So we got a couple of press credentials to cover South Summit 2018 in Madrid, and we spend 3 days in between panels, conferences from the most influencing people of the startup ecosystem, networking events with the leaders of the industry and enjoyed the startup competition.
It was normal to have coffee with venture capitalists running a $5 billion fund, shake hands with Telefonica’s CEO (biggest telecom company in Europe, fifth in the world) and see Ken Robinson (the one from the TED talk) actually giving a talk on education (cool, but it was the same talk he has been giving for 10 years and his speaking fee is probably near $100,000, we expected more).
But what is this event for and why should you care?
This event is made mostly for startups in the early stages looking for financing. I can’t remember a place with so many investors ready to literally throw money at you. Talking with a partner of a London-based VC fund he told us that he can’t go back to their offices without investing at least $3 million. In 3 days.
If you are prepared to pitch this kind of investors, it’s the opportunity of a lifetime. You have small and not-so-small events to pitch your product, get feedback, talk to firms and even build more features and hire people.
The startup competition is also the place to be.
The winner this year, Amadix is a biotech company that has developed a way to detect cancer sooner.
Round of applause for the team.
Another honorable mention is Clicars, a company that makes buying a car a seamless experience or BYHOURS, a service that allows booking a hotel room for a few hours for much less than the price of the room.
The event was great, but there was a common thing I heard repeating over and over in panels, conferences and solo keynote: Spain needs to be the “Startup Country” but because of regulation, high taxes, and tedious bureaucracy, we are far from it.
Let’s deep dive into this.
Regulation is killing innovation and destroying jobs
As a Spaniard myself, there is nothing that would make me happier than see Spain at the top of the Economic Freedom Index next to Singapore or New Zealand. Unfortunately, our current situation is far from it.
First, the economic and business framework in which Spanish entrepreneurs operate is not prepared for the digital, globalized world.
Incorporating a company is difficult, expensive, and tedious. The legal entities available are not prepared to support proper international financing rounds or acquisitions and the extreme regulation of booming sectors like fintech, mobility, and hospitality makes Spain a very difficult choice to start a business.
Last week we attended a panel with Cabify CEO Juan de Antonio and it became clear to us one of the key problems of the economic environment in Spain: Regulation.
Cabify is the Spanish version of Uber and the one I use when I’m in Spain, even though we also have Uber. I found after hundreds of rides that Cabify offers an overall better service. They are just more detailed-oriented.
The reason why I highlight Cabify is because mobility is probably the most targeted sector in the country. The other is the hospitality sector because of services like Airbnb, for very much the same reasons.
Regulation in Spain requires you to have a license for almost anything you do, and of course, if you want to be a cab driver or join Cabify or Uber, you need one. They are very expensive and very limited and the ratio vs. taxis in cities like Madrid or Barcelona is 1:30.
Nevertheless, there is no Cabify or Uber car without one.
For decades, taxi drivers have been the kings in town, and now that new players come to the game and do the job better and cheaper, most of them do not want to adapt and just want to fight. Taxi drivers have been protesting, blocking avenues and being extremely violent to Cabify and Uber drivers, all alleging “unfair competition”.
Some taxi drivers in Madrid see this aggression against a Cabify driver (with a little girl inside the car) completely normal:
Unbelievable. What they consider “unfair” is basically others having a better product and service at cheaper cost.
Blaming others and not yourself for your current situation says it all. Improve yourself, adapt and win. Nobody is going to do it for you.
You cannot force people to use your product. And this applies to every single business. Add more value, solve problems, be more honest and don’t complain that much.
Of course, The Spanish Government is doing nothing about this, they have been protecting the taxis for years and it seems they will continue to do so, therefore promoting a worse service and stopping innovation.
Some taxi drivers opted for the alternative road: Understand the new reality, improve their service or even sell the taxi license, became a Cabify or Uber driver and be part of a much more respectful and innovative environment.
The hospitality sector has pretty much the same problem. The problem is also legislation.
These are some of the “brilliant” ideas that the Spanish Government have to help the sector: add a digital tax to services like Airbnb, Just Eat (Spanish UberEats), Amazon, etc.
The Mayor of Madrid was a former member of the communist party for decades so there is actually no much surprise there.
“Legistation is destroying jobs, not promoting a modern country and make it all worse for everybody” – Kike Sarasola, President Room Mate
At the end of South Summit, President Pedro Sánchez announced (without giving much detail) a small tax credit for companies that invest in R&D. Not quite our tempo, Mr. President.
Wanna make Spain the “Startup country”? here’s our take on the recipe:
- Remove social security monthly payment (currently at around 360€ / $415 per month no matter your revenue).
- Lower taxes or make them zero if reinvested (currently 30% + 21% VAT).
- Add more deductions and make it easy and cheaper to hire talent. It is a joke that for an employee to receive 1,000€ in his/her bank account the total cost for the company is over 2,000€.
- Make bureaucracy all digital. I had to renew my digital signature a few months ago and it took me 3 visits to the nearest office (30 min by car). We cannot wait one month for an appointment, digital is the only way. Make this happen or watch entrepreneurs moving elsewhere.
Most of the startups are fully digital and global. There is no way Spain can compete with the United Kingdom, Estonia, Singapore, Hong Kong or Delaware to incorporate a business if this is not followed.
These countries make it a pleasure to do business: decent taxation, cheaper to run, more efficient, global, digital. If you’re interested, we have written on how Estonia, for example, is helping digital entrepreneurs).
It’s funny, South Summit 2016 winner Spotahome (a top-notch startup that offers short-term accommodation in Europe’s best destinations) moved all operations to London.
Not surprised. You just got to be where you’re treated best.
We certainly hope that this framework starts changing soon and in South Summit 2019 we see the Spanish Government announcing real changes to the framework that turns the country into the startup atmosphere we very much desire.