This chapter examines the financing conditions, instruments and opportunities available to Spanish startup and scaleup entrepreneurs. It represents the sixth of the ten elements of the entrepreneurial ecosystem framework used to diagnose the country’s ecosystem. The chapter highlights strengths and areas for improvement, presents an international example for inspiration, reviews recent policy developments, and provides recommendations for further progress in the finance domain.
Entrepreneurial Ecosystem Diagnostics of Spain
Abstract
Entrepreneurs who start a new business need capital to set up their companies, develop their products or services, and run business development. This requires paying for equipment, facilities, salaries, and other expenses before any revenue is collected. Entrepreneurs must thus rely on external funds (Miglo, 2022[1]). While the inception of a new venture may start in a basement or in an incubator, access to finance is essential to grow a startup and turn it into a functioning company (King and Levine, 1993[2]). Typically, the entrepreneur must mix debt (bank loans, loans from friends, peer-to-peer online lending, etc.) and equity financing (venture capital, own funds, angel financing, equity-based crowdfunding, etc.) depending on the type of business. While SMEs are particularly sensitive to access to credit (Allen et al., 2015[3]), startups often need venture capital (Keuschnigg, 2004[4]). According to (Audretsch, Keilbach and Lehmann, 2007[5]), the entrepreneurial finance hypothesis stipulates that knowledge‐based entrepreneurial firms tend to be financed from equity‐based sources, such as venture capital, and less typically from traditional debt‐based sources. These types of firms often lack collateral, and their business model is often too risky for banks’ asset management operations. The availability of venture capital and the presence of private equity funds and other stakeholders such as business angels are therefore crucial to enable the development of these types of startups. Based on the OECD ecosystem diagnostics data, Spain attains a mixed performance on the Finance element, where stronger aspects coexist with weaker aspects.
Financial conditions for startups and scaleups in Spain must be analysed within the European context, recognising that there are structural features of European capital markets and global trends that affect financing in Spain and that can only be partially influenced by the Spanish government.
Financial systems are still predominately bank-based across all European countries. Due to economic structure, historical legacy, and cultural reasons, bank capital represents over half of all capital in the European financial system. In contrast, in the United States, bank capital is below one-third of the total. Many European entrepreneurs finance their startups with a combination of family or self-finance and bank loans. Bank loan finance, however, is often not well suited to financing high-tech and capital-intensive startups, because of the difficulty for many of these ventures to offer tangible collateral and regular income flows. Bank investments in these types of activities are not only often poorly matched to traditional bank operations but can also be discouraged in some aspects by regulatory and supervisory entities (Arnold, Claveres and Frie, 2024[6]).
European financial markets are also fragmented. Cross-country differences in regulatory and legal regimes limit Europe-wide business development and the formation of Europe-wide pools of capital necessary to support large venture capital (VC) funds. Exit options are also scarcer in Europe due to fragmented, smaller and less liquid equity markets and stock exchanges. As a result, there are fewer and significantly smaller VC funds in EU than in the United States. Some recent initiatives such as the European Investment Fund’s European Tech Champion Initiative, a fund-of-fund of EUR 3.8 billion launched in 2023, are attempting to bridge this gap. Nonetheless, Europe is still catching up with other global players on venture capital markets.
Another important limitation in European venture capital markets is the relatively small size of funds compared to those in the United States. None of the top 15 global venture capital funds are European, with United States funds leading by a large margin. Over the period 2013-2023 there have been only 36 European funds of a size greater than USD 500 million, among which only 11 exceeded the 1 billion mark. Conversely, in the United States, there were over 400 funds of that size, with almost 140 funds over USD 1 billion (European Investment Bank, 2024[7]).
The low participation of institutional investors such as pension funds and insurance companies in European venture capital investments is the primary cause of these differences. Pension funds’ investment in venture capital, as a percentage of their total assets were less than 0.02% in 2023 while in the US they were about 1.9% (Arnold, Claveres and Frie, 2024[6]). This is driven by multiple factors, including the fact that VC is still often considered as too risky an asset class for pension fund investments. The limited involvement of institutional investors reduces the availability of large sources of long-term finance to startups and scaleups in Europe and plays an important role in explaining why there are significantly fewer large venture capital funds in Europe than in the United States.
In addition, European households are often more risk-averse than US households, and although on average European households accumulate larger savings accounts, they disproportionally invest in fixed income instruments while equity investment only takes a small share of total investments.
There are also global trends that an assessment of Spanish financial ecosystem must take into account. Globally, venture capital deals and investments were abnormally high in 2021 and 2022. In Europe, the sum of all VC investments was below EUR 40 billion in 2020 but spiked to EUR 100 billion and EUR 80 billion EUR in 2021 and 2022, respectively. Levels then returned to trend in 2023 and 2024, reaching about EUR 45 billion per year (Atomico, 2024[8]). A similar dynamic is observed across most OECD countries. Albeit lower than 2021 and 2022, European and global venture capital investments have been higher in 2024 than in the pre-pandemic period.
Access to finance is strong overall but there is scope for growth in equity finance
Overall, international benchmarking data suggest that Spain performs slightly below the European OECD average on access to finance (Figure 8.1). On the other hand, it is ahead of economies such as Italy, and its performance has improved compared to the 2016-2020 period. Spain’s performance on SME credit supply (outstanding SME loans) is in line with the European OECD average; however, it is below the European OECD average on early-stage venture capital per-capita.
Note: Data are presented as normalised scores obtained by applying min-max transformations to the raw values, where the max/min are equal to the sample mean +/- 2*sample standards deviations, relative to the average of data from the 2020-2023 period. 2016-2020 scores are anchored to the 2020-2023’s data and must be interpreted as relative performance the 2020-2023 period.
Bank loans are in line with expectations
Loans are an important source of finance supply for startup and scaleup businesses and one of the important sources of capital for their development, alongside own finance and equity finance. On this aspect, Spain’s credit supply (in per capita terms) is line of those of most European OECD countries, such as Germany and the Netherlands. Among the large European countries, only France performs better. This performance is confirmed by the 2023 EIB Investment Survey, which finds that less than 7% of Spanish SMEs are credit constrained (Figure 8.2). Access to credit is thus not a major bottleneck for the development of the entrepreneurial ecosystem.
Note: Data refer to the year 2023
Source: 2023 EIB investment survey
The venture capital market is still developing
On venture capital (VC), Spain is catching up with other large European OECD economies. Spain’s early-stage VC investment levels have nearly caught up with France, Germany, and the United Kingdom during the last 10 years, and it is already ahead of Italy in per capita terms. Furthermore, Spain’s score on the OECD entrepreneurial ecosystem diagnostics indicators for later stage venture capital investments is close to the European OECD average, although it is behind France and the UK.
Both early-stage investment and later-stage investments represent about 0.03%-0.04% of GDP in Spain. The ratio between them is similar to other large European OECD economies such as France and Germany. However, Spain operates on a significantly smaller scale than these economies as a share of GDP, and is well behind the United Kingdom levels, where both early stage and later stage investments represent about 0.07% of GDP. This is shown in Figure 8.3, where the total volume of VC is portrayed by the size of the bubble and the relative weighting towards early and later stages is shown by the position of the circle relative to the trend line.
Note: The size of the bubble represents the total venture capital volume as a sum of early stage and later stage VC investments in USD billion. In these venture capital investments figures, only investments by formal fund managers (private equity funds making direct private equity investments, mezzanine private equity funds, co-investment funds or rescue/turnaround funds) are included. Investments by business angels, incubators, infrastructure funds, real estate funds, distress debt funds, primary funds-of-funds or secondary funds-of-funds are excluded. Investments are based on the location of the portfolio companies, regardless of the location of the private equity firms. The investment amount only captures the equity amount that is invested by formal fund managers and not the value of the entire financing round. Capital or buyout investments in current or formerly venture capital-backed companies are also not included.
Source: Based on OECD Entrepreneurship Financing Database
Although the venture capital ecosystem in Spain has grown over the past twenty years, it remains important to expand the availability of scaleup finance. According to Fundacion Innovacion Bankinter’s Startup observatory data, over 91% of deals by domestic funds between 2017 and 2024 were below EUR 5 million (Figure 8.4).
Note: Total number of deals by domestic investors, cumulative 2017-2024 investment data Source: Fundación Innovación Bankinter, Startup observatory database
Many Spanish startups are small, have non-capital-intensive business models and may not even want to scale up. Such firms often do not seek to participate in investment rounds beyond Series A. However, for startups with scaleup potential, it is difficult to find venture capital beyond Series B rounds. The lack of this type of funding can lead promising startups to relocate abroad, frequently in the US. The rapid development of numerous, small venture capital initiatives, has not yet created a critical mass of sufficiently large, specialised funds with the necessary expertise to understand, guide and support all types of startup founders.
The core of the issue is that there are many family offices in Spain, but not enough large funds that can finance deals larger than EUR 50 million. This is a problem common to most European countries, but Spanish VC funds are significantly smaller. For instance, there were only 2 Spanish funds among approximately 450 active fund managers supported by the European Investment Fund in the context of the European Tech Champions Initiative.1 In addition, the average and the maximum size of funds in the United Kingdom, Germany and France is significantly larger than those in Spain. For example. the Anglo-American Index Ventures had a fund size of about EUR 2.3 billion, and Atomico, a fund with offices in London, Paris and Stockholm reached a size of EUR 1.3 billion in 2024. In contrast, the larger Spanish funds can only commit up to around EUR 300 million. The lack of large Spanish funds means that whenever a Spanish startup grows to reach Series C or D, it often needs to find foreign sources of finance. According to Fundacion Innovation Bankinter’s Startups Observatory, only 33% of EUR 20-50 million deals and only 12% of over EUR 50-million deals that took place in 2017 and 2024 in Spain were financed by domestic funds (Figure 8.5).
Note: Domestic identifies Spanish rounds. Share of investments by round size and origin of funds in the cumulative 2017-2024 investment data
Source: Fundación Innovación Bankinter, Startup Observatory database
Nonetheless, most stakeholders in the ecosystem acknowledge a structural change in the Spanish VC market since the beginning of the century. Public and private VC funds and business angel networks have grown significantly. In addition, accelerators, incubators, science parks, research centres, and programmes to support startups have become more widespread and have improved access to finance for startups and scaleups (Asociación Española Business Angels Networks, 2024[9]).
In addition, the Spanish Securities Markets and Investment Services Law, Law 6/2023, has introduced important innovation to the listing process for non-equity securities, including a new legal regime for the representation or registration of negotiable securities by the means of distributed ledger technology systems ("DLT Securities"). While this reform does not impact venture capital markets directly, it helps create a positive sentiment among investors in the Spanish capital market.
These developments have created mutually reinforcing mechanisms through which increased finance opportunities have led to creation of more startups, which has in turn attracted more investors. According to Pitchbook, Spanish Private Equity raised EUR 2.9 billion in 2024, marking a new record for the country. At the same time, Spaincap has reported that the number of VC operations more than doubled between 2013 and 2023, creating a vibrant environment and healthy competition in seed and Series A capital markets. Access to capital at this level does not represent a major bottleneck for Spanish startups, at least in the main cities.
Some programmes have been particularly important in bridging the gap for relatively low capital-intensity startups which do not yet attract the interest of VC funds but cannot access bank credit either. ENISA’s participatory loans have historically played this role, by offering a financial instrument halfway between a traditional loan and venture capital. The amount of the loan can be up to the founder’s contribution, and the lender, apart from the ordinary interest, receives a payment that depends on the evolution of the company's activity. Such loans do not require collateral other than the business project itself and the professional solvency of the management team. These loans are typically long-term (up to 9 years) and allow for longer repayment terms and grace periods than traditional loans. In addition, in the event of a company reducing its capital or liquidating it, the loan is considered as accounting equity. Since the launch of the participatory loan instrument, ENISA has provided finance to almost 7 850 companies, offering a unique instrument in the market for the development of non-capital-intensive startups.
A further recent development is the introduction of a stock exchange dedicated to small firms. About 15 years ago, Bolsas y Mercados Españoles (BME), the Spanish stock exchange authority, created a new multilateral trading facility called alternative stock market, where innovative and fast-growing companies (mainly startups, spinoffs, and family businesses) can raise equity, learn to deal with stock exchange mechanisms and requirements, and prepare to be listed in the main market at a later stage. This includes the “Entorno pre-mercado” programme, a training initiative for companies. For example, scaleups can learn about how to manage free float shares, due diligence, compulsory reporting requirements on markets, and comfort letters from auditors.
BME started with a single market segment, and over time opened two other segments: premarket (the most junior one) and BME growth (the more advanced one). After having moved up to the BME growth market, a company can be listed on the BME main market. To date, this alternative market is not yet mature. There are about 150 companies listed, but they have low capitalisation, few transactions per day and limited liquidity. On the other hand, there have been several capital increases, which is important to create a perception among investors that it is acceptable for companies to increase their capital gradually in this market. In this context capital increases do not represent an equity dilution issue.
There are opportunities to accelerate this positive dynamic in alternative stock markets. Firstly, tax incentives introduced by the Startup Law can be made available for companies listed on junior or alternative stock markets. To date, ENISA cannot certify a company as an emerging startup if it is listed on any stock exchange (including alternative markets). Moreover, the requirement to have a free float of at least EUR 2 million, distributed to at least 25 shareholders, could be lifted. As many firms are unwilling to expand their cap table, these requirements discourage firms from being listed. Going forward, Spain could improve the functioning and regulation of the market and develop a pipeline of companies that could be listed. The United Kingdom has pioneered the use of these subsegments of the stock exchange to involve startups with equity markets, and Spain can look to this model. The UK experience, as well as the experiences of Scandinavian countries shows that changing the mentality of investors and startup founders is critical for the development of these markets.
Institutional and corporate involvement in venture capital can grow
One of the factors behind the lack of large venture capital funds in Spain is a limited involvement of institutional investors (pension funds and insurance funds), which are the key players with the critical mass and investment horizon necessary for very large funds. This is a common issue in Europe, but some countries have started to incentivise institutional investors to participate more in Venture Capital and private equity. For instance, Spain can be inspired by France’s PACTE law as a way to promote investments in private equity by insurance companies and alternative retirement plans (Box 8.1).
Corporates could also represent an important source of funds, but they are also contributing less than in other countries. Based on 2023 data, family offices are the primary source of VC funds raised in Spain by domestic private entities (about 33%), followed by the public sector (about 23%), which support funds through Axis Participaciones Empresariales (the private equity arm of ICO, the Spanish development bank), CDTI a public entity under the Ministry of Science and Innovation, and, since 2024, SETT, a public entity under the Ministry of Digital Transformation and the Civil Service. Corporations and non-financial companies contribute about 20% of the total. A part of these investments is related to their commitment to a new public-private fund (Next Tech). Institutional investors provided only about 6% of total VC raised in 2023, much lower than the European average, which is above 15% (Spaincap, 2024[10]). Institutional investors in Spain tend to be risk-averse, allocating most of their funds to fixed assets and only small amounts to private equity or alternative investments, even in periods when interest rates were low.
Greater involvement of institutional investors would not only inject more long-term capital into the system but could also improve the liquidity of VC markets. Currently, a significant amount of capital is invested in startups that have grown but have not yet gone through an initial public offering (IPO) or acquisition. The involvement of institutional investors could help to build a stronger secondary ecosystem of funds. Some funds have unrealised returns that in some cases are high but caught in very long holding periods, locking capital in illiquid positions. Institutional investors, entering in these segments of the VC market could acquire profitable VC portfolios at a discount, providing liquidity to the system for new investments in emerging startups. The business of acquiring positions from Limited Partners (LPs) or General Partners (GPs) is a specific market segment that requires specialised agents, yet it is hard to develop a well-functioning secondary market if there is not enough liquidity in the system. Unlocking some positions and creating a deeper financial system is a precondition for the development of more sophisticated secondary markets.
Attracting financial resources from corporates into venture capital funds could also be important for boosting the finance element of Spain’s ecosystem. Financial participations from large companies in VC funds could crowd-in other firms and investors, expanding the capital base. Corporates are also often better equipped to understand the technical and market aspects of products developed by startups, including through their own R&D efforts.
Investments in VC funds by corporates have often been limited by difficulties associated with internal VC fund management. Corporate governance and manager incentive structures may not accept investments that do not generate revenues, such as early-stage startups, and corporate structures may have slower decision-making processes than VC funds. In some cases, internal political economy further limits internally managed VC funds, especially if fund managers receive a greater financial benefit than core business directors. At the same time, it can be risky for startups to work with corporates, since there may not be satisfactory incentives and expertise from the corporates to develop the startup to the same level as a professional VC firm would do.
An ideal scenario would be a synergy between VC funds and corporates, where VC funds pool resources from different sources and provide expertise, and corporates provide funds and R&D insights. This scenario is still not very common in Spain, but there are signs of changes. Telefonica, the largest Spanish telecom corporation, recently created an externally managed EUR 70 million fund for VC investments. Similarly, Repsol and Iberia have recently started to allocate some resources to venture capital. These developments signal a change in the approach of corporates. However, a deeper cultural change is needed before corporates can participate in venture capital markets as much as observed in other European countries.
Description
Over the past 10 years, France has introduced various reforms that have progressively facilitated investments in private equity. At least two important laws have been introduced in France in this time frame: Law 2015-990 (called "Loi Macron") and Law 2019-486 (called PACTE).
In Law 2015-990, among the 308 articles, article 145 introduces limited partnership firms (Société de Libre Partenariat (SLP)), a new investment vehicle organised as a type of limited partnership (société en commandite simple) under the responsibility of the general partners. It is designed to address the needs of foreign investors, including a legal personality and the possibility of benefiting from foreign tax breaks through more straightforward categorisation in foreign tax codes.
The second and arguably more impactful reform has been the Law 2019-486 (PACTE). This contains numerous articles aimed at boosting entrepreneurship such as reduced administrative procedures to start a company, a simplified liquidation procedure, a simplified property transfer procedure, and the creation of the 'business-to-mission' company category to encourage corporate social responsibility. With respect to finance, the Law introduces important measures that facilitate the involvement of life insurance companies and alternative retirement saving plans in private equity and venture capital.
A long-standing issue in Europe is that private savings and institutional investors do not flow into private equity markets but tend to be invested in lower risk asset classes (e.g. fixed income, or shares of listed companies). The PACTE Law allows life insurance companies to invest in private equity funds, such as Fonds Professionnels de Capital Investissement (FPCI), Fonds Professionnels Spécialisés (FPS) and Sociétés de Libre Partenariat (SLP). An important change was the expansion of eligible “FIA” (funds d’investissement alternatifs) for life insurance and the relaxation of some previous limits. This has given the possibility for private equity vehicles to raise capital through a wider range of retail investors. The Law has also encouraged European Long-Term Investment Funds (ELTIF) to invest in unlisted companies via long-term closed-end funds. Finally, the Law has introduced an alternative retirement saving plan Plan d'Epargne Retraite (PER), which has made it possible for savings from retirement accounts to be invested in unlisted assets such as private equity (including VC), private debt or infrastructure.
Success factors
The reforms, in particular the PACTE Law, have marked a milestone in enabling French savings to be channelled into less traditional and more innovative uses. Prior to these reforms, both regulatory constraints and prudential caution among fund managers limited the allocation of life insurance funds and savings to private equity and venture capital. The introduction of these reforms has improved governing rules and begun to shift mindsets.
To achieve these reforms political leadership required long consultations with all stakeholders. Notably, the PACTE Law took about two years and several meetings with business leaders, unions and different political leaders to be drafted. This long and comprehensive consultation ensured that all views were considered, and all stakeholders participated in shaping the reform. At this stage it is difficult to evaluate the impact of the reforms, but many stakeholders have welcomed the measures as positive developments towards a more robust venture capital ecosystem.
Lessons for Spain
Moving from startup finance to scaleup finance is a priority for the Spanish entrepreneurial ecosystem. This can be boosted by fund mobilisation from institutional investors such as pension funds and insurance companies. The French experience shows that freeing resources and facilitating the participation of actors that were previously excluded from private equity investment is possible if there is a political will to act in that direction. Even marginal gains are important to unlock investments in promising startups, make the secondary market more liquid and incentivise future investments.
Sources:https://www.dechert.com/knowledge/onpoint/2016/6/the-societe-de-libre-partenariat-a-new-french-fund-alternative.html ; Fin du grand débat, loi Pacte enfin votée: La Réforme de l’épargne déjà en marche. - - EGD FINANCE ; Loi PACTE : définition, objectifs et mesures pour les entreprises | Big média | S’inspirer, S’informer, S’engager ; Loi Pacte: impact on private equity in France, life insurance and retirement savings
Public support of the venture capital market is important
Government is playing an important role in building the venture capital market in Spain, and its involvement has increased over the past decade, especially through public development banks (OECD, 2025[11]). Numerous programmes and significant resources have been allocated by different public institutions in Spain to capital and quasi-capital instruments, reaching about a quarter of the total venture capital raised in the country. As in most European countries, public funds usually cannot invest directly; they either operate through funds of funds or they create co-investment programmes, where private investors must commit at least the same amounts supplied by the public entity. This means that by themselves, the public sector cannot solve the lack of large investment funds. They need large private actors who can commit billions of dollars in a fund to work with them.
At national level, the three larger players in this area are ICO (Instituto de Credito Oficial) which operates through Axis, its venture capital subsidiary, CDTI (Centro para el Desarrollo Tecnológico y la Innovación) and SETT (Sociedad Española para la Transformación Tecnológica). The former operates 3 large funds and fund-of-funds (ICO Next tech, ICO Global, ICO Pyme and ICO Infrastructure). CDTI is mainly focused on startups emerging from university scientific research, providing a large fund (INNVIERTE), a fund-of-funds and multiple grants, loans and partially refundable aid instruments. And SETT manages several strategic investment vehicles linked to the Recovery and Resilience Facility, including the Next Tech fund, the PERTE Chip initiative and the Audiovisual Hub fund, with a focus on technological transformation and the scaling-up of innovative companies. In addition, COFIDES, a state-owned enterprise specialised in state funds, manages the Co-investment Fund (FOCO), a public financial instrument to mobilise resources from foreign investors. There are also other smaller initiatives at national and regional level.
This creates a complex ecosystem of large public-backed venture capital funds where available resources are not pooled in a single place, and the multiplication of programmes makes it hard for startups and scaleups and potential investors to be aware of available opportunities. Some stakeholders therefore propose that there should be a single client-facing contact point for all existing public-backed funds.
There is scope for growth in angel finance
While Spain’s main limitation in the finance element of the entrepreneurial ecosystem relates to scaleup finance, there are some possible areas for improvement in the smaller-scale venture capital investment space. For instance, angel investments have yet to reach their potential and angel investors have yet to achieve the level of expertise of the frontrunner entrepreneurial ecosystems in Europe and globally. One boost that can be given to the system is to apply available tax incentives to investors in startups both to individuals and syndicates as well as investors who set up special purpose vehicle (SPV) or other legal structures.
The volume of investment in this segment is still relatively small, reaching about EUR 50 000 per investor in 2023. An associated lack of liquidity limits exits’ options for angel investors, who often need to hold their positions longer than expected, reducing possibilities to recycle funds towards new business founders. This issue was particularly acute in 2023, when the investment environment worsened, and exits collapsed. Recently there has been some consolidation of private investor networks, investor groups, and online platforms to improve access to finance to entrepreneurs. As investor networks grow, they also improve their level of professionalism and sophistication. For instance, business angels have started to co-invest with other business finance instruments and adopted in-house investment vehicles (Asociación Española Business Angels Networks, 2024[9]). However, developing a more professionalised, specialised and liquid angel investment environment will still require time and efforts from all the stakeholder in the ecosystem.
More international participation in venture capital investment can be stimulated
In Spain, foreign investors and venture capital funds are playing an important role in large VC rounds. Most Series C and Series D funding rounds in Spain are sourced from foreign European or US funds. However, despite these trends and new incentives to foreign investors introduced by the Startup Law, more could be done to boost entrepreneurial finance by mobilising foreign capital. Attracting large foreign VC funds not only increases total capital in the Spanish ecosystem but is also crucial to bringing in the specialisation and venture management skills that most Spanish funds have not yet developed. In addition, the presence of reputed, large funds signals the quality of the investment environment and can crowd-in other major international funds.
Currently, Spanish public and private funds attract foreign funds (especially European funds), by allocating capital that foreign investors need to match with a multiplier of 1.2 (e.g. 120 million for every 100 million from a local fund). There are however regulatory and structural issues that limit the possibility of using this mechanism to its fullest. One of the issues is that since December 2024, investors who aim to acquire a stake of 10% or more in a Spanish company must obtain prior authorisation if they invest in “strategic” sectors such as infrastructures, technology, dual-use items, access to sensitive information, and media (Ministerio de Economia, 2024[12]; Garrigues, 2024[13]). Another challenge for investors is the administrative process required whenever the equity structure of a startup changes, such as capital increases. All changes to the equity shares must pass through a notary and often require the presence of all the equity owners or their legal representative in one place. This adds time and transaction costs that could discourage investments. In contrast, in the US, the use of NVCA’s free model legal documents simplifies these procedures and makes the system more attractive to investors.
Moreover, the proliferation of many different funds offered by different national and regional governments and government agencies makes it difficult for international investors to be aware of all the opportunities available in the Spanish ecosystem. While the ONE platform introduced by the Startup Law may in the future serve as a one-stop shop for information on initiatives and funds, to date it does not gather all information and is not yet sufficiently well-known by foreign investors, universities and other stakeholders.
Another issue concerns the identification of foreign investors. The Startup Law has made an improvement by waiving the requirement for the investor to be physically present in Spain to obtain a foreigner's identity number (NIE), so that only an electronic application for a tax identification number (TIN) is required, which can be obtained without being physically in Spain. However, before an investor can apply for a tax identification number, they must validate their identity by presenting themselves physically in Spain or through an attorney who acts on their behalf. The procedure is simpler if a new company is created from abroad. In this case, the investor can request a TIN through an electronic platform (“CIRCE”), using the Single Electronic Document (DUE) obtained from the Entrepreneur Support Office. Nonetheless other countries allow personal identification of investors abroad through their networks of embassies, consulate or dedicated offices abroad, which would ease access for potential investors while maintaining national security protocols.
Adjustments to tax incentives could also be considered. The Startup Law introduced tax incentives on fund managers’ carried interest, yet these benefits are only available to domestic or international individual investors, and do not apply to financial groups, companies or juridic entities. This reduces the potential effect on attraction of foreign investments, which predominately take place through funds and other investment vehicles. Moreover, the possibility for foreign investors to opt for non-resident taxation was discontinued as of March 2025 as defined by the Law 1/2025.
Traditional loan financing instruments as well as products such as leasing and factoring are well developed in the Spanish banking system and are important sources of entrepreneurial finance for startups and scaleups. Early-stage venture capital and private equity is also expanding, giving additional opportunities for startups. During the last two decades, the offer of venture capital funds has increased exponentially, and most stakeholders agree that it is relatively easy, at least in the main urban centres, to find early-stage venture capital for good business ideas.
The availability of scaleup finance, however, is limited. Although this is a challenge common to most European countries, Spain suffers from a lack of large domestic funds to a greater extent than several other large European countries such as the United Kingdom, France and Germany. An increased involvement of institutional investors (mainly pension funds and insurance companies) in venture capital and private equity investments would provide an important boost to scaleup finance, as would greater involvement of the corporate sector. There has been an important increase in support for venture capital from public funds in Spain recently, but greater co-ordination across the public actors would be useful, while for the largest investments large private players are needed as partners.
At the same time, despite the presence of some large foreign funds in the market, there is a widespread perception that there is potential to further boost the attraction of foreign investors, which could be supported by further regulatory and bureaucratic easing and increasing the visibility of emerging investment opportunities.
Going forward, to improve the finance element of the Spanish entrepreneurial ecosystem, it is important to prioritise resolving the scaleup finance bottleneck. This can be driven by to incentivising institutional investors and enhancing the attractiveness of the market to foreign investors. To these ends, the following policy actions are recommended:
Set up incentive schemes and introduce legal reforms to encourage institutional investors to invest more in venture capital and private equity.
Extend the tax benefit to investors introduced by the Startup Law to SPVs and angel investor syndicates.
Reduce legal and bureaucratic barriers to capital increases and investment rounds, for instance, by leveraging information technologies for identity validation and signature that reduce the involvement of notaries and enable the signature of official documents remotely.
Publish information about funding opportunities for investors on the ONE platform and introduce functionalities to facilitate networking and matchmaking between funding entities.
Act at European level to change critical aspects of AIMFD regulation, including the limits for retail investments from private savers into venture capital and support European Investment Fund initiatives to launch European-level funds of funds.
Continue leveraging public development banks and other public-funded entities (e.g. CDTI) to crowd-in private investors to venture capital markets, and possibly institutional investors.
Better support impact investors by extending venture capital tax benefits to European Social Entrepreneurship Funds (ESEFs) and European Venture Capital Funds (EuVEFs).
References
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[1] Miglo, A. (2022), “Theories of financing for entrepreneurial firms: a review”.
[12] Ministerio de Economia, C. (2024), Control de inversiones enxtranjeras en Espana 2024.
[11] OECD (2025), “Benchmarking government support for venture capital: A comparative analysis”, OECD SME and Entrepreneurship Papers, No. 71, OECD Publishing, Paris, https://doi.org/10.1787/81e53985-en.
[10] Spaincap (2024), Venture Capital & Private Equity activity in Spain 2024.
← 1. For more details about the initiative, refer to https://www.eif.org/etci/about-etci/index.htm