Insights into the latest investment trends across the Spanish tech ecosystem and the role public financing can play to accelerate the growth of startups.
FUNDING OF STARTUPS AND TECH COMPANIES IN TIMES OF UNCERTAINTY
The pandemic has not slowed down, but rather accelerated a digital revolution that was already underway. Along with it, public funding in Spain for startups and technology companies has been boosted by the current situation and context. In this article, we will outline the main public funding resources available, as well as how to access them. For more information and further queries, check the Spanish chapter of Tech Spain Advocates. Even if you are not permanently based in Spain, we can help you access these resources.
Startups and tech companies’ access to financing will be a decisive factor in accelerating their growth. Therefore, having an adequate knowledge of the procedures and requirements needed to access funding will be crucial. Today, there are numerous alternatives and lines of public funding available to startups, at both a national and regional level in Spain. In fact, public funding in Spain for start-ups is quite accessible and presents a wide variety of options.
We must distinguish between subsidies and loans: those who receive subsidies do not have to pay back the financial contribution, they are ‘non-refundable’; by contrast, a loan will have to be repaid. The main public funding alternatives that exist in Spain for startups are the following:
1.- Empresa Nacional de Innovación, S.A. (ENISA, https://www.enisa.es/): public company dedicated to financing the viable and innovative business projects of Spanish SMEs and startups in the form of loans. It also commits itself to guide and support with clear and objective information, as well as to the promotion of innovative entrepreneurship. ENISA’s lines of financing are as follows:
- Young entrepreneurs: aimed at newly formed startups created by young entrepreneurs (under 40 years of age) with the goal of providing financial resources to address the investments required by the business project in its initial phase. The loans range from EUR 25,000 to EUR 75,000.
- Entrepreneurs: similar to the above line, this is aimed at start-ups in their early stages, but created by entrepreneurs of all ages. Likewise, the aim is to provide the applicant with financial resources to address the investments required by the business project in its initial phase. The value of the loans range from EUR 25,000 to EUR 300,000.
- Growth: this line is aimed at supporting the business projects of companies interested in expanding their business or improving their competitiveness. It is focused on developed business projects that seek to become more competitive, expand their production capacity, consolidate, or grow internationally.
2.- Centro para el Desarrollo Tecnológico Industrial (CDTI, https://www.cdti.es/): public entity, dependent on the Ministry of Science and Innovation, which promotes innovation and technological development in Spanish companies, channelling applications for funding and support for R&D&I projects. It has different lines (CIEN, Proyectos Transferencia Cervera, among others), offering good financial conditions, including a low interest rate, close to 0%, and a non-refundable tranche. It also has subsidies for R&D and investment projects.
3.- Instituto de Crédito Oficial (ICO, https://www.ico.es/web/ico/sobre-ico): public bank attached to the Ministry of Economy and Competitiveness, where financing is obtained in national and international markets. ICO loans provide financing aimed at the self-employed, SMEs and startups. Its activities are divided into two paths:
- Direct financing with cash flows aimed at large projects, whether public or private, with significant amounts of money. These loans are tailored to the needs of the company and the repayment terms are very long.
- Credit mediation lines, lines of financing with which the ICO provides funds with the intermediation of credit institutions, taking charge of studying the projects and defining the characteristics of the loan.
4.- Next Generation Funds (EU): startups can opt to finance their projects through the EUR 750,000 million that the EU has approved through the Next Generation EU agreement, of which Spain will receive EUR 150,000. The projects will have to be within the axes and leveraging policies approved by the EU, which includes the modernisation and digitisation of the business ecosystem. To be eligible for these funds, startups have to keep up to date and pay attention to the calls for proposals of the programs.
History teaches us that technology has played a key role in all crises in boosting economic recovery, productivity and growth. The lack of technology and innovation has always meant that the recovery and the “return to normality” have taken a long time. There is no doubt that all technological advances end up bringing benefits to society and that they are and will be a key element in tackling any economic, health, ecological or social challenge.
For all these reasons, startups will continue to play a fundamental role the economic recovery. The first step for their growth, development and success is to study in detail the different financing options available to them, choosing and taking advantage of those that best suit their needs.
The growth potential of startups is huge and, together with creativity, entrepreneurship and innovation, will play a fundamental role in economic recovery and the return to normality.
Uncertainty generates new needs and satisfying these needs is the essence of startups.
Teresa Martín, Group Lead, Tech Spain Advocates
Tech Spain Advocates (email@example.com)