WEBCAPITALRIESGO MATURITY OF VENTURE CAPITAL IN SPAIN Successful cases when a transformation of startup to solid company has occured 2017 Contributor: Sponsored by: - - Copyright © 2017, Webcaprisk Servicios, S.L. Total or partial reproduction of this document is strictly forbidden, as is its manipulation with software or transmission in any form via any medium, be it electronic, through photocopying or other means without the previous permission of the Copyright holder. Access to Maturity of Venture Capital in Spain, Successful cases when a transformation of startup to solid company has occured report is free at www.webcapitalriesgo.com; this may not be made availa- ble to the public through any other means, electronic or written, without the written permission of the rights holder. The source of data in all chart show in the report is ASCRI/Webcapitalriesgo.com Maturity of Venture Capital in Spain Successful cases when a transformation of startup to solid company has occured March 2017. Release 1.0 Webcaprisk Servicios S.L. is the owner of www.webcapitalriesgo.com de www.webcapitalriesgo.com - 2 - Index Introduction Executive Summary Conclusions Interviews Ysios Capital Julia Salaverría. Founding partner Inveready Roger Piqué. Investment Director and co-founder Carlos Conti. Director of Venture Debt Funds and partner Enisa Bruno Fernández Scrimieri. CEO Ad&Law Miguel Ángel Martínez Bernal. Partner - 3 - Introduction Venture Capital activity has undergone a great change in recent years in Spain. Beyond the extra- ordinary amount invested in 20151, a qualitative leap has taken place in the last years, having markedly increased the maturity degree of this financial activity. The massive arrival of international investors, whose figure has increased fivefold in the last 5 years, has been the main change experienced. In addition to the new funds injected into the busi- ness sector, Spain has definitely been postulated as a country where very profitable deals can be done. The report, in addition to reviewing the different VC stages in our country, with relevant facts and details of over 60 outstanding deals, explores the success stories of eDreams, Privalia, Social Point, Idealista.com, Softonic, Ticketbits, MásMóvil and Oryzon Genomics, which raised funding from business angels, Venture Capital and Private Equity funds and loans granted by public bo- dies as Enisa or CDTI. It also shows11 startups that could lead the next major exit. The Venture Capital circle in Spain has been completed, reaching a sufficient size to get the at- tention of Private Equity funds, large industrial groups and improve the odds for an eventual IPO. Webcapitalriesgo.com whishes to express its gratitude to ENISA for collaborate in the report, to the sponsors Kibo Ventures and Ad&Law, and to Bridgepoint and Portobello for its support in sus- taining Webcapitalriesgo.com. Marcos Salas de la Hera Partner at Webcapitalriesgo.com 1. According to the oficial figures of ASCRI, Association of the industry that has been supporting the activity for 30 years, €613 million. Access ASCRI 2016 report Maturity of Venture Capital in Spain Successful cases when a transformation of startup to solid company has occured - 4 - Executive Summary Venture Capital has changed enormously in Spain, especially in the last five years. The massive arrival of international funding, the new generation of domestic funds, the burgeoning of accelerators and crowdfunding platforms, greater organization of business angels, the size achieved by some startups, or the contribution of public agents, such as Enisa or FondICO Global, are just some of the factors giving wit- ness to the change. All of this attracted the interest both of Private Equity funds and industrial groups, leading to several rounds of funding, large scale purchase-sales and some cases of going public, all the time showing how mature this segment is becoming. The appearance of public regional industrial development companies (SODIS) in the seventies and eigh- ties, was the antechamber for the takeoff of Venture Capital activity in Spain in the early nineties. That early stage was fairly flat in investment amounts, mainly public ones, worth around €25 million and scar- cely anything for international funds. From 1997 onwards, there were increasing numbers of private inves- tors and it was possible to see something of the potential of the Internet through Intercom Group. Some noteworthy deals in this initial period were Thyssen, Quavitae, Chupa Chups and Softonic. Internet bubble in Spain (1998-2000). In the three-year period 1998-2000, we began to see some of the early deals which were to mark an epoch in the world of Internet and Telecommunications in Spain, for better or for worse. They were years when new investors appeared, a large amount of capital entered the country (peaking in 2000 with investment amounting to €288 million) and there were numerous invest- ments in technological firms in the initial stages. Some investors disappeared for ever after the bubble burst and the collapse of NASDAQ in April 2000, led to a return to “safer” deals in well established com- panies of traditional sectors. Among the notable deals in these years were Jazztel, eDreams, PharmaMar, Myalert.com, Submarino.com, Mercadolibre.com, Vitaminic, Patagon.com, Lanetro.com or Xfera. The music stops…transition stage (2001-2005). When the Internet bubble burst, there was still some iner- tia in this type of firms in 2001, to start a long drought lasting till 2006. In this period the average invest- ment was €183 million invested and 119 deals per year and the number of private investors rose to 71 (+17). Outstanding were operations carried out in Wisdom, Vueling Airlines, Fractus or Netspira Networks. In this period there was also a noticeable rise and fall of the technological fund Marco Polo, which attrac- ted nearly €100 million from important Spanish firms and was dissolved five years after being set up befo- re it had carried out the expected investments. Internet led the way in the first large divestments (2006-2010). Investment continued rising by an average €243 million (+33%) and 328 deals a year (+66%). The outstanding case was the Computer-related sec- tor, which amassed 30% of the amount and number of deals, and to a lesser extent, the Renewable energy and Biotechnology sectors. In this period, the number of private national assets showed a 34% rise to 95. 2006 saw the arrival in Spain of the first large international Venture Capital funds, with the investment of Sequoia and index Ventures in FON. Maturity of Venture Capital in Spain Successful cases when a transformation of startup to solid company has occured - 5 - Succesive sales of BuyVip to Amazon for around €70 million and Tuenti to Telefónica, for a similar amount, was well reported in the media and led to growing expectations within the sector. In both cases, a success- ful startup, acceleration and sale, in just less than three years took place, something very unusual in Spain. Unfortunately, these deals did not lead very much to continuation in the following years. Also in this period Privalia started up and Idealista.com was given a considerable boost, though their development sale took a decade or more, respectively. Another significant and atypical deal during this time was the startup of the television channel La Sexta. International investors take up positions… 2015 a record year (2011-2016) Between 2011 and 2016 Venture Capital in Spain has undergone a record period of growth and transfor- mation. This was also the case for the segment of Accelerators-Incubators, business angels and Crowdfun- ding platforms. These have been years of loss of complexes on the part of international investors, and they have carried out purchase/sales of varying sizes while filling the gap in the funding rounds of larger size. In these rounds, business angels and domestic funds have played a determining role in validating the poten- tial of the startup in its initial stages, 103 international funds from 17 countries invested in Spanish star- tups during this period, compared to the 18 from four countries which did so in the previous period. The United States is the most represented country, with 54 investors, followed by the United Kingdom with 13 and France with 18. Between 2011 and 2015, Venture Capital activity showed a 45% increase in the average amount invested per year (€352 million), and a 23% increase in the average number of deals (405), compared to the pre- vious period. This large increase was linked, mainly, with the explosive growth of 20152 (€613 million in- vested) and the coincidence in the same year of two unusually large deals, Wallapop and Letgo. Other deals also attracting a large amount of capital in this period were Alien Vault, Cabify, Carto, CornerJob, Jobandtalent, Kantox, Peer Transfer, Scytl, Social Point or Stat Diagnóstica. In 20163, according to the preliminary figures published by ASCRI, €385 million in VC investments were reported in 436 deals. In spite of the fall that took place, mainly because not so many large size rounds were closed as in 2015, the dynamic appeared to be highly positive. Some of the startups which obtained funding and were sold to industrial groups at this time4 were Trovit, sold to the Japanese Next Co Ltd for €80 million; La Nevera Roja, acquired by Food Panda for another €80 million; Akamon, sold to the Canadian Imperus Technologies for $27 million; Olapic, acquired by the American Monotype for $130 million; and Habitissimo, sold to the British firm Homeserve for more than €20 million. Also of note we have the sales of BlablaCar to Index Ventures in a $100 million round and that of Kiwoko (Masquepet) to the American PE fund TA Associates. But indeed, the most significant succesful cases of firms obtaining funding from business angels, and/or Venture Capital funds and were sold to major industrial groups, to some international Private Equity fund, or quoted on the Stock Exchange were Privalia, eDreams, Social Point , Softonic, Idealista.com, Oryzon Genomics, Ticketbis and MásMóvil.