Life’s a beach as Southern Europe’s tech startup scene heats up

Brid-Aine Parnell

Wednesday 19 August 2015

They’re still feeling the bite of the global financial crisis in Southern Europe, but that hasn’t stopped the new tech scene from gathering steam.

The global financial crisis has taken longer to loosen its grip in the southern parts of the continent than it has in Northern Europe and in the US. Unemployment is still high in countries like Spain and Italy, and Greece has dominated economic headlines for months with its ongoing debt difficulties and potential ‘Grexit’ – a forced exit from the Eurozone monetary union.

But despite the economic difficulties, tech startups are starting to thrive in the region. The sector may be more than a bit behind its counterparts in the UK or Scandinavia, but you know an industry is doing well when it starts spawning its own events. Spain’s annual South Summit brings together startups from Southern Europe with talent from the Mediterranean and Latin America and investors from all over the world.

Big names in the region like CartoDB, ByHours, Bluemove and Tyba have all featured in the event’s startup competition and have grown exponentially in the last few years.

“Five years ago, there were some tech startups here in Madrid, but they were quite hidden – literally in basement offices – and there wasn’t much market exposure. Lisbon at the time had barely anything and Barcelona had a slightly growing startup scene, but not on a European or global scale,” says Eiso Kant, co-founder and managing director of Tyba. “In five years, that’s changed a lot.”

Tyba has taken a fresh approach to recruitment by focusing on the startup sector and presenting potential employees with a directory of exciting young companies to work at. At the same time, the company is matching developers with job vacancies by analysing their past work. The firm is planning to grow its staff from 28 to 42 by the end of this year and has raised €4.5 million in funding since it launched four years ago.

Recruitment is also the name of the game at one of Spain’s biggest success stories, JobandTalent. The firm uses employees’ past history to match them with the right job using unique algorithms. The site now operates out of London and Madrid and has over five million registered users and millions of dollars of investment. It most recently closed a Series A funding round worth €23 million in May, led by Spanish venture capital firm Kibo Ventures and Spanish private equity firm Qualitas Equity Partners.

Local investment in local startups has been a major feature of the scene in Southern Europe so far, but Tyba’s Kant says this is changing.

“There are many startups here that aren’t oriented locally, they’re global or Europe-wide, or Spain and Latin America. And they’re starting to realise that because they’re already competing on a European or global scale, they’re much better off competing for financing on that scale too,” he explains.

“Usually, you get much better valuations than you do locally and higher amounts of money, because, for example, if I’m in London doing a seed round of half a million pounds, that funding takes me two or three times further in Southern Europe than it would in the UK.”

The cost and quality of living is a huge advantage of doing business in Southern Europe and part of the reason that startups in the region are flourishing, Kant believes.

“It’s very easy to get people to move to Southern Europe!” he says. “We have Brits, Americans, Fins, Swedes, Germans and more working for us. If I look at a guy in London that’s making £80,000 a year, if he makes £30,000 a year here, he’ll probably have a better apartment, better quality of life and save more money just because of the cost of life here.”

As of yet, Asian and US foreign investment into the market is limited, but the UK and Northern Europe are starting to take an interest in Southern European startups. There’s even a Southern European firm that has made it to the status of ‘unicorn’ – a tech startup with a valuation of at least a billion dollars. Italian-based online retailer YOOX is the only Southern European unicorn since 2000, according to research from British investment bank GP Bullhound. Nearly half of the 40 European unicorns are UK-based, with Sweden, Germany and Russia also featuring high on the list.

But YOOX, founded in 2000 by former investment banker Federico Marchetti, has made a huge business out of internet mail order retailing – enough to turn his company into YOOX Group, an ecommerce conglomerate serving more than a hundred countries worldwide.

The global financial crisis may have encouraged more people to take risks and become entrepreneurs, but Kant doesn’t believe this is what’s driving the tech scene growth in Southern Europe.

“There is more of an ecosystem now, there’s a lot more visibility of the companies that are doing well and there’s more investment,” he concludes.

Add that to the low cost and high quality of life and it’s easy to see why doing business down south is proving to be alluring for tech entrepreneurs.

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