July 24, 2021

These are the obstacles to undertake in Spain | Economy

These are the obstacles to undertake in Spain | Economy

Cafes and a laptop per person occupy the tables of the Google Campus in Madrid. Lenny Kravitz sounds and a constant murmur of mobile calls. Pablo Postigo, 28 years old and founder of Frontity, a technological start-up, works in that coworking space. There, he says, he has met young people with good ideas who hit a wall when they try to start. Spain, where starting a business takes an average of 13 days and costs at least 3,000 euros (to found a limited company), has the second lowest rate of incipient entrepreneurs, according to the Organization for Economic Cooperation and Development (OECD) ). In 2017, the creation of companies in the country fell by 7% and its extinction rose by 5%.

Why does it cost more than in the United Kingdom or Germany? Experts and young entrepreneurs agree that a first obstacle is the lack of entrepreneurial skills, which the Spanish educational system does not encourage, according to Andrea Sabio, 24 years old. She is the director of the Humanup Lab project, from the Dynamis consultancy, which gave scholarships to students from 18 to 25 years old to accelerate their entrepreneurial potential. He assures that his generation, which has seen its parents lose their jobs due to the crisis, is willing to start, but lacks incentives. "What we learn in primary, secondary and university is against or has nothing to do with entrepreneurship", ditch. Compare the education system in Spain with the United States, where he studied for one year, and lists the skills that are lacking in the country: risk tolerance, resilience, proactivity, adaptability, leadership, communication, emotional intelligence, negotiation, creativity, conflict resolution , goal setting, decision making … and continues.

Failure is not failure

In other countries, it is assumed that nobody succeeds, affirms Ana María Romero, vice-dean of Economic Management and Institutional Relations of the Faculty of Commerce and Tourism of the Complutense University of Madrid. That a business does not go well is not a failure, is part of the learning process so that the next business comes out better, he says. "In Spain, if the first time you go wrong, you're indebted for life, it's a horror and a family drama," Romero explains.

But being encouraged to undertake is not enough. Some young Spanish businessmen make a mistake that Camila Polensvaig, CEO of the accelerator Madrid Tetuan Valley, considers basic: not validate the idea on time. For Polensvaig, entrepreneurs "take a long time to launch their product because they expect everything to be perfect. Many times we see that even years are spent with the same product without having launched it to test that things are working, "he explains. It is key, he adds, to know that the product or service that is being developed is a solution to a real problem.

These are the obstacles to undertake in Spain

"Go sell it to a customer with a PDF and, if you buy it, you do it. It goes against common sense but, once you understand it, it makes things a lot easier, "recommends Postigo, whose technology start-up has just obtained 400,000 euros from a venture capital fund in its third round of financing. Postigo and his partner spent a year and a half doing "experiments" and confronting them with potential clients until they arrived at the germ of what is now Frontity. When they learned that there was a place in the market for a company that improved the performance of web pages created with wordpress in mobile devices and that they would obtain financing, they registered their company. After that they followed the adjustments and even changed the name of the signature.

The flexibility at the time of setting up the business also matters. In the United Kingdom, for example, it takes 4.5 days on average to start a project and no minimum capital is required, according to the World Bank's Doing Business 2018 report. That classification of the World Bank places Spain in position 86 of 190 in ease to start; The United Kingdom is the seventh country with the greatest opportunities. "It should be as simple as opening an email account, but for that you need the whole Administration to be digital and all the actors to be in this century," says Postigo ironically.

After creation, we must take into account the tax burdens that a start-up has to assume, starting with the quota of self-employed for individual entrepreneurs. "And when you start to prosper a bit more, hiring is very expensive. There are aids, but they are not designed for small companies, "Postigo adds. The problem, he says, is that the Administration and the legislators "do not smell what this is about to undertake". "The tax inspector comes here [al espacio de coworking del Campus Google] and he asks me how many square meters the company has. The guy hallucinates that our company does not have tables or chairs bought. We're going to a coworking! Do you have a warehouse? But what are you telling me, if we produce software, "he says. "It's hopeless. It's the 21st century speaking to the 20th century. "

Once validated, the idea will find money if it is good, according to the experts. Although financing in Spain is scarce, according to Luis Garvía, professor at ICADE, "it is becoming professional at a high speed". "Every time there is a greater number of venture capital funds that have among their investors successful entrepreneurs."

"If an idea has a minimum of traction and its viability can be proven, the funding is there. You will have to talk maybe with 20, 30, 40 potential financiers, "adds Adrián García-Aranyos, director of Endeavor, a global organization that supports high-impact entrepreneurs such as Ticketea or Cabify. García-Aranyos insists: "Many times the entrepreneur says there is a lack of funding because he has spoken with 40 investors who have said no, but maybe he has to talk to 40 others. If he has spoken with 80 and 80 he has said no, it may be that everyone has a lack of incredible vision or it may be that the entrepreneur is very wrong in what he is developing. "

For María Benjumea, founder and CEO of Spain Startup, a platform that connects entrepreneurs with investors through the South Summit global forum, financing difficulties appear, above all, in the growth stage of companies. Benjumea advocates that there be more support measures for public funds to finance and more encouragement for private investment in that phase. "The law only allows investors to invest in newly created companies to obtain a deduction of 20% in the IRPF. This tax deduction benefits the investment of individuals in startups in seed capital, but is limited and does not support those investors who want to bet on more developed companies, "he says. "The big difference we have with Silicon Valley are the means and the conviction. There, they have an unconditional commitment to the entrepreneurial ecosystem, "he summarizes.

García-Aranyos identifies, despite everything, a change of attitude in Spain, where he assures that entrepreneurship "has been little more than insulted: the entrepreneur was an exploiter, who sought his wealth above all else". Now, observe that the word entrepreneurship becomes fashionable: "Every time more is spoken, the entrepreneur is given more prominence as a person who is not looking to be a millionaire, but who is seeking to fill a need, create employment and wealth in the society".

The probability of the first venture failing is 50%, according to the Map of Entrepreneurship published in September by Spain Startup. Perhaps that explains why 60% of entrepreneurs have to break their bank – or that of their family and friends – to start their business. Why would an investor bet on financing an incipient company?

An investor usually looks at balance sheets and extract projections from there, but in the case of companies in early stages that does not exist. Mark Kavalaars, CEO of the venture capital fund SwanLaab, which invests in young companies, explains that in those cases the first thing they evaluate is the idea and how much innovation it has. They also analyze if the team is able to scale the business so that "it becomes a customer growth machine". The failure, he says, often appears there: "We see very powerful teams, with beautiful ideas, with a huge market potential but are not prepared, in ambition and power, to grow the business." "They invest a lot in product engineering and have to invest more in commercial engineering," he proposes.

Kavalaars also recommends "understanding what types of investors are out there and knowing how to propose to each of them something that gives them a return based on their motivations and expectations." It encourages us to ask ourselves: "What is the right investor for the stage I am in and the type of business I have?" And he concludes: "Good projects are not going to lack funds".


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