Iberian Startup Scene | Q4 2022

I am a VC at Armilar, covering B2B SaaS and Web 3 infrastructure.

In my free time, I write startup-related topics, including this newsletter. Content, opinions, and typos are my own!

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HIGHLIGHTS

resources

Investments

2022

Supply of start-up financing had a strong contraction last year across the globe, and Iberia was no different
The environment for up to Series A companies inverted around Q2
Given the lag between starting to raise a round and the public announcement (and when I can report it), only now I have some data, though still limited, of this new environment (and the contraction impact)
Thus, in this quarterly edition, I will try to provide some insights on what happened in Q4 2022 and my expectations for the next months for early-stage financing in Iberia
Q4 total
- Rounds: 149 | Delta vs. last year (YoY growth): -34 (-19%)
  - Portugal: 26 | Delta vs. last year (YoY growth): -4 (-13%)
  - Spain: 123 | Delta vs. last year (YoY growth): -30 (-20%)
- Invested amount: €840M | Delta vs. last year (YoY growth): -€917M (-52%)
  - Portugal: €105M | Delta vs. last year (YoY growth): -€402M (-79%)
  - Spain: €735M | Delta vs. last year (YoY growth): -€515M (-41%)
Pre-seed
- Rounds: 39 | Delta vs. last year (YoY growth): -13 (-25%)
  - Portugal: 7 | Delta vs. last year (YoY growth): -4 (-36%)
  - Spain: 32 | Delta vs. last year (YoY growth): -9 (-22%)
- Invested amount: €9.6M | Delta vs. last year (YoY growth): -€3.8M (-28%)
  - Portugal: €0.8M | Delta vs. last year (YoY growth): -€3.1M (-79%)
  - Spain: €8.8M | Delta vs. last year (YoY growth): -€0.7M (-7%)
- What happened
  - Pre-seed funding contracted in both regions, though due to different reasons
  - In Portugal, Business Angels, the most active investor segment last year in pre-seed, didn’t announce any new investments
  - In Spain, local VCs, public-related funding sources, and international investors, relevant contributors to pre-seed funding, contracted the investment in the last quarter of 2022 vs. 2021
  - Going forward, I don’t expect pre-seed funding will be easier, as most of the pre-seed investors seem to have reduced the pace of investment and are also requiring more traction
  - Furthermore, some local VCs that invested in pre-seed in the past years have moved upwards
  - Nevertheless, the number of pre-seed investments is highly dependent on Demium Capital investments, as they represented a relevant share of the pre-seed deals announced (~40% in Q4 2022)
Seed
- Rounds: 65 | Delta vs. last year (YoY growth): -27 (-29%)
  - Portugal: 10 | Delta vs. last year (YoY growth): -3 (-23%)
  - Spain: 55 | Delta vs. last year (YoY growth): -24 (-30%)
- Invested amount: €85M | Delta vs. last year (YoY growth): -€51M (-37%)
  - Portugal: €18M | Delta vs. last year (YoY growth): -€10M (-35%)
  - Spain: €68M | Delta vs. last year (YoY growth): -€41M (-38%)
- What happened
  - Q4 2022 was the worst quarter in the last 2 years in Seed in Iberia in terms of the number of rounds
  - The main driver was the reduction of international investors and Corporates/CVCs, which reduced their participation by 50% vs. the same period last year
  - The average round size was also smaller vs. the same period last year, due to a lower number of rounds above €2M
  - Nevertheless, the median round size was stable and around €1M
  - Going forward, I expect activity in Seed to continue to be lower than we have seen in the past quarters, mostly because the demand for capital (entrepreneurs) has contracted
  - I am still trying to understand what was the main driver (contraction in terms of companies being launched, entrepreneurs delaying their fundraising because now its harder to raise or if my Seed deal flow has gotten worse)

Series A
- Rounds: 30 | Delta vs. last year (YoY growth): +7 (+30%)
  - Portugal: 8 | Delta vs. last year (YoY growth): +4 (+100%)
  - Spain: 22 | Delta vs. last year (YoY growth): +3 (+16%)
- Invested amount: €238M | Delta vs. last year (YoY growth): +€81M (+52%)
  - Portugal: €75M | Delta vs. last year (YoY growth): +46M (+157%)
  - Spain: €163M | Delta vs. last year (YoY growth): +€35M (+28%)
- What happened
  - When writing this newsletter, I was initially puzzled by Q4 2022 Series A numbers
  - Despite a tougher environment and the increase in bridge rounds not (yet) announced, Series A rounds and the amount invested grew vs. the same period last year
  - Looking deeply, most of the growth came from Portugal, particularly from investments from Private Equity Funds, leveraging SIFIDE funds, and CVCs
  - Going forward, I expect Series A rounds to continue to be constrained (more than Seed) both on the demand – startups have raised bridges and reduced burn, so have delayed fundraising – and supply side – investors are more selective and taking longer in making decisions

Series B and beyond
- Rounds: 15 | Delta vs. last year (YoY growth): -1 (-6%)
  - Portugal: 1 | Delta vs. last year (YoY growth): -1 (-50%)
  - Spain: 14 | Delta vs. last year (YoY growth): 0 (0%)
- Invested amount: €508M | Delta vs. last year (YoY growth): -€943M (-65%)
  - Portugal: €12M | Delta vs. last year (YoY growth): -€435M (-97%)
  - Spain: €496M | Delta vs. last year (YoY growth): -€508 (-51%)