Iberian Startup Scene | December 2021

I am a VC at Armilar, covering Enterprise Software/B2B SaaS and Blockchain/Fintech.

In my free time, I write startup-related topics, including this newsletter. Content, opinions, and typos are my own!

Feedback is welcome.

2021 in a nutshell

• 2021 ended with a record in terms of funding on both sides of Iberia
  • €5.7Bn was invested in Iberia, of which ~€1.4Bn in Portugal and €4.3Bn in Spain
  • December alone represented €1Bn (details below)
  • According to Dealroom and Pitchbook, there were ~€100Bn invested in Europe, which means that Iberia represents slightly over 5% of the European market. Madrid and Barcelona are now among the most active Hubs in Europe
  • Versus 2020, both Portugal and Spain increased ~4x invested amount. This compares with a ~2x increase in Europe.
• During 2021, there were 732 rounds, of which 158 were in Portugal and 574 in Spain. Breaking it down by stage, 31 were Series C or beyond, 24 Series B, 92 Series A, 318 Seed and 267 pre-seed.

What happened in 2021?

• Main drivers impacting 2021, in my opinion
  • Mega-rounds and Unicorns: in line with what happened in Europe, there was an increase of very large rounds ($100M+ deals). In 2021, 16 rounds were $100M or more and represented €3.3Bn (>50% of the total amount invested). Those mega-rounds fuel existing unicorns but also created new ones. In total and at the end of 2021, there existed 15 Iberian unicorns – 7 in Portugal and 8 in Spain – of which 8 (more than double) were created last year – 4 in Portugal and 4 in Spain.
  • Increasing participation of International investors: Iberian ecosystem benefited from an increase in international investors’ participation. International investors’ participation was already a given in later stages rounds, but 2021 marked an increase in participation even in seed stages. In total >25% of the rounds counted with international investors’ participation. In addition to an increase in participation, several international VCs have also physically moved/opened offices in Iberia (Pepe being the most recent announcement)
  • Increase in startup valuations: Impacted by the increase in size of rounds globally and international investors participation, rounds also increased, particularly in Seed and Series A. I estimate that rounds size in Seed and Series A have almost doubled. But this wasn’t a local phenomenom. Internationally, companies have been raising Series A and B earlier
  • Compression of time from first meeting to close: Increasing local and international competition has also driven investors to make decisions faster and I estimate that timing from the first meeting to money in the bank has reduced significantly and is now under 3 months for Seed and Series A deals.
  • Increase in Public direct investment: Looking into 2021, I also see a clear trend of increasing direct investment from local public institutions. During 2021, over 100 deals (~20% of the rounds) had public support. Portugal Ventures alone announced 70 investments  (some are not yet public and thus not included in this analysis).
  • Increase in local VC activity: T27 local VCs and CVCs did 10+ investments and 6 investors did 20+ investments (these numbers include new and follow-ons and investments outside Iberia). Think Bigger Capital (from Demium) alone, participated in almost 40 rounds, ~3 investments a month.
  • Finally, and only in Portugal, there was a reduction in the number of rounds communicated by Business Angels, resulting in a lower number of pre-seed rounds. The main driver is the end of IFD lines for business Angels which resulted in a lower number of rounds announced

What to expect from 2022?

• 2022 started with similar trends to the end of 2021 – January highlights
  • Delivery Hero signs agreement to become the majority shareholder of Glovo
  • TravelPerk raised $115M and reached unicorn status
  • ~€700m invested in January in Spain
  • New funds
    • Kibo Ventures raised $175M in two funds: fund III and an opportunity fund. Kibo also shared details about the performance of their previous funds, which is quite impressive
    • Lightshift raised a $30M fund focused on digital assets and decentralized financial services
    • Unitatea announced a €750k investment vehicle
    • Arcano announced a €100M Fund of Funds, focused on VC funds
  • Faber Ventures announced a new blockchain hackathon and acceleration program, in partnership with Protocol labs
• But while 2021 started with similar trends, macroeconomic trends might impact the Iberian startup scene in 2022
  • Public markets multiple valuations have reduced by ~40% and bitcoin is down ~50% vs. last year all-time high
  • There is an expectation that FED will increase interest rates, due to increasing inflation
• And while the existing pool of capital available to deploy in startups haven’t change (international investors will still come to Iberia and local investors have increasingly large funds to deploy), I expect that investors might be more cautious to deploy capital as (i) soon or later startups will meet market valuation and (ii) it might be harder /take longer to raise VC funds vs. last months, so investors will delay their own runway
• So, in a nutshell, I expect 2022 with a higher number of rounds – due to an increase in international founders moving to Iberia and by having more Iberians creating their startups – but with a lower average deal. Let’s see how far I am on this prediction.

• Spanish tech in review: the key moments of 2021 by Sifted
• 10 super promising Spanish startups to keep an eye on in 2022 and beyond by EU Startups
• Scaling to $100 Million by BVP
• Three steps into the future by Ben Evans
• Tech questions for 2022 by Ben Evans
• Hot or not: Where European VC funding went in 2021 and European Venture Report 2021 by Pitchbook
• Here’s how far VCs have lowered revenue expectations for seed through Series B by TechCrunch

Click here for additional resources, including

• Term-sheets
• Investors information
• Startup fundraising data

Portugal

Spain

Iberian investors, investing abroad

Activity report

See also

• Iberian Startup Scene | Q4 2022
• Iberian Startup Scene | November 2022
• Iberian Startup Scene | Q3 2022
• Iberian Startup Scene | Q2 2022
• Iberian Startup Scene | May 2022