Can Spain wrest the role of Start Up Central from Germany?

Can Spain's youngsters make it the next Start Up Capital of Europe?

The German capital of Berlin has been the de facto capital of Europe’s Start Up industry for the past few years. Drawn by the country’s robust economy, the city’s low rents and its famously creative population – and undeterred by the infamously obtuse German bureaucracy – Berlin has been the birthplace for an impressive number of new and exciting businesses.

But could the winds of change be blowing in Spain’s direction…?

Whereas Berlin and Germany represent ideal conditions in which to nurture a new idea, Spain offers something rather different – necessity entrepreneurship.

The country’s ongoing recession has caused a subtle yet seismic shift in the mindset of Spanish youth over the past 24 months. Before the economic downturn, it is estimated that more than half of young Spaniards dreamed of securing a job with the government, according to a report by Bloomberg Businessweek.

And while the article finds that government jobs still account for one in six of all employment in Spain, it also reports that the attitude many young people have towards work has upped sticks from ‘easy street’ towards the more exciting ‘my way or the highway’.

Let’s back up to the start up. Bloomberg’s article reports that 21,992 people in Spain registered to become self-employed in the first seven months of this year – which is in stark contrast to the 6,826 fewer people who did likewise in 2012. At the same time, there has been an 8.2 per cent increase in the number of new companies created, suggesting that entrepreneurship has become a viable and attractive option for young Spaniards of today.

Over the same period, the number of new businesses created in Germany has actually fallen. So is Spain ready to take up the mantle of Start Up Capital for Europe? The signs are positive.

Labour reforms introduced last year by Prime Minister Mariano Rajoy’s government were intended to make it easier for people to start their own business in Spain (such as tax breaks and simplified bureaucracy), and the country’s lawmakers are currently in the process of redrawing Spain’s laws on bankruptcy – a change that is mooted to reduce the risk of a business owner losing personal assets should their company go bust.

“Necessity is changing this unfortunate chip in people’s minds that led to a situation in which, even four or five years ago, more than half the population wanted to work for the government,” Paris de L’Etraz, general director of the Venture Lab at the Madrid campus of the IE Business School told Bloomberg. L’Etraz believes that the economic crisis has jolted people out of their comfort zone, instilling in them a can-do, entrepreneurial spirit that had lain dormant for much too long.

However, a Start Up economy is a fragile economy, the article warns. Figures published by Spain’s INE statistics office show that over half of Spanish companies – 53 per cent – are registered as having no full-time employees (a figure that stood at 55 per cent in 2012), and while more new companies are being created, the total number of businesses registered in Spain fell for a fifth year in a row last year.

“We need to help companies consolidate or else we’ll keep on churning out companies that go bust after a year,” Pilar Andrade Sánchez, the president of young entrepreneurs’ business lobby Ceaje, told Bloomberg.

Since Rajoy came to power in 2011, his government has actively made it more difficult for Spaniards to find public sector work. During his time as Prime Minister, there has been a 12 per cent fall in the number of people employed by the state and related organisations, which relates to 3.22 million job cuts. In comparison, the private sector lost just 6.7 per cent of jobs during that period.

This is the harsh austerity medicine that has been doled out by the government. When taken in isolation, it leaves a bitter taste, but many of today’s young Spaniards have taken their medicine with a spoonful of sugar, optimism and get up and go, and the results are already starting to show.

There is no guarantee that the Start Up culture will be enough to drag Spain through the recession, but it represents a tangible shift in attitude. Along with the estimated 280,000 young Spaniards who have emigrated to find work, it demonstrates that Spain’s so-called ‘lost generation’ might not be so rudderless after all.

We wish them all well.