Madrid: The Bull of Startup Cities

Madrid is wildly alive and fiercely open. Its inexhaustible energy is both addictive and inviting, prompting the popular phrase - “If you are in Madrid, you are from Madrid”!

In the summer of 2015, when I decided to leave the automotive industry of Detroit for something more entrepreneurial, the natural destination of choice was the West Coast. Most articles about startups are usually set in Silicon Valley, the promised land for entrepreneurs. However, it was just a fleeting thought. Like this article, my entrepreneurship journey quickly ventured in the opposite direction.

I arrived in the golden metropolis of Madrid in the summer of 2015 as an International MBA student at the IE Business School. Why IE? Quite simple – while most business schools eloquently preached about entrepreneurship, IE vigorously practiced it. The school was bold enough to re-channel the focus of its students from jobs to startups. They cared less about the collateral damage it did to MBA job reports and rankings. IE took the raging bull of entrepreneurship by its horns, embraced its uncertainty and struggle and turned it into a feisty and fashionable brand of business. And the students love it.

Why IE? Quite simple – while most business schools eloquently preached about entrepreneurship, IE vigorously practiced it.

The Matador of Business Schools

It didn’t surprise me that many of my fellow students never attended a career fair or even prepared a resume. Instead they perfected the art of business plans and startup pitch presentations. While other MBA students in the world spend their weekends working on case competitions, IE MBA students were busy pitching their ideas to potential partners, customers and investors. The school fosters an entrepreneurial culture by creating an environment that resembles more Silicon Valley than Wall Street. Everything, including humanities, is taught through the lens of entrepreneurship.

At Area 31, the startup incubator within IE Business School, current and recently graduated MBA students work alongside mentors, professors and experienced entrepreneurs, making for an atmosphere rich in ideas, energy and diversity. Even those students who choose not to become entrepreneurs eventually express their educational pedigree by pursuing entrepreneurial ideas at their workplace. That is the DNA of the school – the reason why Financial Times ranked IE Business School 1st in Europe for Entrepreneurship and 8th in the world for its International MBA program. What does all this mean for Madrid?

Many of the newly minted MBA entrepreneurs are staying in Madrid after graduation, significantly raising the level of resident talent in the city.

Why stay in Madrid?

In September 2013, the Spanish government passed a law to attract foreign entrepreneurs to start companies in Spain. The law introduced the ‘Entrepreneurship Visa’ which offers long term resident privileges to any applicant who can submit a startup business plan, proof of health insurance and enough money to support themselves while living in Spain. The Spanish government is uncharacteristically fast with processing the visa – decisions are promised within 10 working days, and residence permits are issued in 20.

Business plans submitted by MBA students at IE Business School have seen a near perfect chance of being accepted. Many MBA students from my graduating class have taken advantage of the new entrepreneurship visa to stay longer in Madrid and work on startups. Some graduating students have observed that it is easier to secure an entrepreneurship visa than a regular work permit. The entrepreneurship visa also allows visa holders to work part time or even full time for other employers.

The perks of the visa and the influx of foreign talent is only the icing on the cake. The availability of cheap programmers, low cost of living and the entrepreneurial culture of Spain have long been the major drivers of the growing startup scene in Madrid. Google recently opened a campus in Madrid for current and aspiring entrepreneurs to network, share ideas and learn from each other. It is the latest addition to a list of cities worldwide - London, Tel Aviv, Seoul, Warsaw and Sao Paulo where Google regularly sponsors and hosts workshops and speaker events. Campus Madrid is yet another resounding recognition of Madrid's rise as a startup city.

What makes the Golden Metropolis shine?

The low cost of living, the great quality of life, the entrepreneurship visa program and premier institutions like IE Business School and Google campus make Madrid a great startup destination. But what is it really about? Why choose Madrid over cities like San Francisco, London, Berlin and Tel Aviv? To answer that question, you have to look deeply into the soul of this vibrant city. What makes Madrid stand out among such global powerhouses is a pervasive attitude among its people to look for more when they are given just a little. It is clearly evident in Madrid's nightlife - a glass of rioja and couple tapas at 11 pm usually turns into gin-tonics and dancing the night away at 5 am.

What makes Madrid stand out is a pervasive attitude among its people to look for more when they are given just a little.

This attitude is also seen during the day among the most ambitious. As salaries in Madrid’s corporate sector stay dismally low, it is only natural for the talented to look elsewhere for opportunities. Many follow a path of relentless hustle like Fernando, my landlord in Madrid, shuffling their time between two or three different jobs. Fernando teaches English to bankers during the day and manages a set of rental properties on the side. Most of his tenants are English speaking international students. So he gets to practice in the evening what he teaches in the morning. The path of relentless hustle comes naturally to the ambitious in Madrid. For those treading that path with talent and ideas – Madrid’s growing startup scene will draw you in. The attitude to look for more and the relentless hustle are both the bread and butter of the Madrid startup scene.

The path of relentless hustle comes naturally to the ambitious in Madrid. For those treading that path with talent and ideas – Madrid’s growing startup scene will draw you in.

Madrid shines and then it struggles

Entrepreneurs in Madrid are resilient. They are not accidental entrepreneurs who founded a startup because they failed at everything else. Instead, they are committed to the struggle, having chosen that path from the very beginning. You can see that energy as they pitch their ideas. However, there’s a dearth in private funding especially for early stage startups. Most investors are looking to invest and exit quickly. Very few investors are committed to spreading their investment across a number of early stage startups and to help develop the ecosystem. The government has few grants and loans available but not many students are aware of them.

If you’re an entrepreneur in Madrid, here are some resources for accessing government grants and loans –

• http://www.icex.es

• http://www.enisa.es

• https://www.cdti.es

• http://www.seyens.com/visual-design-horizon-2020-proposals/

For MBA graduate entrepreneurs scrambling to support themselves after spending a huge amount on their education, funding can be a thorny issue to navigate.

Tuition loan payments usually kick in 6 months after graduation. It may not be prudent to continue taking out loans even if they are readily available. Some borrow money from families and friends to stay afloat. Others have moved their startups outside of Spain to pursue private investment or grants. Berlin and London are usually first choices. The story of Practix Innovative Workout is one such example.

Assaf Van Trienen, Sivan Entelis and Omri Zaeid, my MBA classmates from Israel, co-founded Practix during our IE MBA program. I had the good fortune of seeing Practix develop from an idea pitched by my fellow students to an actual product with a compelling business model. After graduation, the Practix team chose to officially launch their company in Berlin instead of Madrid. In the months that followed, they built a functional prototype, their promotional video was recently featured by Mashable news and their kickstarter campaign reached its funding goal within a week.

I met Assaf Van Trienen in Madrid this week to learn more about the story of Practix and why his team chose Berlin over Madrid. According to him, Berlin has a much more vibrant startup ecosystem. There were frequent startup-related events in Berlin where they got to meet investors and other successful entrepreneurs.

The German government offers many more grants for early stage startups.

Assaf's team eventually secured a grant from the German government and the EU to develop their product in collaboration with Potsdam University. That opportunity was the ticket that took Practix to Berlin. Assaf says he continues to work and live in Madrid because of his family, the network and support system offered by IE. Although he stops short of saying it, I believe this city and its charm is another reason he chose to stay.

The struggle is real but so is the promise!

Yes, private investors are scarce in Madrid. And startups like Practix might have left for greener pastures. But the talent and the hustle that gave birth to Practix continue to thrive in Madrid. Meanwhile, Assaf and his tribe of entrepreneurs in Madrid are on the rise as an increasing number of students from around the world are now enrolling at IE Business School. I recently met with the new intake of students at IE. I noticed a fresh energy about them. The path ahead of them is not any easier than the one I took with my fellow students. But there is a growing sense of belief in knowing that the ones before them have made it. And so they get down to the grind, pitching their ideas and drawing up business plans.

That feisty brand of business is alive. The golden metropolis is alive. Madrid is fast becoming a goldmine of talent. The gold seekers just haven’t seen it yet.