Spain’s Technology Startups Get Second Wind From Telefonica

April 2 (Bloomberg) -- Gary Stewart, director of Telefonica SA's Wayra program in Spain, and Inigo Serrano, co-founder and chief executive officer of Emtrics, a mobile-phone based instant customer review application, talk about the climate for technology startups in Spain. They spoke March 12 in Madrid with Bloomberg's Manuel Baigorri. (Source: Bloomberg)

Juan Hurtado Bravo wants you to look good and he would like to show you how -- before you buy your clothes online.

Inditex SA (ITX), owner of Spanish retail giant Zara, and Mango are in discussion with Hurtado to allow the 29-year-old to do just that, he says. Coquetame, the company he co-founded last year, makes a website that helps customers visually mix and match attire online. It’s one of the 80 startups in Madrid-based operator Telefonica SA (TEF)’s Wayra program, which is nurturing companies in Europe and Latin America.

Spain may sound like an unlikely place to incubate tomorrow’s tech success stories. Mired in its worst economic crisis in decades and with the highest unemployment rate in the European Union, the country ranks 30th out of 71 in the Global Entrepreneurship and Development Index, after other European nations such as Germany, France and Italy. The index, which measures entrepreneurial attitudes, action and aspirations, is led by Denmark, while the U.S. was rated No. 3.

Still, Spain is home to some successful standouts, including outdoor Wi-Fi services provider Grupo Gowex (GOW), founded by Jenaro Garcia, airline Volotea and social networking site Tuenti, now owned by Telefonica. Now Bravo hopes his Coquetame will be the next success story.

Mentoring

“I always wanted to set up my own business and have been thrilled about creating something new that adds value to what’s out there,” said Hurtado, an engineer who quit his job as a business consultant last year.

Under Wayra, which means “wind” in the Andean Quechua language, entrepreneurs get an average of about $50,000, space and six months of mentoring. Telefonica receives a 10 percent stake in each business and a preference right to buy a successful product.

Telefonica is looking for start-ups that “are developing products and services that probably we are going to sell to our clients in a couple of years,” Wayra Global Director Gonzalo Martin-Villa said. “This is very important for us. It’s also a matter of developing talent, which we are sure exists in Europe and in Latin America.”

For the last year, Spain has developed “a more appropriate environment for entrepreneurs thanks to institutional support and accelerator programs for startups,” said Eduardo Berastegui, an investor and founder of Comunicare, a Madrid- based marketing consultancy firm.

Deutsche Telekom, Vodafone

“Those initiatives are very keen in funding innovative ideas in technology and with an international potential, two features that didn’t very much exist in Spain before and that now, due to the crisis, have become crucial,” he said.

Other European phone companies have had varying degrees of success in supporting innovation. Deutsche Telekom AG (DTE)’s T- Venture arm invested in Swoodoo, which became one of Germany’s biggest flight and hotel search sites, and was sold in 2010. Vodafone Group Plc (VOD) moved a research base to Silicon Valley in September to gain access to U.S. businesses.

Inigo Serrano, co-founder and chief executive officer of Emtrics, a mobile-phone based customer review app, says he didn’t need much money in the early days, recalling his first working meetings at a Starbucks in Madrid. As soon as the initial idea turns into a real one, money becomes an issue, the former Telefonica manager said.

Cultural Change

After quitting his job at Telefonica, Serrano set up his first startup, which failed. That didn’t stop him from finding a partner and getting into Wayra. Emtrics is testing the application, which lets users rate their customer experience, with companies such as hotelier NH Hoteles SA (NHH) and restaurant franchise Foster’s Hollywood.

Prime Minister Mariano Rajoy has pledged to pass a law for entrepreneurs and offer “red carpet” treatment for those who create jobs, while cutting levies for small companies.

“Spain’s institutional support to entrepreneurs is now bigger than ever and I think Rajoy’s program is encouraging,” said Victor Conde, a professor at Universidad Nebrija in Madrid. “We still need to change in cultural terms. Only 4 percent of Spaniards want to set up their own business, compared to 60 or 70 percent in the U.S.”

For Telefonica CEO Cesar Alierta, Wayra follows the company’s latest push in tapping digital opportunities. In September, the operator created a division with offices in London, Silicon Valley, Tel Aviv, Sao Paulo and Madrid, pulling together digital assets over three continents.

‘Boring Market’

“Telefonica is moving from being a former monopoly in a rather boring market to becoming a player of a really exciting one, in which the Internet, contents and mobile are converging,” Antonio Davila, a professor of Entrepreneurship at IESE Business School, said. “Telefonica needs to reinvent itself and Wayra is part of that effort.”

Directors at Wayra also spent a lot of time explaining Telefonica’s top executives about the project to get them on board, Martin-Villa said. “Letting people know what we were doing was very difficult in the beginning,” he said.

Telefonica has dropped 8.2 percent this year through March 30. It fell 1.2 percent to 12.14 euros at 2:30 p.m. in Madrid.

When Hurtado and his two partners landed a meeting with Zara online directors, they didn’t need to think twice. As their budget was tight they drove the almost 600 kilometers (373 miles) to Inditex’s headquarters in Arteixo, northwest Spain. The feedback: Coquetame was developing a new and cool technology which could fit in the retailer’s online expansion, Hurtado said.

That’s helping him keep improving the product as Coquetame tries to raise 400,000 euros ($530,000) from investors, he said, recalling how difficult it was for a fashion designer and an engineer to work together at the beginning. Representatives at Inditex and Mango declined to comment.

“I’m not chasing a gig to get by and foot the bills but an idea that can grow, turn big and involve many people,” Hurtado said.

To contact the reporter on this story: Manuel Baigorri in Madrid at mbaigorri@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.
Tap for Slideshow
Photographer: Angel Navarrete/Bloomberg

Under Wayra, which means “wind” in the Andean Quechua language, entrepreneurs get an average of about $50,000, space and six months of mentoring. Telefonica receives a 10 percent.

Close
Photographer: Angel Navarrete/Bloomberg

Under Wayra, which means “wind” in the Andean Quechua language, entrepreneurs get an average of about $50,000, space and six months of mentoring. Telefonica receives a 10 percent. Close

Under Wayra, which means “wind” in the Andean Quechua language, entrepreneurs get an average of about $50,000, space... Read More

Photographer: Angel Navarrete/Bloomberg

Telefonica is looking for start-ups that "are developing products and services that probably we are going to sell to our clients in a couple of years," Wayra Global Director Gonzalo Martin-Villa said. Close

Telefonica is looking for start-ups that "are developing products and services that probably we are going to sell to... Read More

Photographer: Angel Navarrete/Bloomberg

Prime Minister Mariano Rajoy has pledged to pass a law for entrepreneurs and offer “red carpet” treatment for those who create jobs, while cutting levies for small companies. Close

Prime Minister Mariano Rajoy has pledged to pass a law for entrepreneurs and offer “red carpet” treatment for those... Read More

Photographer: Angel Navarrete/Bloomberg

For Telefonica CEO Cesar Alierta, Wayra follows the company’s latest push in tapping digital opportunities. Close

For Telefonica CEO Cesar Alierta, Wayra follows the company’s latest push in tapping digital opportunities.

Photographer: Angel Navarrete/Bloomberg

"Only 4 percent of Spaniards want to set up their own business, compared to 60 or 70 percent in the U.S.” Close

"Only 4 percent of Spaniards want to set up their own business, compared to 60 or 70 percent in the U.S.”

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.