Startups in Spain tend to trivialize the importance of the financial management of its businesses, and often look down on it, considering it a “simple number producing” activity related to “gestorías” (agencies that undertake administrative work).

But companies who care for having a first class finance management from the beginning have some clear strategic advantages:

  • Efficiency: Releases time from other key positions of a startup — founders, CEO’s, CTO’s, CPO’s, Sales Directors — who otherwise have to do financial management in a partial, reactive and non professional way.
  • Data analysis: Beyond the “simple number producing” label, the company becomes a data-driven organization, managed by information and data. Data rigorously analyzed, linked and integrated that keep the board well informed, adding value and guiding the strategic decisions.
  • Organization processes: Process is everything! With a sound base of financial and non-financial metrics, the company can adopt a rigorous and standardized weekly and monthly operational cadence. The Board and the Board of Directors ensure that the strategy is implemented and that any significant variation is discussed, debated and, if necessary, corrected.
  • Visibility: To third parties — investors, strategic partners and financial partners — a level of confidence is transmitted when the company has a strong and professional financial management.

Here are the answers to some frequently asked questions:

I do not have CFO, so what?
Many companies make the mistake of assimilating a professional financial management to large and complex enterprises. Nothing could be further from the truth. There is a clear advantage to professionalizing the role from day one .

Now or later?
Now! The main reason for delaying the decision of professionalizing the financial tasks of a company is usually the cost, since it is not a function of the front office. Companies that pay attention to financial management from day one are able to scale their operations better. Instead, those companies that wait to succeed, often discover that they professionalized their financial department too late.

Common mistakes:

  1. “We are facing a shaky and not cohesive organization with respect to key metrics”.
  2. “We must walk the path of one year in only one month”.
  3. “There were mistakes in the initial approach of the company that are now expensive, slow and delicate to fix”.
  4. “In an emergency such as a financing round or an internationalization process, the finance area may not respond adequately and quickly enough”.

Having a “gestoría” is not enough?
No. The accounting data is not directly interpretable by the business and, in any case, someone should do the job of adding non-financial metrics, interpret them, report them and discuss them appropriately with the board. Raw data do not add value.

What is the difference between the financial management in a small company and the one we might have later, once we succeed?
Essentially the cost and the flexibility, not the quality. On each growth-phase of a company, complexity and business success requires a CFO model adapted to it. But maintaining the common elements that we discussed earlier in this post. It is a mistake to wait for the company to succeed to change from an external financial agency to an internal CFO, who is capable of dealing with a millionair financing round or sell the business. The change is too abrupt, and the results do not occur as quickly as the company would like .

Given the need for a startup to have a professional financial management service, we have identified the following solutions:

  1. The startup has a CFO who is also a co-founder and who knows and wants to grow with the company. This CFO cost should be aligned with the initial business needs.
  2. The startup has an independent CFO who can growth with the company. He/she has to be able to gradually adapt to new situations, challenges and complexities. And the company has to be able to retain him/her!
  3. The startup has a service support tailored in terms of commitment and cost. This service provides the support needed on every life stage of the company and it is able to scale with the business.

This post appeared first on Delvy Law & Finance blog, on February, 3 2015

***
by Xavier Sansó
CFO at Delvy Law and Finance

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V.

VCs come into action — Breakdown of Spanish investment activity of January 2018

January closes with €195.3 million investments in Spanish startups within 24 operations

  • The Spanish entrepreneurial ecosystem is maturing thanks to investment rounds of more than €10 millions.
  • Barcelona and Madrid continue leading the Spanish ecosystem.


This is the first in a series of posts in which we will do an analysis of the Spanish startup investment landscape. We will look at the overall funding numbers and trends in the country month by month and compare it with data of the previous year.

What are the Spanish investment activities like on a month to month basis? What deals and volumes are we talking about? At what stages are startups prone to search investment and which regions in Spain attract the most funding?

The year 2017 brought us plenty in terms of innovation and investment activity within the area of technological startups, although Spain has been driven by political problems. The developments we have seen in 2018 so far are picking up at just the same fast pace.

January has closed with €195.3 million investments in Spanish startups within 24 operations. Of these funding rounds, highlights are the round of Cabify, Hawkers and Redpoints :

  • Cabify: The ride-hailing app that competes against Uber, has raised €143.3 million ($160) Series E funding round from a mix of previous and new investors, including Rakuten Capital, TheVentureCity, Endeavor Catalyst, GAT Investments, Liil Ventures and WTI, as well as prominent local investors from Spain and Latin America.

When analyzing the structure of financing deals, the increase in venture capital activity in Jan-18 is noticeable in comparison with Jan-17.

#Deals and volume in the Spanish startup investment landscape in January


In terms of the number of deals closed, we have seen a slight downward trend in the country. With a broad participation of Venture Capital, there have been less deals but more capital invested in each transaction. The reason for such a boost is mostly the gigantic financing round of Cabify with participation of giants’ VCs like Rakuten Capital, TheVentureCity and others.

The entry of European, American and Japanese funds investing in Spanish startups are accounting for a large percentage of the growth of the investments in Spain. At the same time, this global investment rise is making the average value of the financial rounds soar up to more than 1.5 times that of the previous year (without taking account of Cabify’s investment, that would turn this factor to more than 6 times the previous year)

The differences between January-2017 and January 2018 in terms of the increase in venture capital activity is shown below:

Startup investment deals by size of round


As we expected to see, the number of operations closed by investment size tends to a larger number in larger deals. While the number of deals of €500k or less have decreased considerably, the number of larger deals have gone up notably. This might be understood as an increasing number of companies maturing and reaching later stages of funding.

To properly ensure the aforementioned, in the following figure we show the breakdown of the investment activity by year of foundation of the company:

Startup investment activity (Jan-18) by year of foundation


Our previous statement is reinforced by this figure. The large transactions take place on established companies. In general, the more years a startup survives, the more established it is. As we observed, in average, the startups that were previously founded are those who raised more funding. That makes sense because normally an older startup has a bigger team and unless it has reached breakeven, it will need more funds to survive.

Startup investment deals by Region



Regarding the breakdown of startup investments by region, Barcelona, Madrid and Valencia bolster their position in the top of Spanish regions:

  • Cataluña (mostly in Barcelona) stands with 9 deals closed and an investment of €19 millions
  • Madrid gathers 7 deals and an investment of €148 million (€143 million in Cabify)
  • Valencia up to 3 deals and €23 million (€20 million in Hawkers)

Operations January 2018: