Spanish 'unicorns': how I made my company worth 1,000 million euros

Having your feet on the ground sometimes doesn't stop you from believing in fairy tales. This is demonstrated by some episodes in the economic history of Spain, which despite having a rich collection of proverbs that exude crude realism, has not avoided on several occasions throwing itself into the arms of bubbling euphoria. One of these sayings was formulated by Francisco de Quevedo in the 17th century: “Only a fool confuses value and price.” It is also the phrase that comes to mind for investor Luis Martín Cabiedes when he is asked about a mythological animal that has traveled the world, and also Spain, in recent years: the

unicorn

.

The name of this magical one-horned white horse is the one used to designate, in the world of technological entrepreneurship, companies that achieve a valuation of more than $1 billion, normally in private markets through rounds. of financing, although there are also those that continue to maintain this valuation after going public. At the beginning of the last decade, when the term was coined, it actually referred to very rare organisms, such as the

unicorns

themselves in stories: they were fundamentally technology companies, most of them from Silicon Valley (California, USA), with a high disruptive component, which were called to change important aspects of everyday life around the world, and in which investors were willing to put so much money so that its valuation exceeded the mythical barrier of 1,000 million.

It was at the end of 2013 when investor Aileen Lee used the adjective

unicorn

for the first time in a newspaper article to designate these brilliant business projects. At that time, Lee counted 39 companies in the world that were included in this select club. Ten years later, there are between 1,200 and 1,500

unicorns

, depending on the different classifications available. And just over half a dozen have their origin in Spain. The cocktail of success has several ingredients: luck, contacts, finding a gap not covered by the market or being in the right sector—now imagine all the artificial intelligence projects—at the right time. Of course, all members of the entrepreneurial ecosystem warn that being classified as

a unicorn

is just a number, and the money, just as it comes, goes if business expectations are not met. Furthermore, everyone recognizes that the business projects that come after them will have a more difficult time: the end of free money with the increases in interest rates has caused investors to be more selective and distrustful.

Cabiedes, who through his fund was the first Spanish investor to put money in a company that would become a

unicorn

- in this case French, Blablacar - defends the entrepreneurship ecosystem, but is "openly critical" of the mania for investing labels everything. “Just because a certain price has been paid for a company does not make it have that value. We have gone through a book bubble in some technology companies: there has been feedback, price increases and contagions,” he points out. Realism prevails in the current economic situation, and entering the select club of

unicorns

is now more difficult, because investors are no longer asking for just a good idea. Now, more than before, they are asking for the numbers that show that this idea will be profitable.

Travel companions

But why do some companies reach this status and others do not? The founders of

start-ups

that became

unicorns

interviewed for this report —Juan Urdiales, from Job and Talent; Jordi Romero, from Factorial; Sacha Michaud, from Glovo; Juan de Antonio, from Cabify, and Avi Meir, from TravelPerk, agree on highlighting some aspects: being flexible when modifying the idea you start with, getting the investors who support the project right, having a cohesive team and, above all, identify the market potential. They also agree on something else: although the

unicorn

label has given them publicity and projection, they assure that it has never kept them awake. “The most important thing about becoming

unicorns

was that it allowed us to capitalize and not lose control of the company. Ratings are something very vain, they are very popular, they help visibility, but it is not relevant. The important thing is to have a solution that works for your client,” says Romero, co-founder and CEO of Factoril.

According to the classification that CB Insights makes in its updated The complete list of unicorn companies, there are more than 1,200 companies in the world that fit this category — the first, with a valuation of $225 billion, is the Chinese company ByteDance, owned by the social network Tik Tok, and is followed by giants such as SpaceX, Open AI and Shein. If we go to another of the sector's bibles, in this case Crunchbase, there are 1,524

unicorn

companies that have a total valuation of more than three billion dollars.

And in Spain? The CB Insights list currently places only five Spanish companies as

unicorns

: Job and Talent, Cabify, TravelPerk, Recover and Factorial. Crunchbase also adds Idealista, due to the sale operation to the Swedish fund EQT, which valued it at 1,321 million euros. There are more Spanish companies that have surpassed the 1,000 million barrier at some point, others that are aspiring and have little left to get there, or that are considered as such in other classifications — there are more than half a dozen rankings that track these highly valued companies—: Glovo, Wallbox, Fever, Edreams, Copado, Devo, Domestika, Wallapop, Flyware, Haciendas BIO or LetGo. Others, such as Paack, Typeform or Exoticca, have high ratings and hope to be the next to enter the club. Among the founding teams of all these companies there are hardly any women, following the trend in the world of entrepreneurship in general, where start-ups founded only by women are barely 6% of the total, according to the latest annual report by Global Entrepreneurship Monitor.

a pinch of luck

Cabify was the first to acquire this status. Juan de Antonio, founder and executive president, explains that the key to reaching this valuation is “for the company to generate relevant value for society” through “efficient and innovative solutions.” Added to this key is being able to manage a company that, by attracting huge rounds of investment, can trigger its growth, and “a pinch of luck.” “The history of Cabify would have been very different if we had been born earlier, since the penetration of smartphones was still insufficient, or later, since the competition could have been excessive,” acknowledges the businessman. Like Romero, the founder of Cabify also believes that being a

unicorn

“is not an end in itself, it is not the axis of your business plan, but rather a sign that the company is on the right path.”

When Sacha Michaud first met Óscar Pierre, he didn't know that Glovo, the

start-up

they were about to launch, would end up being the second

Spanish

unicorn

. The keys to becoming one, according to the co-founder of the home delivery platform, were “discipline, flexibility and perseverance to solve all the problems that arise along the way.” They have not been short of setbacks, especially in the area of ​​regulation and justice, but Michaud highlights the ability to connect the service with what the public is willing to pay. “At first it's all trial and error. Once the company gains momentum, it enters another phase in which more scalable processes are developed.” Glovo has grown like crazy since it was founded in 2015, and investors have showered it with money as it expanded internationally, but Michaud says founders who obsess over the valuation of their business are wrong. “They should focus more on improving and optimizing their main internal indicators,” he advises.

The

unicorn

label is one more in the rich vocabulary of

start-ups

, where English words and concepts such as elevator pitch – the elevator speech with which to convince an investor in the short time it takes – or friends, fools and family —“friends, fools and family”, the first ones you go to to ask for money and start the company. This vocabulary, together with the story of entrepreneurship imported from the United States, the interest of investors in opening new markets and legislation that was not yet prepared to regulate the activity of new companies, partly explain the birth of these projects, which later They have become

unicorns

in Spain and in many cases, such as Glovo, the profitability of their accounts has been conspicuous by its absence.

The dark side

Compared to the way in which the founders themselves explain their success, there is an opposite story, which tries to put in black and white a history of aggressive growth, elimination of competition through very low margins and abuse of labor regulation in order to maintain these prices. . In the book

The

Unicorn

Club , the journalist Paula Solanas shows a Spanish entrepreneurship ecosystem that has been able to imitate the trends of the United States to enter traditional businesses—people transportation, home delivery, temporary employment companies, classified ads—through digitalization, at the same time came into conflict with workers' rights. And she draws an entrepreneurship network that is not as open as it seems, in which several of the successful models have the same investors – the presence of the founders of Tuenti in several of them stands out – and they support each other. “They have used technology to simplify tasks in the physical world and share a basic characteristic: they accumulate data about us non-stop, which they then monetize in different ways,” Solanas points out in her book.

Technological entrepreneurship has also benefited from a very favorable context: the pandemic, confinement and teleworking boosted the demand for digital services like never before, and this, in a few years of very low interest rates, made money flow freely. . Venture capital and

venture capital

funds

put more resources than ever into emerging technology companies, skyrocketing their valuations: in 2021, the global

start-up

ecosystem received $643 billion in investment. Now the context has changed, technology companies in general have gone through difficulties after the normalization of demand once the pandemic was behind us, which they compensated with spending cuts through massive layoffs. To make matters worse, the money was no longer free and the financing tap was turned off.

The Spanish ecosystem also benefited from this euphoria, where more than a dozen companies at some point reached the valuation that gave them the title of

unicorn

. While some are still there, such as Factorial or TravelPerk, others have lost their category by being sold to third parties and seeing their valuation lowered (Glovo) or after IPOs that reduced the initial euphoria (Wallbox).

Juan Urdiales, founder of Job and Talent, explains that the market “has absolutely changed in the last two years.” First with the change in trend in companies that are listed on the stock market in 2021, with a drop in the value of technology companies that later affected unlisted ones. “The market went from asking for growth at all costs and from valuing companies based on income or gross margin metrics, to valuing them based on profitability. Inflation and rising rates have restricted liquidity, and part of the investment has gone into fixed income or debt, which means there is less liquidity in venture capital funds,” explains Urdiales. In his case, he believes that they benefited from the previous stage, which allowed the company to exceed the 1 billion valuation at the beginning of 2022: “In the current context we do not know what would have happened. But if the 2021 Job and Talent went out to raise money in 2023, the valuation would be lower than it was.” In terms of toughening the environment, it can also have a positive reading, like the one made by the co-founder of Glovo: “Having more realistic valuations is good. It makes companies focus more on defining their path, being profitable and building sustainable business models.”

Slowdown

This brake is seen in the rate of birth of

unicorns

in the world. According to Pitchbook, it peaked in 2021, with 626 companies entering this category. The following year the number dropped by almost half, with 355

unicorns

. In 2023 there were 101, and so far this year only 37 have been created. In Spain, the last success story was the Barcelona-based Factorial, in October 2022, when it closed a significant investment round that boosted it to this valuation. Spain, taking into account the size of its economy, is somewhat behind other comparable countries when it comes to giving birth to

unicorns

, although the cases are very varied: according to the CB Insights list: France has 26 companies in this club, Germany 31 , but Italy has only three and Portugal none.

This difference is explained by the lower investment. According to the report Investment Trends in Spain 2023, from the Start-up Ecosystem Observatory in Spain run by the Bankinter Innovation Foundation, investment in entrepreneurial projects last year was 2,331 million euros distributed across 382 operations, which represents a sharp drop of 32.2% in the total investment figure, although the number of operations fell less, by 10.3%. The report points out that the numbers are still better than those of 2020, the year before the record - when almost 4.5 billion euros were invested in 413 operations - but also points out that “there has been a reduction in the size of investment rounds , likely due to a decline in

startup

valuations

.” And that the participation of

venture capital

(risk capital funds that invest in the initial phases of companies),

family offices

(investment vehicles for high net worth) and

business angels

(investors who normally participate in the birth of projects) has been reduced and only the participation of

corporate

funds

(the investment that comes from large multinationals, normally to take control) and public investment has increased.

Another interesting fact is the number of divestitures or

exits,

that is, the sale of the company to a third party, which is what, together with the investment rounds, determines the valuation made of a company. In 2023 there were 53 operations of this type, 33.7% less than the previous year, for a total volume of 1,002 million euros, 28% less.

TravelPerk co-founder Avi Meir agrees that “investors have become more cautious,” but sees the glass half full: “That does not limit opportunities to those companies with a high-growth, sustainable and realistic plan.” All in all, the current situation supports Cabiedes' initial thesis: “I have seen this before. There will be an adjustment, investment will slow down a lot, and the wheels will be put in motion again. The break in 2000 was worse, and then came some very good years.” For now, in the relationship between price and value, realism once again prevails, and mythological animals such as

unicorns

give way to the common sense claimed by Cabiedes: “The price is what you pay, the value is what you get.”

Avi Meier (Travelperk): The pull of business travel after the pandemic

The start-up founded in Barcelona in 2015 by two former employees of the booking website Booking, Javier Suárez and Avi Meir, is one of the few companies in the Spanish ecosystem that challenges the current situation and continues to raise money in different rounds of financing. . Last January, Travelperk raised approximately 95 million euros in a capital increase led by the Japanese giant Softbank, which shows that its business convinces investors. Travelperk is dedicated to the management of business travel reservations, and achieved unicorn status in 2022, when its valuation reached 1.3 billion dollars (about 1.1 billion euros at the exchange rate at the time). that the operation was closed). With the new financing round closed three months ago, it has revalidated the status of a successful emerging company, maintaining a valuation of 1,280 million euros. The company, which invoices about 150 million euros a year and has about 1,200 employees, focuses on looking for clients in small and medium-sized companies, since that is where the large travel agencies have not entered and where the market is completely open. . Travelperk CEO Avi Meir remembers that the first time they achieved unicorn status was in 2022, right after the pandemic. “During Covid, it was almost illegal to use our product because you couldn't travel. We take advantage of that downtime to grow. Instead of reducing our staff, we increased our engineering and product team by 250%,” explains Meir.

Jordi Romero (Factorial): Manage SMEs from software

Factorial, the last of the Spanish companies to achieve unicorn status, had gone through one of the most typical problems of start-ups before achieving it: having an idea but not finding the right business model. In 2016, three engineering friends—Pau Ramon, Bernat Farrero and Jordi Romero, who met at university, at work and sharing a flat—founded Factorial in Barcelona to provide a solution to a problem that they had detected in a market that they expected to be huge: manage the human resources of small and medium-sized companies in an efficient and digitalized way. Go from paper and pencil to a program tailored for thousands of companies. Although the potential was great, they circled around for three years before finding a way to actually make money. Instead of what they had done until then, offering the program for free and charging employees commissions for products such as restaurant tickets, they focused on the program, for which they began to charge a subscription. Thus they began to raise rounds of financing until the one they achieved in October 2022 allowed them to enter the select club of unicorns. Despite the fact that the economic situation has forced Factorial to cut expenses and lay off more than 20 employees last year - to which was added the departure of Pau Ramon from the management leadership and a controversy over a podcast in which those responsible made light of with the reduction of staff—, the company continues to seduce investors since it has just successfully closed a new round of fundraising for 80 million euros.

Jesús Encinar (Idealista): A revolution for the real estate sector

The unicorn label came to Idealista after a journey of 20 years. Founded in 2000 by Jesús Encinar, who was later joined as co-founders by his brother Fernando and César Oteiza, the most famous real estate portal in the Spanish market had to face the dotcom crisis in its early stages as a company, it rose then the euphoria that ended in an abrupt burst of the real estate bubble, suffered the impact of the subsequent Great Recession and, more recently, the shock caused by the pandemic. But Idealista has resisted all these ups and downs and with its platform it has definitively changed the way in which an apartment is searched and also the strategy with which real estate agencies offer their homes to the general public. Like some of the other Spanish unicorns, this company replicated a business model that was beginning to be successful in the United States, where Jesús Encinar went to study a master's degree at Harvard. But his trajectory is different from other Spanish unicorns since Idealista was profitable from very early on, and has not based its growth on a series of investment rounds or a major international expansion. In 2015, the British fund Apax took over the majority of Idealista's capital, and in 2020 the Swedish fund EQT took control, in an operation that then valued the portal at €1,321 million, granting it unicorn status. Now the Swedes have once again put Idealista up for sale, with a valuation that amounts to 2.5 billion euros, a record figure for a technology company made in Spain.

Juan de Antonio (Cabify): Pioneer and nightmare of taxi drivers

Cabify was the first Spanish unicorn, a threshold that it surpassed in 2018. The founder, Juan de Antonio, had the support of the promoters of Tuenti to create Cabify in 2011, and replicate what he had seen as a student in the US, where Uber already It was successful with its model of the then-called collaborative economy: drivers who offered their car to take people from one point to another. From Antonio he took it to Spain, first aimed at a more elite niche audience. But here the system was more regulated, and they entered by associating with fleets that used VTC licenses: car permits with driver, until recently limited by law and used only by specialized drivers, and which therefore had a relatively low value that skyrocketed when In 2009 its use was liberalized. Cabify partnered with fleets commanded by entrepreneurs and former taxi drivers who had acquired large numbers of VTC licenses. The arrival of Cabify and Uber unleashed the war with the taxi sector. The efforts of the administrations to regulate the activity led to episodes such as Cabify's decision to stop operating in Barcelona for a few months, and then return adapting to the regulations in its own way. Despite the conflict with the taxi and misgivings about the working conditions of drivers, and although it was only profitable in 2019, Cabify has been finding money to grow, especially thanks to the Japanese investment group Rakuten. In 2022, Cabify had a turnover of 627 million. The last investment round was in 2023, with 100 million. The possible IPO is, for the moment, on hold.

Sacha Michaud (Glovo): A controversial model of employment relationship

The home delivery company Glovo was the second unicorn in Spain, a category it reached in 2019. This start-up founded in Barcelona in 2015 by Óscar Pierre and Sacha Michaud ended up selling the majority of its capital to one of its main competitors, Delivery Hero. The value of the sale was estimated at $2.3 billion, but at the time of closing the operation, in 2022, Delivery Hero and the entire delivery platform industry suffered a major setback on the stock market, which caused the valuation of the company to fall. Glovo 65% and stripped him of his unicorn title. Glovo, which in all the markets in which it has operated has never been profitable, is one of the best examples of a technological start-up in Spain: it has been a money-burning machine; investors have been supporting it as it expanded aggressively; and was sold to a larger competitor and its business model has drawn both admiration and outright rejection. Its delivery drivers, with their yellow backpacks, have changed the landscape of the cities. While his clients grew and his business idea was applauded in some circles, suspicion also increased about his use of the algorithm and about his labor model, questioned in the Labor Inspection and in the courts until it was demonstrated, in the Supreme Court, that the relationships that he passed off as commercial were actually labor-related. The Rider law wanted to amend this use of false self-employed workers, and although part of its workforce is now hired, another is subcontracted or remains self-employed. The Labor Inspection imposed a sanction on him in January and this same week the Ministry of Labor informed the Prosecutor's Office of the crimes it has found in its investigation. Yolanda Díaz says that the delivery company's efforts to employ false self-employed workers may be “constitutive of a crime against workers' rights” that violates the Penal Code.

Juan Urdiales (Job and Talent): The ETT of the digital ecosystem

Juan Urdiales and Felipe Navío founded Job and Talent in 2009 in Málaga, but soon moved to Madrid. Urdiales remembers the beginnings as a “roller coaster” in search of the right business model: they began as a social network to share content related to employment and became a platform to connect qualified candidates with companies that were looking for profiles, until in 2016 reached its turning point. It was then that one of the co-founders of Tuenti, Félix Ruiz, joined the team, and Job and Talent pivoted again to become an integral manager of the recruitment process.

temporary hiring for companies, from selection to contracts and payroll. That is, a temporary employment agency (ETT), but in the digital world. This shift came at a high price: they had to lay off a third of their staff as a requirement to continue attracting investment. The growth since then was unstoppable: from five million in turnover that year to 1.9 billion in 2022. The history of Job and Talent cannot be understood without its expansion through the purchase of traditional ETTs, nor without its relationship with other technology companies. : Many of the workers at Cabify, Glovo, Amazon, Just Eat or Uber Eats are outsourced through Job and Talent. This has made them rise like foam, but it has also caused the regulatory pressure on these companies to end up affecting them. It reached unicorn status at the beginning of 2021, and at the end of that same year it doubled its size and valuation.

Anders Sjöblom (Recover): A start-up with more than a century of history

The history of Recover, a company dedicated to textile recycling that was born in December 2020 in Banyeres de Mariola (Alicante), cannot be understood without that of Hilaturas Ferré, which was founded in 1947 on the Ferré family's textile company, whose origin dates back to 1914. In fact, Recover is what is known in the world of entrepreneurship as a spin off, a project that was born within a traditional company but that, due to its technological innovation, separates itself to make its own path. . A little over three years ago, Hilaturas Ferré sold Recover to Story3 Capital, an American venture capital fund, so that the company could fly on its own with a business focused on the production of recycled cotton fiber and high-quality, sustainable cotton fiber blends. quality. This company has one center in Spain and two in Asia, and exceeded the valuation of $1 billion, the threshold at which it enters the category of unicorn company, in June 2022, when Goldman Sachs led a valued financing round. by 100 million to further boost its international presence. “Recover is helping to create a sustainable future by solving a colossal environmental problem and we are delighted to partner with Goldman Sachs to accelerate our growth,” said the company's then CEO, Alfredo Ferré (after the signing of Anders Sjöblom, from H&M , Ferré, fourth generation of the founding family, became product manager). The company has worked for Wrangler, Tommy Hilfiger, G-Star and The North Face.

_