THE SPANISH STARTUP

ECOSYSTEM

STARTUPS IN SPAIN More than 20 years creating tech companies

Source: Novobrief, Vitamina K

STARTUPS IN SPAIN Spain: The digital sector continues to grow

• Digital sector to account for 3.1% of Spain’s GDP in 2016, €34.9 billion

• Telco-driven sector

• 2,638 startups (+26% YoY)

• 3 main hubs:

• Barcelona: 26% of all startups, +16% YoY

• Madrid: 27%, +25%

• Valencia: 14%, +32%

Source: Boston Consulting Group, McKinsey, Startupxplore

Barcelona and Spain’s climate, lifestyle, talent pool, low cost structure and other factures have helped it attract significant foreign talent (founders, employees and investors)

STARTUPS IN SPAIN Spain: attracting talent from abroad

Alex Puregger (Fon)

Marek Fodor (Atrapalo, Kantox)

Philippe Gelis (Kantox)

Dominique Leca (Stuart)

Ben Askew-Renaut (Packlink)

Sacha Michaud (Glovo)

Mauricio Prieto (eDreams)

David Okuniev (Typeform)

Gustavo GBrusilovsky (BuyVIP)

Conor O’Connor (Hot Hotels)

STARTUPS IN SPAIN Spain: competitive workforce, hard to find

Average tech salary

San Francisco

New York

UK

Europe

Ireland

Sweden

Germany

France

Italy

US$0 US$60000 US$120000

Source: AngelList

SPAIN

Number of developers

San Francisco

London

Paris

Moscow

Istanbul

Berlin

Stockholm

Lisbon

Oslo

0 45,000 90,000

MADRID

• Less expensive to build companies

• Healthy developer density

• BUT • Technical talent at

big firms

• Hard for startups to attract that talent

• Lack of big nation-wide success

Amazon (Adam Sedó, PR Manager ): “Tech

talent in Spain is abundant, but most

importantly available”Source: Atomico, Stackoverflow

Source: Novobrief

2015, RECORD YEAR €500m+ raised by Spanish startups for the 1st time ever

Investment received by Spanish startups

0

150

300

450

600

2013 2014 2015

DealsInvestment (m€) 535

286

222

MEGA ROUNDS 13 rounds bigger than €10m

2013

2014

2015

2X €10m+ rounds in 2015 vs. 2013 and 2014 combined

HEALTHY MIX OF INVESTOR TYPES VCs and business angels as key ecosystem drivers

Source: Venture Watch

Distribution of deals by investor type (Q1-3 2015 vs. 2014)

0 %

25 %

50 %

75 %

100 %

2014 2015

27 %

15 %

43 %

59 %

Venture Capital Business Angel BA Network Public fundingCorporation Corporate VC Crowdfunding Accelerator

(69)

(17)

(37)

(59)

WHERE DOES THE MONEY GO? An ecommerce (or mobile classifieds) country

Source: Venture Watch

Top investment sectors 2013-15 (number of deals)

Ecommerce

Marketing

Lifestyle

Fintech

Travel

Communications

Education

Gaming

Data

Food

0 17.5 35 52.5 70

Sectors that have received most investment volume 2013-15 (M€)

Ecommerce

Fintech

eGovernance

Security

Marketing

Communications

Employment

Gaming

Data

Lifestyle

€0 €100 €200 €300 €400

FOREIGN INVESTORS NOT ONLY COME FOR THE SUN Growth capital mostly provided by international investors

• Most ever: 44 VCs

• Fueling growth: 73% of all capital invested in 2015

• Only one round of €10m+ (Jobandtalent) with no participation of foreign VCs

In what type of rounds did foreign VCs participate in in 2015?

17 %

13 %

19 % 15 %

35 % €1 to €5m€6 to €10m€11 to €15m€16 to €20m€20+m

Source: Novobrief

FOREIGN CAPITAL: 3 MAIN SECTORS International investors mostly invested in these sectors

Wallapop, Letgo, Fever

• Accel Partners • Fidelity Growth

Partners Europe • Northzone VC • 14W • Insight VP • Naspers Limited

Kantox, Novicap, peerTransfer, Digital

Origin

• Bain Capital • Spark Capital • Partech Ventures • IdInvest Partners • Techstars Ventures • Tekton Ventures • QED • Devonshire Investors • Accel Partners

CartoDB, Typeform, Userzoom

• Earlybird VC • Accel Partners • Index Ventures • Salesforce • PNC • RTA Ventures • TC Growth

Partners • StepStone

Group

Mobile marketplaces Fintech ‘Pure software’

BARCELONA TECH HUB

A DIGITAL COUNTRY Barcelona drives Catalonia’s digital economy

• 10,700 ICT companies

• 73,000 employees

• €14.5b in turnover (1/5 of Spain)

• €214m in R&D

• Barcelona startups:

• Revenue: €6b

• Workforce: 9,500

• International activity: 60% are active abroad

Source: Barcelona Activa (early 2015) & BCN Tech City survey

A DIGITAL COUNTRY Barcelona’s startup ecosystem

Source: BCN Tech City / Startupxplore

Young: 4.8 years

Market: 41% B2B 26% B2C 33% B2B2C

Sectors: 13% media 12% mobile 11% enterprise 6% marketing

Funding: 52% have received investment from business angels 33% went through an accelerator

International: 60% active outside of Spain, in more than 50 countries

A DIGITAL COUNTRY Education + entrepreneurs + funding + public institutions/coworkings = success

Education

Funding

A DIGITAL COUNTRY Barcelona’s ecommerce & mobile economy

Source: Startupxplore

Most common type of startup in Barcelona (as % of total market)

Ecommerce

Mobile

Enterprise

Marketing

Other

Travel

Communications

Health

Consumer web

Media

Education

Sports

Gaming

Software

0.0 % 3.5 % 7.0 % 10.5 % 14.0 %

Ecommerce

13.4%

Mobile

12.8%

Enterprise

10.8%

Marketing

6.2%

Travel

5.9%

Comms

5.7%

Health

5.2%

BARCELONA DOMINATES STARTUP INVESTMENTS 60% of all euros invested in 2015 went to Barcelona-based startups*

€0

€175

€350

€525

€700

Barcelona* Madrid Valencia

19.7

165

324

2011201320142015

Source: Webcapitalriesgo, Novobrief* Barcelona and rest of Catalonia

BIGGEST ROUNDS IN BARCELONA Explosive growth

Source: Webcapitalriesgo, Novobrief

Largest investment rounds in 2015 (€m)*

Letgo

Wallapop

UserZoom

Digital Origin

Typeform

Kantox

Softonic

Deporvillage

Loanbook

Marfeel

0 25 50 75 100

€3

€3

€4

€6

€10

€13

€15

€30

€40

€92

• €264m invested in Barcelona startups

• Hypergrowth: +96% YoY

• 92% of all capital invested inall of Spain in 2014 (€285m)

*This analysis includes Wallapop’s widely reported, but not officially confirmed, $100 million round

CATALONIA’S TOP SECTORS Mobile classifieds, ecommerce & fintech

Source: Webcapitalriesgo, Novobrief

Startup sectors that attracted more investment in 2015

13 %

3 %

10 %

13 %61 %

Ecommerce ‘Pure software’ Fintech Health Other

• Wallapop, Letgo & other ecommerce/classifieds startups lead the way

• Enterprise technology represented by UserZoom, Typeform, comes in second

• Fintech (payments - Digital Origin, FX - Kantox) third

• 5 investment rounds of €1m+ for health startups

INCREASING M&A ACTIVITY Creating wealth through exits

Trovit Akamon La Nevera Roja*

Founded in… 2006 2011 2011

Number of years to exit 8 4 3

Selling price €80m €25 €80m

Rounds of funding1

(€150,000)

3+

(€2.8m)

3+

(€10m)

Revenue in last full fiscal year

before exit€17.5m (2013) €15m (2014)

€2m

(€40m in reported restaurant sales)

EBITDA in same period €6.2m €800K (profit)

Undisclosed

(not profitable)

Revenue multiple paid by acquirer 4.5X 1.6X 40X

Employees 92 ~ 100 ~ 40

Stake (%) of founders at time

of exit~ 90% ~ 78% ~ 30%

Founder earnings €72m €19.5m €24m

Investor earnings €8m (57X) €5.2m €48m

Significant exits in recent years:

• Key to spark entrepreneurship, new startups and redistribution of wealth

• More than $155 million in exits in past two years

• Recent exits:

• Trovit (Next Co): €80m • bodas.net (Weddingwire) • Akamon (Imperus): €25m • Icebergs (Pinterest) • Ducksboard (New Relic) • Nubera (Gartner)

Source: Novobrief *Madrid-based

EUROPEAN CONTEXT Very small VC per capita

VC investments per capita 2014 (€)

€0

€100

€200

€300

€400

Israel USA UK Spain625

141

371 • Spain: more investments and money than ever

• In other main tech hubs in 2015…

• US: €50b+ • UK: €4.5b • Germany: €2.4b • Israel: €1.6b • France: €1.5b • Spain: €0.5b

Source: Pablo Ventura, Dealroom, NVCA

EUROPEAN CONTEXT Low density of business angels

Source: Atomico / AngelList

Density of business angels in Europe

LondonParis

BerlinHelsinki

MoscowIstanbul

Amsterdam

StockholmMunich

ZurichDublin

CopenhagenVienna

HamburgBrussels

Oslo0 625 1,250 1,875 2,500

BARCELONAMADRID

Business angels per ,000 people

HelsinkiZurich

BrusselsLondon

AmsterdamDublin

ParisStockholm

CopenhagenBerlin

Munich

Oslo

ViennaHamburgMoscowIstanbul

0 0.15 0.3 0.45 0.6

BARCELONA

MADRID

161

0.1

0.05

168

EUROPEAN CONTEXT Spain accounts for small fraction of EU exits & M&A value

M&A deals in Europe (Q1-3 2015)

7 %

93 %

Rest of EuropeSpain

• 7% of all EU deals

• 446 in EU:

• Germany: 88 • UK: 62 • Israel: 50 • Spain: 29 • France: 28

• 6% of all M&A value (€8b)

• Telco-driven

Source: tech.eu

EUROPEAN CONTEXT Limited impact of Spain’s ‘Ley de emprendedores’

• Spanish government approved in 2013 ‘Ley de emprendedores’, an entrepreneur-friendly law to promote startups and the creation of new companies

• Its impact has been very limited

• Spanish entrepreneurs and investors continue to face significant challenges:

• High taxes at the early stage for founders

• Exit tax when expanding and changing residency to a non-EU country

• Lack of stock option schemes due to high taxes

• High taxes for business angels

CONCLUSIONS 2015: A YEAR TO REMEMBER

Record investment numbers & notable exits:

2015 was a record year for Spain and Barcelona on various fronts: for the first time ever, Spanish technology companies received investment of more than €500 million, fueled by the participation of a record number of international investors (44 VC firms) and producing notable exits such as Trovit, La Nevera Roja or Akamon.

Worldwide category leaders:

Startups such as Wallapop and Letgo -both based in Barcelona- have become category leaders in the mobile classifieds sector, becoming the two most well funded startups in the world to try to conquer the US market.

Scytl, born in 2002 and the most successful spin-off in the technology history of Spain, has also consolidated its position as the leading eGovernment company in the world and plans to IPO on the Nasdaq in 2017.

Things can, and should, get better:

Investment per capita in Spain represents a small fraction compared to other European countries, and so do the number of startup exits or business angels. This, coupled with unfriendly laws for entrepreneurs and investors (exit tax, no stock options and high taxation of business angels’ activity), pose a strong challenge for the development of the country’s technology ecosystem.

THANK YOU

All of the charts, tables and figures that are included in this report come from publicly available sources.

Special thanks to:

METHODOLOGY