Spain’s ‘angel investors’ resist macroeconomic instability


The ‘start-up’ ecosystem in Spain is boiling: projects, innovation, a lot of desire … And the same problem as almost always, an investment environment that is not always up to par but that, however, shows signs of increasing maturity, and where called “paper”.business angels’, increasingly professional, is taking on a larger role. There is a growing number of entrepreneurial financing options for companies in the early stages of development. Business angels come to cover the needs of “startups” at a particularly sensitive stage: after the informal investment (family and friends), accelerators and incubators, but still not strong enough to choose institutional or professional funding for venture capital. They can be summed up like this, they are the ones who push the “startups” to start playing in the field of the elderly.

In 2022, a year with a challenging macroeconomic context for investors, “venture capital” or informal venture capital (“business angels”) activity, individually or collectively, and Accelerators / Incubators) in the early stages of European-based companies even surpassed the exceptional investment record in 2021 by 5.4%, according to data from PitchBook calculated at the European level and included in the Aeban (Spanish Association of Business Angels) report prepared by IESE. Business School.

On the contrary, the same report states that “the decline in professional investment of ‘venture capital’ in ‘start-up companies’ in European and American markets reflects impact on investors The macroeconomic environment characterized by high inflation rates, an upward trend in interest rates, and a turbulent downward trend in the valuations of companies and stock markets, and thus uncertain expectations regarding the development of economic activity ».

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As Laura Caballero, associate director of the IESE Center for Entrepreneurship and Innovation, and author of the study with Juan Rory, a professor of entrepreneurship at the same business school, explains to ABC, a paradoxical situation occurs, as noted in the report. The biggest declines in investment occurred in more mature stages, which indirectly affects the former countries and makes many investors into ‘Initial capitalOr the first in mature markets such as the United States and the United Kingdom, but also in Spain, which are starting to have difficulties financing the growth of “startups” in their investment portfolios.

In the same way, Caballero adds, in the case of Spain “it was noted that there was a certain decrease in investment, but above all because the ‘business sponsors’ focused on preserving their portfolio”. “By encountering difficulties in discharging the investments accumulated due to the withdrawal, they accumulate too much investment in their portfolio and do not dare to make new investments until they get rid of what they have.” “a uncertain environment This is not the main reason why “business owners” do not invest, because forecasts have a longer maturity period and, therefore, they have a greater ability to take risks regardless of the macroeconomic environment. What limits their investment power, Caballero insists, is their inability to dispose of their previous investments.”

The IBAN and ACE report places figures for this fact. The brakes on institutional “venture capital” in the second half of 2022 determined that many of the “startups” funded in the past three years, lacking cash and eager for additional capital, found themselves on the brink of liquidation or exposed to high-risk situations to maintain operations, ”the study adds, confirming that“ despite the slowdown in professional “investment capital”, the investment ecosystem in Spain has shown to be more resilient (down by 15% compared to 2021) compared to European countries. Others are like Germany (-44%) or the UK (-25), although the average drop on the continent was 11%.”

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Looking ahead for this year, more than 90% of the “business angels” consulted in the IBAN survey are ready to make investments, and adoption is expected to increase. Combined investment formulas It has been observed in the past two years: direct investment in “startups” combined with indirect forms through crowdfunding platforms or “venture capital” funds.

“It will continue to gradually involve local venture capital funds or ‘family offices’ in the angel sectors in favor of convergence of ‘business angels’ with these operators. In addition, interest in cross border investmentswhich undoubtedly constitutes another sign of the internationalization and maturity of the Spanish investment system, ”notes in the report and confirms Professor Caballero, who shows all this that this figure has become more professional, among other things due to the work carried out by Aeban or business schools such as IESE.

By Sectors of Interest The six most important sectoral areas for investment in the short and medium term according to the “business angels” surveyed include “agritech/foodtech” (51% of investors), and related technologies health sector (46%), Green Technologies, Energy and Water (44%), Biotechnology (37%), Cyber ​​Security (35%) and Education Technology (33%). In 2023, the percentage of investors interested in “fintech”, “insurtech” and “proptech”, which has been gaining weight in recent years, will decrease.

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