Sifted - Is Spain getting its act together?

Good morning there,

Unlike much of European tech, 2023 was a favourable year for Spain. The country's former high commissioner for entrepreneurship thinks part of that is down to the Startup Law — legislation that looked to give a leg up to the local ecosystem. One year on from it passing into law, Cristina Gallardo digs into whether or not it’s been a success. Read on for that. 

Elsewhere today, secondary shares in Klarna are up by around 45% in the last six months, we dig into a startup that’ll insure your genitals and list the defence tech startups VCs have their eye on.

— Sadia Nowshin, editorial assistant 

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Is Spain getting its act together?

In a year that saw European tech funding slump, 2023 was somewhat of a moment in the sun for Spain’s early-stage startup ecosystem.

Early-stage funding in the country was up on 2022’s levels, and Spanish startups raked in a record amount of capital. Madrid also broke its record for deal count in 2023, suggesting the local ecosystem is maturing.

Francisco Polo, Spain’s former high commissioner for entrepreneurship, tells me government legislation is partly to thank. He says the nation’s Startup Law — passed a year ago to make Spain more attractive to investors and founders — is partially responsible for an increase in the number of seed, Series A and Series B rounds in 2023, and also contributed to a 42% increase in overall investment levels by national VCs.

“I think this is very connected to the Startup Act, which offers business angels up to 50% tax relief [on the income from their investments] with a limit of €100k, which is one of its star measures,” he says.

Alongside making Spain more attractive for local and foreign investors, the Startup Law was also introduced to attract international talent, by creating a new one-year visa for digital nomads, and expanding the length of residence permits. That brings Spain in line with other countries in Europe, like Estonia and Croatia, in offering incentives for nomads.

So 12 months on, has it been a success?

People working for startups younger than five years (or seven in the case of businesses in strategic areas like biotech, energy and industry) can now receive up to €50k per year in stocks or shares without having to pay any tax on them until they decide to sell — up to a maximum of 10 years from the date they are received by the worker.

Those who drafted the legislation faced resistance from the Spanish treasury, which feared it could become a backdoor for tax fraud, according to people involved in the discussions at the time. However, they say this is a more generous offer than in countries such as the UK, where the tax exemption period is three years for a total of almost €300k.

There are a couple of caveats though. Scaleups and older startups fall outside the scope of the legislation, and to benefit from the incentives, startups need to be certified as such by a new government agency, called Enisa.

Officials had expected around 10k startups to receive Enisa’s green light — but as of the end of last year, the agency had certified about 600 and was studying a further 1,000 applications. 

Miguel Ferrer, director of strategy and public policy at the Spanish tech lobby group Adigital, says the numbers so far “aren’t bad” if you take into account that 2023 was “a very dysfunctional year”. Most of the rules associated with the law were published around the summer, when there was a need to beef up Enisa and a reconfiguration of the Spanish government after a general election in July.

He hopes the certification system will inject “seriousness” into the sector by providing it with reliable data on how many startups exist, and what they do — rather than relying on industry reports from private organisations citing vastly different figures. This should also make it easier for the government to channel support into the ecosystem, Ferrer says.

But what I’ve noticed from my conversations with founders is that some of them are still unaware of some of the changes introduced by the law, including its much more favourable tax regime for stock options. It's the second time in just a few months that I've come across multiple Spanish founders unaware of policy moves — some are still only just finding out about the government’s AI sandbox. Is the government reaching out to them?

Polo, who spearheaded the Startup Law while in his previous role, says the government is running a big promotional campaign to make sure founders are aware of it. 

Ferrer says there's a widespread view in the country that the law has been beneficial for the country’s tech ecosystem. However, he says the government, which is expected to review the law’s impact at the end of this year, must come up with a package of measures to support scaleups and older startups that are in no man's land.

I’d like to hear from Spanish founders — what do you make of the law? Did you know about the changes? Has it made your life easier? Is there anything missing? Email me.

— Cristina Gallardo, Iberia and deeptech reporter

👴 How old are you really? Longevity startup GlycanAge has raised a $4.2m seed round to scale its business that helps users — mostly rich tech bros, celebrities and longevity research laboratories — learn their biological age using an at-home finger prick test, analysis of which can indicate the level of damage in people’s bodies caused by their lifestyle and the environment. The startup also gives them tips on how to improve their condition. 

• Unlike other companies that work on biological ages, GlycanAge analyses glycans — complex carbohydrate molecules and one of the primary components of our bodies’ cells. Its laboratory, located in Zagreb, is the largest glycobiology lab in the world. 
• The round was led by Bulgaria’s LAUNCHub Ventures and UK-based deeptech fund Kadmos Capital. The startup wants to spend the capital on pivoting from the field of well-being and longevity to wider diagnostics. 

🏥 UK-based Juniper raises £1.5m to roll out “insurance for genitals” pilot. The startup plans to offer health insurance for a number of conditions like polycystic ovary syndrome (PCOS), menopause, erectile dysfunction and gender dysphoria. 

• It’s looking to address a gap in the workplace health insurance market caused by many providers not covering reproductive health claims. According to Juniper’s research of coverage offered by 50 health insurance policies from mainstream providers, 90% didn’t offer IVF, while infertility and menopause treatments weren’t covered by any. 
• Juniper plans to roll out the pilot “sometime this year” before officially launching sometime in 2025. The round was led by Insurtech Gateway, and featured VCs 2100 Ventures and Exceptional Ventures.

💉 Vaccine discovery biotech Baseimmune has raised £9m, according to Companies House filings taken from Beauhurst. The company says it can design vaccines that are effective against future variants of a disease, using its proprietary algorithm to create artificial antigens — a molecule that triggers immune response — based on the entire genome of a disease.

• UK VC IQ Capital appears to have invested, alongside existing backer Hoxton Ventures — which led the startup’s previous $4.8m round in 2021 and confirmed its involvement to Sifted.
• Baseimmune’s pipeline currently includes two human vaccines against malaria, a coronavirus vaccine and a veterinary inoculation against African swine fever. According to Hoxton partner Hussein Kanji, the startup will use the new funds to begin developing more potential vaccine candidates.

💰 UK-based chipmaker Graphcore is exploring a sale to foreign buyers, according to The Telegraph.

Is your startup ready for the spotlight?

We are looking for startups with a strong track record of revenue generation for our brand-new feature: Leaderboards — top 100 lists celebrating the successes of high-growth companies and the investors backing them.

💰 Shares in Swedish BNPL giant Klarna have been on a hot streak with investors in the secondaries market lately. Private secondary shares in the startup have risen about 45% in the last six months, with most of those gains coming in the last few months of 2023, according to US-based private market data company Caplight.

• The fintech has been gaining popularity with private investors in light of a recent profitable quarter in late 2023 — plus IPO rumours.

🪖 10 defence tech startups to watch, according to VCs.

Paris-based Planity, a booking platform for the beauty industry, raised $50m in Series C funding. InfraVia Capital Partners led the round and was joined by investors including Crédit Mutuel Innovation, Revaia and Bpifrance Digital Venture.

Berlin-based Monite, which offers payment automation software for B2B companies, has raised $6m from investors including Peter Thiel’s Valar Ventures and Third Prime. 

Paris-based Avatar Medical, which converts CT scans and MRI images into 3D and VR representations of a patient’s medical images, raised €5m in seed funding. GO Capital led the round and was joined by investors including Acorn Pacific Ventures, Plug and Play, Rives Croissance and Cenitz.

Bedford, UK-based Evios, which provides at-home EV charging solutions, raised £4m in Series A funding. Beringea led the round.

Bilbao, Spain-based WIVI Vision, which specialises in gamified AI-based therapies for people with visual dysfunctions, raised €4m in Series A funding in a mix of equity and debt. Adara Ventures led the round and was joined by investors including Hearstlab, Avançsa, Caixabank DayOne, BBVA Spark, Banco Santander, Peak Thomas and VC Go.

Stockholm-based Vitala Health, which helps patients who are prescribed medical exercise to digitally track their progress, raised €1.34m from investors including family offices Fort Knox Förvaring and Huxley Invest and VC firm Spintop Ventures. 

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