2021 Entrepreneurial Activity Review

In early 2021, Spanish President Pedro Sánchez unveiled the Spain Entrepreneurial Nation Strategy, which seeks to make the country a major hub of technology startups by 2030. This was driven in part by the identification of several gaps in Spain’s startup sector, in terms of gender, region, socio-economic status and age of those involved. These are admirable goals for the Spanish startup sector, yet it is also important to keep in mind that startups are only a small part of the entire entrepreneurial picture. If one looks at entrepreneurship in Spain holistically, the emerging story is of balance, rather than gaps.

Spain’s TEA rate in 2021 was 5.5%, a slight improvement from 2020. This has also been the average TEA rate, more or less, since Spain began recovering from the Great Recession around 2011. This suggests there may be a natural rate of earlystage entrepreneurial activity within the Spanish entrepreneurial environment, in balance with a recovery in employment, as well as how much the market is willing to accept new products and services. Similarly, its EBO rate of 7.2% in 2021 was a slight improvement from 6.7% in 2020, which is also about average compared to previous years in Spain, following the recession. Ideally, Spain might benefit from a higher TEA rate so that there are newer businesses to replace established ones that eventually exit. Yet this would likely require a very targeted policy approach to boost new businesses at the margin, perhaps similar to the Spain Entrepreneurial Nation Strategy, but expanded to other high-potential sectors. Any blanket policy might risk creating an over-competitive entrepreneurial sector, where very few new firms can survive to the established stage.

The theme of balance can be seen in other areas of Spanish entrepreneurship. In terms of age, the rates of TEA respondents in Spain under 35 and over 35 are nearly identical. While, on the one hand, this shows a population that does not significantly “age out” of entrepreneurship, it could also be a concern to policymakers because new innovative firms tend to be founded by younger people. It could also be a concern to policymakers because new innovative firms tend to be founded by younger people, meaning fewer young entrepreneurs to replace older entrepreneurs who retire or leave their business. Finally, Spain’s entrepreneurial gender gap ratio is also quite balanced, at just over 1.0, meaning slightly more women than men are involved in early-stage entrepreneurship. This contradicts the story of Spanish startups, which is apparently much more skewed towards men. If the entirety of Spanish entrepreneurship is considered, women are much more present.

2021 Framework Conditions Review

Spain’s Entrepreneurial Framework Conditions generally performed well compared to other GEM Level B economies. This is particularly true in the areas of finance and governance. For the condition of Entrepreneurial Finance, Spain received a 4.9, while for Ease of Access to Entrepreneurial Finance a 4.8, placing it second in both among GEM Level B economies. This was an improvement over 2020, when the Entrepreneurial Finance condition received a 4.4 score. While these are strong scores, Spain’s aspirations, according to the Spain Entrepreneurial Nation Strategy, is to close the investment gap between itself and its neighbours France and Germany.

A critical component of closing that gap will be to attract even more capital and to make it accessible to entrepreneurs in need of finance. Spain’s three government-related conditions also improved in 2021, reflecting more government prioritization of entrepreneurship coming out of the COVID-19 pandemic. Specifically, Government Entrepreneurial Programs received a 6.3 score from experts, placing it first among GEM Level B economies. This level of prioritization will be essential in attracting more talent, including from abroad, to start new businesses in Spain. However, achieving this goal will require sustained prioritization so that potential innovators associate Spain with supportive conditions for entrepreneurship.