A top tourist destination, the city of Madrid is known as being the largest city in Spain, the cultural and political center of the country and the capital city. It has also been known for being one of the most difficult places in the world to start a business. World Bank’s survey of countries to start a business ranked Spain 136th out of 185 countries – behind Bangladesh and Afghanistan. In recent years, however, Spain has been making some fundamental shifts in the way that entrepreneurship is viewed, giving potential businesses some much needed help. This shifting of attitude and focus within the business world of Madrid has allowed entrepreneurs to embrace their passion and has helped to push Madrid onto the world’s stage as a potential startup hub.

Startup Hubs Around the World: Madrid

© Shutterstock.com | Sean Pavone

For the entrepreneur that is considering a move to Madrid to establish a startup, there are several areas to consider. As we discover what advantages Madrid has over other startup cities, we’ll explore: 1) the location, 2) the tax incentives, 3) legal incentives, 4) investors, 5) local resources, 6) specialization of the area, and 7) startups to watch.

LOCATION

Geographical Benefits

Located in the center of Spain, Madrid sits on the Manzanares River. Home to over 3 million people, Madrid has a long history of being the center of the life and times of Spain. As the capital city, it holds power as the political, cultural and social center of the country. It is home to a variety of industries and has influence in everything from fashion, entertainment, politics, science and culture. There is no denying the influential power the city and its leaders have: it has earned the status as one of the world’s most livable cities. So, when they turned their attention to becoming a force in the startup industry, people around the world began to pay attention.

Even though the city has been established in the 9th century, Madrid has a modern infrastructure neatly disguised in historic charm. While much of the city’s early architecture has been lost, the city has emerged as an example of how modern architecture, such as the newly built airport, can co-exist with a church built in the 15th century. The ability of the city to merge different worlds will be of use while the city attempts to re-invent itself as an innovation center. Historically, entrepreneurship was considered the hobby of the wealthy. The potential stigma of failure prevented creative individuals from wading into the innovation market and served to discourage people from venturing away from the traditional forms of business. While the perception is changing, change can be a slow process.

Geographically, the city is perfectly located to reach all of Spain, and by easily accessed modes of transportation, the rest of Europe and the world. Considered the leading logistics hub for Spain and Europe, Madrid has one of the most highly developed infrastructures in the world. Served by one of the world’s three largest high-speed subways, the entrepreneur will have readily available transportation to reach anywhere, quickly. A well designed system of roads connects Madrid with the rest of Spain, and carries over into the rest of Europe. Also home to one of the world’s largest busiest airports, the transportation industry in Madrid is thriving and bustling.

Advantages to choosing the city

Entrepreneurs who choose Madrid to host their startup are joining a growing number of innovators who are taking advantage of the beautiful location, the historical impact and the modern city of the world. For a startup to be successful, it must be able to reach the marketplace. Madrid has demonstrated its ability to reach the global marketplace in virtually every industry imaginable. It is an easy assumption, then, that the startup market will be no different.

A creative city, Madrid is home to several sports teams, a growing cultural scene and has a comprehensive green space plan evident throughout the city. One of the key indicators of a successful startup hub is the creative endeavors in the city; are there creative thinkers who are pushing the limits of innovation and design? With Madrid’s collection of neighborhood districts, there is an eclectic mix of Bohemian influence, high society culture and more. The entrepreneur in Madrid will find much to do to provide an escape from the pressure of the startup.

TAX INCENTIVES

Until 2012, starting a business in Spain took 28 days. It required 10 procedures, multiple trips to the bank and was cumbersome and daunting. In 2013, Spain passed new legislature which would streamline the new ownership process into 24 hours. Within one day, the business will have the correct licenses and permits necessary to begin working in Spain. For one young entrepreneur, the rapid record check came in handy when he lost his job. Two days later, he was in business for himself and is now earning more than he was in his previous employment.

Officials also create specific tax incentives for entrepreneurs. The new tax plan includes tax breaks for businesses who want to go after public contracts and target their products to the world. Designed for small to medium sized businesses, the tax plan can be helpful to a cash-strapped entrepreneur. It includes a credit for investors in a newly developed company, and a tax credit for individuals performing their work duties.

There are specific details about the tax code in Spain that will require the use of a local accountant who can navigate the tax legalese. Tax codes are constantly undergoing amendment; it would be in the entrepreneur’s best interest to hire an accountant. While some critics say the new tax plan doesn’t go far enough, the new plan is a far-cry from the previous un-entrepreneur-friendly plan.

Additionally, foreign entrepreneurs must be aware of specific tax concerns that may apply. There are also specific tax incentives for the investor backing both local and international startup companies.

LEGAL INCENTIVES

The legality of becoming an entrepreneur in Madrid is another area where the foreign entrepreneur would benefit from the use of a local attorney. The specific filings that must be done are under constant scrutiny. Establishing residence, determining the location of the head office, all of these specific informational pieces can be given to the entrepreneur. Knowing what to do with that information once it is discovered is another form of communication.

Doing business in Madrid

INVESTORS

One of the most repeated complaints about establishing a startup is the constant feeling of a monkey on its back. While the community is becoming more accepting and welcoming of new ideas and new visions, it has not translated into available funding. Madrid has very few venture capital funds and even fewer investor funds available for entrepreneurs. Traditionally, when someone started a business, they either financed it with family money or with their own savings. Rarely did a company acquire outside funding for their venture.

This lack of local funding is one of the main reasons that companies are leaving Madrid. Seeking more investor opportunities in the United States and elsewhere, entrepreneurs much prefer to set up their companies in a place where there are a variety of funds.

As Madrid’s startup community grows, they will begin to develop angel investors who have successfully launched and exited a startup. At present, there are very few of these angel investors within Madrid, so the available funds may be outside the city. A list of angel investors gives entrepreneurs a glance into where to turn for funding, but as the number of entrepreneurs rises, there will be a shortage of funds. Madrid must seek to attract other investment firms to help bolster the tech market.

Companies such as Invest in Madrid are a great resource for both entrepreneurs and investors. By establishing themselves as experts in the Madrid area, they can offer support and advice to the entrepreneur and the investor.

Spain’s economy picked up slightly for the first time in five years in 2014. The upswing marked the end of a world-wide hiatus on Spanish investment. Now that the market is improving, hedge funds and private equity are becoming the rage again. Foreign investors are looking for reliable investment opportunities and the innovative firms in Madrid are waiting to give them the opportunity!

LOCAL RESOURCES

Within the city of Madrid are multiple resources that can be capitalized on for the entrepreneur.

Startup Hubs are a vital part of the entrepreneur marketplace, and Madrid is home to a vibrant startup hub. Global Shapers Startup: Madrid is part of a larger, global entity that creates Hub Zones all over the world. By bringing investment money into a startup, the entrepreneur is free to focus on building the business, without having to worry about finding financing. There are additional startup hubs scattered throughout the city, allowing entrepreneurs to find the hub that is the right fit for their industry.

Another important aspect of entrepreneurship in Madrid is the availability of office space. Due to the cash-poor tendencies of startups, it can be cost-prohibitive to finance an office at first. This is where co-working spaces come into play. Madrid is home to some beautiful examples of co-working spaces, including Impact Hub and Utopic_US. Both of these facilities offer office spaces and additional services such as meeting rooms, copying services and more. The hubs serve as a headquarters for innovators in the city, offering workshops, trainings and support to its members. Events held in the hubs are often creative, exciting events that bring entrepreneurs together for collaboration, support and encouragement.

Madrid International Lab is another resource that entrepreneurs can take advantage of in Madrid. Offering startup services to foreign companies opening in Madrid, or soft landing business services to national companies coming to Madrid, the International Lab is meeting the needs of entrepreneurs who are new to the Madrid area.

Finally, one of Madrid’s most important resources is the people. A successful startup-hub needs to have an ample supply of individuals who can join the company, and Madrid has a large population of college graduates who are skilled and trained (many with MBAs). The quality of life in Madrid is high, so people are happy to move and live there. The weather is agreeable, making outdoor pursuits not only possible, but pleasurable.

SPECIALIZATION

Madrid’s startup market seems to be moving into the tech department. Because the startup marketplace is still relatively new, there don’t seem to be too many indicators about a specific division becoming a specialty. One of the largest areas that seem to be drawing startups is in the tech division. A wide range of companies that are offering apps or business services are beginning to seek funding in Madrid – so the city should have no trouble keeping its business affairs in order.

Another specialization area is the development of bio-science. A relatively new field, bio-science is seeking solutions to some of the world’s largest problems. Using science as the platform to discover, entrepreneurs are finding ways to integrate technology in scientific pursuit. The creative combination of tools that advance science and puts those tools into the hands of medical personnel, teachers and other users is a new field that has a bright future.

STARTUPS TO WATCH

uSpeak: uSpeak is a language learning app for iPhone or iPad. Teaching the user Spanish doesn’t have to be rote memorization from flashcards. Using interactive games, responsive graphics and motivational score keeping, uSpeak is designed to give the user a comprehensive approach to Spanish. Instead of trying to make up flash cards and teach yourself or your child, simply load the app onto your phone and you can learn everywhere you go.

Ducksboard: A business dashboard, Ducksboard allows the user to track digital information such as web analytics, social media campaigns, A/B testing, blog commenting and more – all at the same time. A subscription based service, this responsive programming allows for a beautiful dashboard of information to all be neatly organized and current – all at one time. With several plans to choose from, the Ducksboard designers are confident that once you’ve tried the easy to monitor interface, you’ll never be able to live without it again.

Just Eat: For the person who plans their entire day around mealtime, Just Eat provides a listing of nearby restaurants and identifies any specials or coupons that are being used. Mainly based in Spain, there are not a lot of cities that are served by Just Eats. For the few lucky souls who are in their service area, there are restaurants from almost every culinary grouping, and you can do a search by zip code to see what restaurants are in your area. With a listing of the current prices, you can plan your evening out before heading out the door.

Mumumio: Mumumio is an online ordering system that offers healthy, safe, green living establishment. With farm-free produce, free range beef, cheese, specialty olive oils and more, Mumumio has something for everyone. A wide selection of fruit is available as well, making this home delivery something that every working mom can appreciate.

Chicisimo: A fashion design app, Chicisimo lets you collect fashion ideas and pictures into an organizational bulletin board. Sort through outfit ideas and find just the right look based on search queries, and you’ll always be in style. Select specific wardrobe pieces or do a general search for inspiration and design ideas to go shopping.

Wuaki.tv: A streaming company, Wuaki.tv provides users with the best independent films, the latest Hollywood blockbuster hits and the best television series. Conveniently available for your smartphone, computer, tablet or gaming console, this service lets you take your entertainment with you. Not currently available in every country, this subscription based service brings the power of movies into your hands – at home, at work or at play.

Share your thoughts and experience

E-mail is already registered on the site. Please use the Login form or enter another.

You entered an incorrect username or password

Sorry, you must be logged in to post a comment.