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WORKING IN SPAIN

Which startups succeed in Spain (and which ones fail)?

Foreigners thinking of setting up a startup in Spain should keep in mind that one in five new companies here doesn't last longer than 12 months. Here's what the data available says about the businesses that find success and those that don't.

spain success startups
When it comes to startups specifically, nine out ten startups don’t make it past the three-year mark in Spain. Photo: Justin Sullivan/Getty Images via AFP

There are various interpretations about the differences between a startup and a company but, broadly speaking, a startup is a company in its early stages that’s looking for an attractive and innovative business model, whereas a company already has a pre-existing business model and is focused on executing it successfully.

According to a study by the Spanish Tech Ecosystem, Spain has 10,500 startups and more than 300 scaleups, innovative and more established companies that are already growing.

The introduction of Spain’s new Startups Law in early 2023 promises to make the country far more attractive for foreign entrepreneurs, investors and digital nomads.

READ MORE: Spain’s new law for startups and digital nomads – 15 things you need to know

But the road to success isn’t just guaranteed by less bureaucracy, tax cuts and special visas.

Twenty-three percent of new companies set up in Spain don’t survive past a year, according to the country’s National Statistics Institute (INE). 

Of those that do make it past the first 12 months, 45 percent are not in business after five years. 

When it comes to startups specifically, nine out ten startups don’t make it past the three-year mark, according to the Map of Entrepreneurship drafted by Spain Startups, but they do grow at faster rates than SMEs. 

Although these figures may not seem very promising for anyone considering setting up shop in Spain, the Iberian nation isn’t last on the list when it comes to the longevity of startups in the EU.

Lithuania, Denmark, Latvia, Estonia, Malta and Portugal all have lower rates of success than Spain, according to Eurostat data. 

Spain also lost 311,000 SMEs in 2020 as a result of the Covid-19 pandemic, so authorities are now keen to breathe new life into all types of sectors with foreign talent drawn in by the new startups legislation. 

Spain is also the fifth country with the most so-called ‘unicorns’ companies with a market value above €1 billion.

READ ALSO: What do the experts think of Spain’ new startups law?

Which startups and companies find the most success in Spain?

Insurance companies, reinsurance groups and pension funds are those with the companies with the highest survival rate, as 82.6 percent are still operational in Spain five years after their creation, INE data reveals. 

They’re followed by new companies involved in the supply of electricity, gas and air conditioning (80 percent survival) and those in the tobacco industry (75 percent).

Companies that offer financial services, assistance in residential matters, legal and accounting companies, pharmaceutical manufacturers and those that deal with the extraction of metals and minerals also have a good life expectancy in Spain.

That’s not to say that if you have a business idea in a different sector or that your startup is completely innovative you should get discouraged. 

According to industry specialists Meetwork, among the 50 biggest growing startups in Spain in 2022 are a travel management company, a copyright protection business, a language app for kids, a digital platform for freight transport, a vegetable-based meat manufacturer and other businesses from a wide variety of sectors.

The same applies to most highly valued startups in recent years in Spain; many are companies focused on innovation or the improvement of pre-existing ideas.

Self-employment and entrepreneurship website autonomosyemprendedor.es reported that the ten Spanish startups which have found the most success in Spain and abroad are Brooklyn Fitboxing International (gyms), Freepik (image downloads), Bigbuy (dropshipping), El Tenedor (restaurant bookings), Heura Foods (vegan food), eDreams (flight and holiday bookings), Clicars (online vehicle sales), Mr. Wonderful (an ‘online store for happy products’), Cabify (e-hailing) and Glovo (food delivery). 

And it’s not as if a startup that’s set up in Spain should necessarily have to cater to a Spain-specific market – fintech, tourism, logistics, mobility, cybersecurity, education, foodtech, energy, cryptocurrencies, gaming, employment, retail or health are all sectors with signs of growth potential in Spain and around the world.

Which companies and startups find less success in Spain?

According to INE, among the companies that struggle to survive past the five-year mark in Spain are leather and shoe manufacturers (20 percent success rate), maritime industry businesses (29.8 percent success rate) clothing companies (33.2 percent) and entertainment and artistic businesses (33.7 percent). 

Civil engineering companies are the ones that struggle the most to make it past the first year (30.2 percent survival rate), followed by those involved in arts and entertainment.  

The life expectancy of new companies in Spain has worsened since the pandemic, according to the latest report by Spanish business database Iberinform, who wrote: “The critical moment for any business project usually occurs after the third year, since the initial injection of capital allows the vast majority to complete the first 24 months of life without problems.”

Interestingly, during the pandemic, the sectors which saw the biggest increase in earnings in Spain but also the most businesses closing down were hospitality and retail, which together with tourism are the pillars of Spain’s service-based economy.

Iberinform’s general director Ignacio Jiménez told El Mundo newspaper that “the incomplete and uneven recovery that we are going through, marked by new challenges such as price escalations and supply problems” directly affect business survival in Spain.

“Companies, especially SMEs, which have less capacity to transfer these cost increases to prices are suffering a reduction in margins and loss of profitability,” Spain’s confederation of SMEs reported. 

READ ALSO: What will Spain’s income requirement for the new digital nomad visa be?

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FREELANCING

The help that self-employed in Spain can apply for in 2023

Anyone who is self-employed in Spain knows it's tough. Fortunately, there are several grants and benefits available to autónomos and small businesses this year to help you out.

The help that self-employed in Spain can apply for in 2023

There are 3,329,863 autónomos or self-employed people in Spain, but according to the Asociación de Trabajadores Autónomos, Spain’s self-employed union, more than 2 million self-employed workers (which is 63 percent of them) have an income that is below Spain’s Interprofessional Minimum Wage (SMI).

READ ALSO: Spain to raise minimum wage by 8 percent

With self-employed workers earning so little and having to pay very high monthly social security payments, which go down €200 a month for lower earners and progressively higher – up to €590 a month for higher earners, many may be forced to look for support where they can. 

What benefits and help are available?

Spain offers a whole host of benefits and help for self-employed people, including the following, which are all available this year.

Starting a new company

Grants of up €10,000 are available to people to help them launch a new business or company. The exact amount varies, and they are aimed at helping unemployed young people aged 30 years or younger, unemployed women, unemployed people with disabilities, and unemployed women with disabilities.

In the case of victims of gender violence, grants can be boosted by 10 percent.

Investment subsidies

There is also aid to help you finance investments. The subsidies work out equivalent to a 4 percent reduction on the interest rate set by the body or business that grants the loan, with the subsidy limit being a maximum of €10,000.

Training

If a self-employed person wishes to undertake some extra training to improve their business or career prospects, they can apply for aid that covers up to 75 percent of the cost up to a maximum of €3,000.

READ ALSO – REVEALED: Everything you need to know about applying for Spain’s digital nomad visa

Digitalisation 

The Spanish government also offers a so-called ‘Digital Kit’, which can be accessed through grants of up to €2,000 to help ‘digitalise’ a business to make it more competitive. These grants are intended for things such as creating a website or e-commerce platform, managing social networks, installing cybersecurity or upgrading systems.

The ‘zero quota’

As many of you probably already know, in Spain self-employed people not only pay quarterly income tax (IRPF in Spain) but must also pay a monthly social security payment. You can read all about that and upcoming changes to the system here, but note that some regions offer to waive this fee in order to promote entrepreneurism.

READ ALSO: New self-employed workers in Madrid to pay no social security tax

Madrid, Andalusia and Murcia all do, and the Balearic Islands will do it for self-employed people under 35 and for women entrepreneurs. These grants effectively mean the region picks up the tab for your monthly fee. It is available for one year and extendable by another 12 months if the recipient’s net income is lower than the SMI.

Minimum Vital Income

Since January, the number of self-employed people who can access the Minimum Vital Income has also increased. This benefit is compatible with income from self-employment and has also been increased. If you qualify, you could get an extra €565.37 per month for a single person without kids and more if you have children. You can find out more about it here

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