Summer will formally come to an end in just under two weeks. And this will not go down in history for being, far from it, the most active in terms of investment in Spanish technology companies. The summer period ends with few operations focused on seed or very initial phases. Capital increases covered by current shareholders, to try to provide more cash in the face of market adjustments in valuations, continue to occur. And, meanwhile, venture capital managers cannot find an easy way to raise their new investment vehicles.
At the European level, the situation remains the same: venture capital investment in the sector was cut in half again during the second quarter of the year, according to data from analysis firms Crunchbase and Dealroom. Both firms do a different accounting with respect to debt transactions and other modalities. But the conclusion is the same. In the United States, according to Dealroom, the lowest quarter since the beginning of 2018 has been recorded. In Spain there is no specific data, but all the sources consulted by La Información agree that the cooling continues to be evident with declines that are approaching. to those figures. The closure of the ‘course’ in July hardly had closures of extensions on the horn, as has traditionally happened in the sector.
Spanish venture capital agrees that the ‘dealflow’, that is, the number of opportunities that reach their tables to invest, has slowed down in more advanced phases. And various sources in the sector agree that it is due to the change that has occurred in the market, with companies avoiding going out to set a valuation and closing transactions with current partners to extend the life of their cash on hand and with the use of more debt. . ‘traditional’. The macroeconomic background, with rising interest rates and lower liquidity, continues to have weight.
The most relevant operation in the last three months is the one carried out by the logistics startup Paack, reported by La Información. And summarizes the current situation. First, because of the structure of the transaction: an internal round involving current partners – not led by Softbank – that mixes traditional debt with capital to exceed 40 million. Secondly, for the destination of the funds: to bring profitability closer after years of heavy losses due to accelerated growth – in 2022 the accumulated losses among all subsidiaries jumped the barrier of 60 million. This is a scheme that has been repeated.
With these wickerwork, the sector looks to the final stretch of this year in which the most optimistic set a certain rebound. Other more cautious voices believe that this greater fluidity of money will occur well into the year 2024. In any case, the managers have a mandate from their shareholders to invest the money. And what is foreseeable is that the tap will be opened more. International funds have a lot to say, as they are the ones that have kept the pulse on larger rounds. In recent months, new irruptions -not internal rounds- of international firms in Spanish companies have been really scarce. It remains to be seen his behavior from now on.
And the funds?
Spanish funds continue to preserve liquidity in their vehicles to invest in this new rebound. Although, according to the same sources in the sector, raising resources is being even more complicated than it used to be historically. Raising capital to invest in startups has not been very easy in Spain, due among other factors to the lower willingness of large corporations and other more ‘traditional’ actors to invest. This has been changing, but the turn in macroeconomic conditions is not making it easy.
Proof of the situation is that today Fondico’s Next Tech public fund, which has more than 4,000 million of public money ‘ready’ to disburse to mobilize up to 8,000 million of private funds, has committed a very small part. Until March, it had entered four firms: Leadwind (K Fund), Andromeda (Seaya), P103 and Cathay, along with participations in rounds of direct companies such as Cabify or Trucksters. Since that date, the entry into any other fund has not been reported, despite the fact that some managers include in the brochures of their new vehicle the possibility of using the ‘mega fund’.
the Unicorns
How do Spanish unicorns – companies valued at more than 1,000 million euros – reach this final stretch? Some of them, such as Fever or Wallapop, resorted to internal rounds at the beginning of the year and have sufficient financing. Others like Cabify started ‘in extremis’ an expansion that gives them oxygen. Jobandtalent has not raised new capital since the ‘mega round’ at the end of 2021, but in this time it has tightened its belt to try to bring the accounts closer to a positive operating result (Ebitda). Idealista, as is clear in its 2022 annual accounts, is a business with strong profitability that does not need relevant capital injections. Although it is not a formal unicorn, Typeform almost was after the March 2022 expansion. The company has made significant adjustments to its costs – with a significant ERE in Spain – and has preserved a relevant part of its cash, according to sources. knowledgeable.
With summer already behind us on the calendar, startups and their investors face a key end to the year. Many see this period as a particular ‘examination’. Many of those ‘advanced’ rounds that have now been bypassed will be booted again. And it remains to be seen what the reception will be like. For now, the current scenario has returned the sector to 2019 figures, before the ‘post-pandemic’ frenzy.
