Jordi Romero’s company Factorial has created a fund for startups
Every year at about this time, Barcelona hosts the World Mobile Congress (MWC), a massive technology show designed to showcase the international mobile communications industry. The event – which according to the organizers, attracted 101,000 attendees this year – is not only a showcase for the industry it represents but also a reminder that Barcelona itself has established itself as an important hub for tech startups.
So having spent a day wearing out shoe leather in and around the multiple event spaces of MWC, I took some time to talk to some of Barcelona’s technology entrepreneurs to get their view of the city and its place in Europe’s wider technology ecosystem.
Barcelona is positioned well within the top ten of European ecosystems. The exact ranking depends on how you collate and read the stats. For instance, according to Startup Heatmap Europe, the city is number three after London and Berlin. Online magazine, EU Startup puts it at number six, one place ahead of the Spanish capital, Madrid.
But I was curious to find out what lies behind the ranking. As a London-based writer, I’m a regular recipient of reports proclaiming that when it comes to VC investment, the U.K. capital remains at the top of the European league table. In reality, though, while founders seeking Seed and Series A funding appear to be well-catered for, growth-stage capital is currently not so plentiful, even in Europe’s longest-established tech ecosystem.
So how does the funding environment look from the perspective of Barcelona?
An Improved Environment
I’m sitting in a meeting room in the Itnig Cafe, talking to Jordi Romero, co-founder of B2B software company, Factorial. Launched in 2016, the business offers a cloud-based service, automating HR, admin and finance functions. As Romero explains, the target market is small and mid-sized businesses, rather than the enterprise market. “We focused on (selling to) many countries with small and mid-sized businesses as a potential target. With a large market, we can invest in product,” he says.
To date, the company has raised $200 million with the last – Series C – round coming in at $120 million. But as Romero recalls, back in 2016, staying in Barcelona and raising capital was not a given. “At the start, we had doubts about our ability to finance the business at a top level. That was a risk but we said if we need to move we will,” he says.
The doubts stemmed from previous experience. Romero’s previous venture relocated to San Francisco, in part to raise capital. In the case of Factorial, a decision was made to attempt to grow in Spain.
“There were early-stage Seed funds that understood our business model. But we also saw that international investors were looking at Barcelona – US, UK, Swedish.”
There has, he adds, been a massive change. “Now we are seeing really great growth funds out of Europe – our Series C was $120 million. It was led by Atomico – a fund out of London and GIC – the sovereign wealth fund of Singapore – also participated.
Rocío Alcocer is COO of Norrsken House, a plush co-working space for sustainability startups. Originating in Stockholm, it has extended its reach, opening a second hub in Kigali and a third in Barcelona. Alcocer also sees an improvement in the local funding ecosystem.
“The finance ecosystem is developing, although there is still a lot of room for it to grow,” she says. “It’s easier to get pre-seed and seed than later stage, but it is getting better. In the past startups had to go elsewhere when they started growing. But we are seeing examples of VCs here betting on bigger rounds. It is moving in a positive direction.”
Calling More Capital
She says that’s partly down to longer-established companies setting an example and in particular a growing band of unicorns and “soonicorns,” including Glovo, Cabify, Travelperk and the aforementioned Factorial. “Success stories, call more capital,” says Alcocer. “ Within the ecosystem, there are companies that have grown. They have shown it’s possible to be a big company.”
Avi Meir is CEO of business travel management company, TravelPerk – one of those unicorns. In January of this year, the company raised $104 million in a Series D round led by Softbank. “Ten years ago or fifteen years ago investors wouldn’t look at Barcelona as a destination,” he says. Now it is not an issue anymore and that is why the ecosystem is flourishing now because investors are willing to invest.”
Overseas Funds
It does seem, however, that the growth end of the investment market is dominated by overseas funds. Meir says Travelperk’s investors are from the U.S., London, Stockholm and Tel Aviv.
Romero says Spain doesn’t have funds based in Spain that will provide large checks to fund growth. “I think it will happen, but it takes time,” he says. “It took a while for London.
So is it a problem, attracting the attention of international investors? “For us, Spain was never an issue. If anything, people like to travel to a warm country,” says Meir.
Attracting Talent
So far, Barcelona has managed to grow its technology sector without the cost of living getting out of control. This and the added benefit of a Mediterranean climate is enabling Barcelona to attract talent.
“I moved here from business school,” says Avi Meir. “My wife is from France, I am from Israel and we didn’t have any family connection to Spain. But living here you realize it has a great quality of life. That’s the key pull for many people. So, it’s a great place to hire people from abroad. It’s very easy to convince people to move here.”
“As we started expanding, we started hiring,” says Jordi Romero. “What we were able to do was hire French, German and Italian nationals who wanted to live in Barcelona.” Some were living in the city already, others relocated.
“We have been able to build a very strong team,” Romero adds. “That wouldn’t have been so easy in a city like London where there is a lot more competition.
Grassroots Support
However, Romero says there is still a need for grassroots support.
“People don’t know that you can build a company from Barcelona,” he says. “You don’t have access to capital or talent. We struggled, but we managed. We were the exception to the rule.”
This brings us back to the Itnig Cafe, Funded by the founders of Factorial, which serves as a meeting place, a workplace and a pitching venue for early-ventures. Romero says it provides a platform for Factorial to share its success.
“We share what we earn. We earn a little bit of money, we earn knowledge and we earn networks,” he says. “We run a fund – we are the main investors – people come here to pitch and we invest in that. We have made 15 investments. “
With most of its member business consisting of one or two founders and perhaps a couple of employees. Norrsken House is also in the grassroots support business, with its services including investment and accelerator programs. It has, however, a very specific focus. Members must be part of impact companies – broadly working towards at least one UN Social Development Goal – with its social mission embedded in its business model.
Alcocer says the hub has a role in encouraging technologists to grow world-changing businesses, not least by forging links with universities. “There are a lot of interesting things and we want to make sure it sees the market,” she says, citing climate risk modeling company Mitiga as an example.
Meir says there are issues. He cites politics and also social issues such as crime. “We have to fix safety on the streets and overall street services, such as maintenance and cleaning,” he says.
And arguably more Spanish funds are required. That could be an evolution as entrepreneurs exit their companies and in turn become investors.
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