Current market trends
In general terms, the Spanish private equity and venture capital market has grown considerably in 2017, due to the country’s solid economic growth. There has been a considerable increase in the volume of investments which, according to estimates by the Spanish PE and VC Association (Ascri), will reach approximately €4,900 million (a 27% increase on 2016). In terms of deals, the expected increase is 11%. These increases are mainly due to intense investment activity by international funds, which has fuelled the number of “megadeals” (deals above €100 million). Projections also predict record levels of mid-market transactions, where Spanish investment firms take the lead. Fundraising by PE and VC national firms in 2017 maintained the vigour of 2016 and the prospects for 2018 are also promising.
In terms of investment volume, the most thriving sectors are consumer products, hotels and leisure, transport and logistics, financial services, information technology and life sciences, in that order.
Madrid and Barcelona continue to be the major hubs for investment, with Barcelona consolidating its position as a European technology hub. In fact, the Barcelona start-up ecosystem accounts for 34% of Spanish start-ups, which raised €453 million in 2017. On the other hand, Madrid is the base for 31% of technology start-ups which attracted €309 million in venture financing last year. The largest exit of 2017 by a venture-backed company also took place in Barcelona, where the gaming company Social Point was sold to Take-Two for US$276 million (see Key deals in 2017 below).
International venture capital funds tend to invest in growth stages, while early stage investment is essentially led and funded by Spanish firms. However, foreign funds investing in series A rounds is becoming more frequent, as they become better acquainted with the Spanish market. The size of venture capital rounds is still far behind more mature markets such as Silicon Valley or London, but has experienced significant growth during 2017, with an average volume of €3.6 million per round (up from €1.8 million in 2016).
Recently, initial coin offerings (ICOs) have attracted attention in Spain, although the number of companies raising funds through ICOs is still quite limited, due to the legal uncertainties. In this respect, the National Securities Market Commission (Comisión Nacional del Mercado de Valores), following the precedent set by other regulatory authorities (such as the SEC and ESMA), has alerted investors to the high risks associated with this type of investment and the lack of protection for investors, as ICOs are mainly unregulated. Additionally, it has created a working group to draft statutory regulation in order to address these legal uncertainties and provide adequate protection to non-accredited investors. Because of this unclear legal situation, most Spanish companies using tokens to raise money from the public have opted to place their offer in other jurisdictions that supposedly have a clearer regulatory landscape.
Key deals in 2017
Osborne Clarke Spain continues to be a significant player in the Spanish venture capital industry, advising national and international VC firms and corporate venture divisions of industrial corporations. Some of our main deals in 2017 include:
- Advising 14W and Scranton Enterprises in a US$175 million finance round in mobile second-hand marketplace Letgo.
- Advising the founders of Social Point in its US$276 million sale to Take-Two Interactive Software.
- Advising on-demand delivery platform Glovo in a €30 million series B round.