Innovation is opening up in Galicia, an entrepreneurial ecosystem with huge potential

In Galicia, some homes house venues with centuries of history where the owners serve food and surplus wine from their harvests to customers. These places are known as furanchos. You have to know the past to be able to look to the future, so the Startup Galicia association has been inspired by this tradition, using that term to name an initiative dedicated to innovation – a channel on corporate communications platform Slack where over 900 Galician entrepreneurs actively exchange knowledge, as though they were in a virtual tavern.

“The Galician startup scene needs substance, and substance is born of relationships between people. The association wants to be a speaker for the ecosystem and give as much information as possible to anyone who wants to know about it”, explains Daniel Cerqueiro, head of Startup Galicia. Created in 2015, this community has become a meeting point for the startups in a region that still has some way to go to reach the magnitude of other ecosystems like Valencia or the Basque Country, as Cerqueiro himself acknowledges.

Despite this, innovation and entrepreneurship have an increasingly important role to play. The recent Regional Innovation Scoreboard, a ranking carried out by the European Commission, shows that the level of innovation in Galicia is “moderate” but making good progress – it ranks 156 in the European Union, 34 spots higher than the 2019 edition, and it is Spain’s eighth most innovative autonomous community. What’s more, it is the second largest community in terms of the proportion of SMEs collaborating with other innovation agents, according to the Fundación Cotec.

To this is added the impetus to invest in Galician startups, which have raised more than €23.6 million over the last 22 months, as per public information compiled by Startup Galicia. For this booming entrepreneurial ecosystem with unique characteristics, a large network of supporters and some noteworthy fintech startups, challenges lie ahead.

Initiatives to get started in all sectors

Unlike other cities that have a concentration of innovation centres, such as Barcelona and Málaga, Galician startups are not located in a single spot. Instead they are scattered around the north west of the Iberian Peninsula, particularly in A Coruña and Santiago de Compostela. This can be seen on Startup Galicia’s map, which pinpoints over 140 projects.

This dispersion can also be seen in the Galician Network of Accelerators by the Galician Innovation Agency, a subsidiary of the Xunta de Galicia (regional government), which gathers incubation, acceleration and consolidation initiatives promoted by public and private entities in the four provinces. Via Galicia stands out for having provided support to 79 startups generating over 400 jobs. There are also initiatives to support entrepreneurs that specialise in sectors of particular relevance to the Galician economy – accelerators include BFAuto dedicated to the automotive industry, BFFood to food, and BFAero to the aeronautical industry. There is also the incubator BioIncubaTech, which promotes the transfer of technology to micro-SMEs in the biotechnology sector.

“The industrial sectors in Galicia, together with the clusters into which they are grouped and research and innovation entities, form a consolidated ecosystem that drives other sectors and the service industry”, says Fernando Guldrís, Director General of Igape, the Galician Institute for Economic Promotion. This public entity from the Xunta offers programmes to help set up companies in rural areas, 360º orientation for entrepreneurs and a network of mentors.

Guldrís also describes other ongoing initiatives, such as the establishment of new focal points for sector-based entrepreneurship around “logistics, the circular economy and the maritime industry”. Seven advanced manufacturing centres are also being launched to “offer an infrastructure of resources and technological services to Galician SMEs” in fields like tourism.

On the investment side, XesGalicia, the Xunta’s fund manager, is worth highlighting. It backs entrepreneurial projects and has recently injected ten million euros into three large venture capital funds, Alma Mundi, K Fund and Kibo Ventures, to stimulate investment in Galician startups. The region also has open innovation programmes promoted by major companies, such as Estrella Galicia with The Hop, and events like Galicia Startup Congress and NOS Day that bring the ecosystem together.

Docuten, Coinscrap and WayApp Pay, threes startups to follow

With the backing of all these different initiatives, different proposals from emerging companies have popped up in Galicia and have managed to grow in recent years. One example of this is Docuten, a firm in A Coruña that specialises in the digitalisation of administrative processes, with 35 employees and clients including Desigual, Holaluz and Grupo Planeta. At the beginning of 2020 it raised €1.5 million in financing. “Five years ago we were not at all like we are now – now we have a startup structure and we have addressed the challenges of how a product company works”, says Cerqueiro, who is Customer Success Manager and CMO of Docuten as well as having his leadership role at Startup Galicia.

In the fintech world, Galicia is the fifth largest community for the number of startups – it has nine in total according to a report by the Economic Forum of Galicia, which works to strengthen the sector. One such startup is the savings platform from Pontevedra Coinscrap, which has gained €2.2 million in a recent round of financing that XesGalicia, a supporter of the project since its inception, took part in. To begin with, the company offered an app aimed only at end users that could be used to set financial targets and automatic rules, such as rounding up card purchases to transfer the difference to a savings product. “We found that it was hard to monetise, so we pivoted to offer our white-label technology to banks and insurers”, explains CEO David Conde.

The change was a success and now the Coinscrap team is made up of 17 people, the majority of whom are Galicians. In fact, researchers at the University of Vigo collaborated on the creation of its artificial intelligence motor, which categorises banking transactions. “There are some really talented programmers and the cost of living is much lower. With the same salary you can have a better quality of life than in Madrid or Barcelona”, Conde enthuses. Despite the majority of its clients being in these two cities, the entrepreneur “has not hit any stumbling blocks” in the region.

For its part, WayApp Pay, which went through the BBVA Open Innovation acceleration programme, offers local retailers an app that integrates a means of payment, customer loyalty tools like gift cards or digital stamps that reward holders with discounts on future purchases, and a new self-service feature to order products in the establishment. The aim? “To help small businesses compete with the online giants”, says founder and director Óscar Anzola.

However, Anzola, who set up the fintech in A Coruña for personal reasons, says that he would not do the same again, describing the market as “small, closed and monopolised”. He claims to have found “communities that are more open” to using his product in places like Madrid.

Challenges that could be opportunities

Despite all these support initiatives and startups that are coming to the fore, the Galician entrepreneurial ecosystem is still facing challenges. One of these is the exodus of technical professionals heading for other regions. “It’s like going round in circles – if there’s not enough talent, fewer companies are established and the talent won’t return”, explains Cerqueiro. Nevertheless, a word with Galician-Portuguese roots – morriña or homesickness – may encourage people to return in future: “We Galicians are very prone to emigrating, but we tend to want to come back. If a strong enough fabric is woven, it will be possible”.

Another challenge concerns age. Galicia is the second autonomous community with the most aged population, but in Guldrís’ view this could be turned into an opportunity: “Ageing favours the development of the silver economy, both in the care and health sectors and in specific consumer products and services”.

Finally, the Galician ecosystem lacks exits (divestment operations from the sale of a startup or a listing on the stock exchange) that would allow entrepreneurs to “reinvest, create secondary projects or attract more investors”, and which also encourage “spiral growth”, in Cerqueiro’s words.

Although there is still work to be done, Galician entrepreneurs – united through channels like Furancho Startup Galicia and cocooned by ecosystem support initiatives – are working to take advantage of their region and to tackle its challenges. That way, Galician innovation can stay at home and prove its potential on Spain’s national scene.