentially, between 2021 and 2023, we will establish the foundations for Spain’s entrepreneurial nation,” Polo clarifies.

The implementation of this strategy will fall to the relevant government ministries, who will enact projects and legislation as required. Polo’s department will provide guidance and support throughout the process, effectively acting as a “startup-minded” facilitator.

The national strategy positions entrepreneurship and startup innovation as the driving force at the apex of a pyramid built upon existing sectors of the Spanish economy—serving as “the spearhead of the innovative system we aspire to create,” according to Polo. “Our focus extends beyond purely innovative entrepreneurship; we also aim to cultivate mutually beneficial relationships between this ecosystem and the established sectors that power the Spanish economy—hence our identification of ten key sectors representing over 60% of the GDP.”

The government intends to concentrate support within these specific sectors to enable them to benefit from collaboration with digital innovation. These sectors are: Industry; Tourism and culture; Mobility; Health; Construction and materials; Energy and ecological transition; Banking and finance; Digitalization and telecommunications; Agri-food; and Biotechnology.

“We recognized the need for prioritization and determined that focusing on sectors contributing 60% of Spain’s GDP provided a clear direction for accelerating the desired changes,” says Polo. “Our goal is to foster interaction between innovative entrepreneurship and these core sectors, allowing them to collaboratively address their respective challenges.

“For instance, consider investment—what if larger companies increased their investment in innovative entrepreneurship? This would accelerate progress. Or, what if startups and scale-ups collaborated with international companies to attract and retain talent? This would enhance our national competitiveness.

“The best illustration, in my view, is scaling up: What could be more advantageous than scaling up with the support of established giants? We already have a significant number of world-class international companies operating in various markets. Leveraging their knowledge and experience can expedite the maturation process for scale-ups. Numerous virtuous cycles can be generated, and we want to encourage engagement from all driving sectors, emphasizing that everyone has a role to play in realizing this vision.”

Digital Divides and Entrepreneurial Growth in Spain

The emergence of digital technologies can, paradoxically, create divisions within society. This has become particularly evident during recent global events, where access to the internet and fundamental computer skills have significantly impacted the educational opportunities of children learning remotely.

Therefore, the principle of fostering entrepreneurial growth through broad social inclusion is critically important. Achieving substantial industrial transformations, however, will require extensive retraining and upskilling initiatives to ensure workers of all ages can adapt and thrive.

A Long-Term Vision

The ten-year timeframe established for “Spain Entrepreneurial Nation” acknowledges that genuine inclusion is a process that demands sustained effort and time.

This long-term plan also aims to address frequent criticisms of Spanish politics being overly focused on short-term gains, as explained by Polo. He states that this initiative demonstrates the government’s commitment to addressing immediate concerns while simultaneously preparing Spain for future challenges.

Challenging Digital Developments

Over the past decade, Spain has developed a reputation for successfully challenging digital developments based on their societal impacts within European courts.

For example, in 2010, a Spanish citizen contested Google’s refusal to remove outdated information about him from its search index. This ultimately led to a 2014 ruling by Europe’s highest court, establishing what is commonly known as the “right to be forgotten”.

Similarly, Spanish taxi associations successfully challenged Uber’s attempts to circumvent regulations. A 2017 European court ruling classified Uber as a transport service, subjecting it to local urban transport laws rather than simply a technology platform.

Protests against Uber and Cabify have been frequent occurrences in Spain, with the taxi industry arguing that app-based rivals are not competing fairly and that existing laws are not adequately enforced.

While gig platforms often dismiss these protests as protectionist or anti-innovation, they have frequently lost legal challenges to the validity of their business models, as recently demonstrated by a U.K. Supreme Court decision regarding Uber’s classification of drivers.

A Strong Sense of Justice

The passionate and often vocal opposition demonstrated by segments of Spanish society when they perceive unfair consequences stemming from new technologies should not be underestimated. It suggests a strong awareness of what truly matters to the population.

This may also explain the government’s dedication to ensuring that no one in Spain is left behind as it implements a comprehensive package of startup-friendly policies.

Smart Regulation and Innovation

The entrepreneurial strategy includes a range of approximately 50 support measures, with a focus on “smart regulation”. It also proposes the creation of regulatory sandboxes, allowing for public testing of products without immediate regulatory compliance requirements.

Glovo co-founder Sacha Michaud enthusiastically supports the idea of sandboxing, believing it will foster innovation by removing regulatory obstacles during the testing phase. He suggests this approach, already successful in financial services, could be extended to various tech sectors.

Attracting investment and improving stock options to enhance the ability of local companies to compete for talent are also key priorities.

Michaud expresses support for the government’s entrepreneurial strategy and the Startup Act, while acknowledging that legislative processes will likely be lengthy.

Concerns Regarding Gig Platform Regulation

However, he voices concerns about the government’s plans to regulate gig platforms, arguing that last-mile delivery services are being unfairly targeted. This proposed reform, currently being developed by the Ministry of Labor, stems from recent legal challenges to platforms’ employment classifications of gig workers, including a loss for Glovo in the Spanish Supreme Court.

Michaud contends that the government’s focus on riders unfairly discriminates against other autonomous workers in logistics, services, and installations, potentially protecting established IBEX35 companies.

Ongoing Labor Law Reform

When questioned about the progress of labor law reform, Polo indicates that work is ongoing. He acknowledges having limited additional information beyond what is publicly available and through ongoing dialogues with companies, including gig platforms.

He emphasizes that the “ultimate goal” of the national transformation plan is “to generate more and better jobs”.

Polo states, “We are always inclined to try to foster the companies that generate these better and increasing new jobs.” He believes that gig companies understand this objective and are willing to adapt as the country evolves.

Social Protests and Freedom of Expression

Recent street protests in Barcelona, sparked by the imprisonment of rapper Pablo Hasél for social media posts criticizing police brutality, highlight ongoing social tensions. Spanish courts deemed these posts to have violated criminal code related to glorifying terrorism.

Spain’s laws in this area have been widely criticized as draconian and disproportionate, including by Amnesty International, which labeled Hasél’s imprisonment an excessive restriction on freedom of expression.

Polo dismisses any perceived contradiction between Spain’s efforts to modernize and its enforcement of laws regarding online expression. He asserts that Spain is a robust democracy with a rule of law, and that Hasél’s imprisonment was justified due to his promotion of terrorism.

He reiterates a recent government statement indicating plans to reform the penal code, acknowledging that times have changed. He emphasizes that these reforms are unrelated to the recent events.

Shifting National Perspectives

Regarding the broader challenge of cultural transformation – specifically, fostering a more entrepreneurial national mindset – Polo conveys assurance in his undertaking. He emphasizes the importance of ensuring individuals grasp the overarching vision and their role within it, perceiving active support for their advancement.

“I am confident in this aspect, particularly drawing from my experience before entering politics,” he shares with TechCrunch. “I’ve previously assisted numerous individuals in recognizing capabilities they didn’t believe they possessed. My understanding is that initiating cultural shifts requires establishing a clear vision for the future.”

“Therefore, we consistently assert that by 2030, Spain will emerge as an entrepreneurial nation with unparalleled social impact, supported by a comprehensive plan. This plan involves empowering entrepreneurs to lead a new innovation paradigm, leveraging key economic sectors to build upon Spain’s existing international economic strengths. We aim to ensure everyone benefits from this plan, incorporating inclusion policies to bridge gender, regional, socio-economic, and generational divides.

“To effect cultural change, it’s essential to unite people around a shared objective exceeding individual aspirations. We believe the Spain Entrepreneurial Nation Strategy represents a crucial initial step. Consequently – and this is a brief aside – we consider the [startup] law to be as vital as this overarching strategy.”

This startup law – soon to be presented as a draft (an anteproyecto de ley) for Council of Ministers approval, followed by parliamentary debate and potential amendments – is the first legislative component aligned with the broader strategy and is anticipated to be among its earliest achievements.

The timeline for Spain’s new startup law remains uncertain. (The nation’s political landscape has been marked by a lack of consensus for years; Sanchez’s “progressive coalition” formed only after two unsuccessful attempts by his Spanish Socialist Workers’ Party (PSOE) to secure a full majority.)

“Predicting the timeframe is difficult, as legislation varies in its approval process,” Polo explains. “Our priority is ensuring the startup law undergoes a thorough process – achieving broad agreement to establish robust and enduring legislation for years to come.”

This “long-awaited” regulation, as Polo describes it, addresses several key issues – including the first official “definition” of a startup to differentiate it from other company types, and measures to aid startups in attracting and retaining talent.

“We must revise stock options to enhance our competitiveness in the international talent market,” he states, aiming to match the incentives offered by countries like the U.K., France, and Germany.

“Visa reforms are also necessary to attract and retain talent,” he continues. “The president also discussed incentivizing investment and providing tax benefits – recognizing the need for greater incentives for business angels. We envision a more streamlined and logical investment system at the pre-seed and seed stages, alongside numerous other initiatives – the Ministry of Economy will finalize the text for Council of Ministers review in the coming weeks.”

Polo cautions that the law won’t immediately resolve all concerns of Spanish founders and investors. He acknowledges it will be a long-term endeavor, not a quick fix.

“That’s why we have a strategy,” he stresses. “I recognize the interest in the startup law, but I consistently emphasize that the Spain Entrepreneurial Nation Strategy is equally important. It addresses the fundamental challenges facing our ecosystem and identifies four key areas for improvement.”

“First, investment. We need to accelerate the pace of investment maturity in Spain. Numbers have grown annually and are promising, but we aim to accelerate this growth to close the gap with neighbors like Germany and France, which have 4 to 5 times our investment levels. Our goal is for Spain to lead investment in innovative entrepreneurship in mainland Europe within ten years.

“Second, talent. Building an entrepreneurial nation requires leveraging all available talent – developing domestic skills, attracting international expertise, and retaining that expertise. This is why we’re considering various tools within the startup law.

“The third challenge is scaling. In Spain, many companies equate success with acquisition. While legitimate, we need a greater percentage of companies focused on growth, expansion, and acquiring other startups globally. This will foster the development of large, high-quality employers in Spain by 2030 – the ultimate objective of the strategy.

“And the fourth goal: Transforming public administration into an entrepreneurial administration. This means greater agility, setting a positive example, and the public sector making investments that even risk-averse venture capital funds might hesitate to undertake. That’s the role of the public sector – to envision and provide the resources to achieve ambitious goals. These challenges are outlined in the strategy, which will be addressed through 50 different measures within the Spain Entrepreneurial Nation Strategy, not just one law.”

The broader entrepreneurial strategy outlines nine priority actions to be developed over the next two years through specific projects, which Polo anticipates will be expedited with EU coronavirus recovery funds.

He highlights two key projects: one to establish a network connecting entrepreneurs, policymakers, and the wider ecosystem, and another to link incubators and accelerators, creating a national support network for founders – both inspired by successful models in other European countries.

“One of these projects, the Oficina Nacional de Emprendimiento, is heavily inspired by La French Tech in France. We aim to create a one-stop shop for entrepreneurs, investors, and the ecosystem, providing access to collaboration opportunities between the central government, regions, and local councils to enhance entrepreneurship in their respective areas,” Polo explains.

“We also have Renace – an acronym for Red Nacional de Centros de Emprendimiento – and we’ve drawn inspiration from Portugal’s successful network. Our goal is to connect Spain’s incubators, accelerators, and venture builders, adding value with a particular focus on addressing existing gaps.

“With Renace, we aim to bridge the territorial gap. It will be beneficial to connect engineers in Cáceres with a company based in Barcelona, or designers from the Basque Country with a startup in Malaga. Renace can help integrate the country, fostering a truly national entrepreneurial spirit, rather than just focusing on individual cities. Spain has the potential to achieve this, and there are many other issues to address.”

France invests billions annually in R&D and direct support for the digital sector. While EU funding won’t allow Spain to match the “ecosystem” spending of wealthier, northern European nations, Polo emphasizes maximizing existing resources – with the Renace project focusing on linking existing incubators/accelerators and adding “a new layer of value” through public-private partnerships.

“The Spain Entrepreneurial Strategy isn’t a plan requiring billions in funding,” he says. “Instead, it’s a robust plan to create a vision and integrate existing assets – leveraging the country’s strengths to work together intelligently and maximize our potential.”

Polo also asserts that Spain already excels in startup clusters, standing alongside Germany as the only European country with more than one city ranked among the top 10 “most entrepreneurial”. He notes Spain’s rising prominence in these rankings as more of its cities gain recognition in the “global competition for innovative entrepreneurship”.

“This indicates that numerous cities and regions across Spain are eager to become hubs for entrepreneurial activity. We can achieve even greater success,” he suggests, highlighting Renace’s potential for social inclusion.

“With Renace, we aim to create this network and add value – providing services, fostering public-private partnerships, and leveraging the unique strengths of each region. For example, a Barcelona-based company could tap into a pool of engineers in Cáceres. Lower salaries in Cáceres – while still competitive – could reduce costs for the Barcelona company. Simultaneously, engineers in Cáceres who prefer to remain in their region, with their families and life projects, can find opportunities. This exemplifies how we can bridge the territorial gap and build a truly integrated entrepreneurial nation.”

“The ultimate goal of the Spain Entrepreneurial Nation Strategy is to safeguard Spain against economic crises, preventing the devastating job losses experienced in 2008, particularly among young people, immigrants, and those over 50. We aim to avoid repeating that scenario, necessitating a fundamental shift in the country’s productive base,” he continues.

“That’s why we’re developing a strategy to empower the innovative entrepreneurship sector to lead a new economic model for Spain, leveraging key economic drivers outlined in the strategy. And, crucially, this is a 21st-century strategy designed by a new generation of politicians responding to the ambitions of future generations – one that prioritizes the social impact of this phenomenon, incorporating inclusion policies.”

Polo refrains from naming specific promising startups, citing “tonnes of super innovative companies” poised to disrupt traditional business in Spain and internationally – from battery charging solutions to retail innovations. (“Different kinds of innovations that people can’t imagine,” he summarizes.)

“Our priority is to promote awareness of these companies and demonstrate to both Spanish and international audiences that we possess the resources to succeed as a nation and become an entrepreneurial nation with the greatest social impact in history,” he adds, acknowledging that a significant part of his role is “to inform the world that we are here”.