If Barcelona’s importance as a capital of entrepreneurship and innovation is growing, in part it is because of the rise in foreign investment. International venture capital has made up more than 60% of the investment in Catalonia in the past three years, accounting for between 70 and 250 million euros a year. It is something followed closely by Oriol Juncosa, cofounder and Managing Partner of Encomenda Smart Capital, a seed capital fund specialising in the early seed stage. With more than 100 million euros of international venture capital obtained by companies they have supported, Juncosa explained the keys to getting international venture capital at one of Acció’s Funding Breakfasts.
Minimum experience
“The main reason for raising international venture capital is the market for companies is global,” he says straight away. The large international funds “usually have more capital available than local investors and offer more interesting valuations.” In all, says the Encomenda head, it ends up generating bigger successes.
However, to get access to this funding, Juncosa makes it clear that “in 99% of cases they must have first gone through local venture capital funds that have an international perspective.” To his mind, the international funds “are grateful that the company has already been through a local fund with whom they have a good relationship.” It is not in vain that four of the five major tech sales in recent years in Spain had local and international capital.
"The large international funds usually have more capital available than local investors and offer more interesting valuations”
The most accessible sectors
The main sectors in which international venture capital acts mostly here are technology and biotech. “Also in industrial sectors and consumption, but not with the same level of attraction,” says Juncosa. Normally, these funds here devote venture capital of between five and 25 million euros per round, in other words, they come in during the company’s growth stage. “The early stage continues to be dominated by national funds and in the late stage (+25M), it is growing but at a lower pace,” he says.
The source of the capital is Europe (London, Paris, Berlin/Munich) and Asia. “Quite a few of the successes we have seen, like Wuaki or Trovit, were bought by Japanese companies. And we have large Asian family offices strongly entering Spain,” says Juncosa. However, American investors “here concentrate on rounds of 20 million euros upwards,” when they are in the consolidation stage.
When to look for international capital?
“It depends on the stage the company is at,” says the Encomenda head. “In the initial stages it is good for your investor to be nearby.” Therefore, the expert recommends having a developed product that has made its first revenue before launching oneself into finding international investors.
It will be in this stage of growth when the startups can more easily attract the attention of international capital, coinciding with the fact that “there are few national funds that can invest more than five million euros.”
How to prepare?
“If you want to make a global company and get international venture capital, you have to speak English.” Juncosa is especially insistent on this aspect that is often taken for granted. “There are fantastic teams with good products that often fail because of the language. It is a serious problem. This is the biggest impediment to raising international capital,” he says.
”If you want to make a global company and get international venture capital, you have to speak English”
At the same time, he points out that “international funding comes when you can already see the green shoots, you have your first client or you have carried out a trial.” In fact, he says, “it is difficult to get international investment without this experience.” This does not mean having offices abroad. In fact, “planning to have 15 international offices in two years is the best recipe for failure,” he says.
For Juncosa, minimal international experience means “having had conversations, tests, trial… .” It is also good “to have international human resources, which is easy to get in Barcelona and which should be used.”
An international plan
As is logical, a strategy and international business plan is also required. “When the entrepreneur gives the international pitch he or she should be very clear about how it compares with their international competitors and how they want to make it stand out,” says the Encomenda head.
Before everything, “investors want to find global winners. People who, wherever they are from, are capable of taking their company into the world Top 5 or Top 10.” So, being able to express it clearly is very important.
Without fear of losing control
In any case, Juncosa advises leaving the fear of losing control of the company out of it. “When an investor comes in, whoever it is, the entrepreneur loses a little control. The more invested, the more control lost,” he says. “Here often this fear leads people to sell and is one of the big impediments to building large companies,” he says. He gives the example of Privalia as one of the companies in which the founders were able to wait and, even though diluted, the final profits were also much higher.
"The investors want to find global winners"
Another of the most common mistakes, according to Juncosa, is “having low operational control in finances and metrics. Often the company has a family origin or a couple of entrepreneurs that have neglected this side of things a little.”
Patience
In all it is a relatively long process, of between six and 12 months. “When you begin to look you have to think that with luck you will have the money in six months.” Therefore, you have to avoid at all costs being left without resources while the operation goes ahead. “If in the middle of the process you end up with empty pockets, the investors will flee because they will get the impression that you have little control,” he warns.