Volume invested by Venture Capital funds in Spanish start-ups fell due to the lack of large rounds by international funds, following record highs in 2022 and 2021. Venture Capital funds invested a total of €899M in Spanish companies in 2023 — a 58% decrease from 2022 (€2,124.6M). This amount reflects a return to higher levels than those recorded before the pandemic. Decreased investment was seen throughout Europe9 due to: In response to the economic environment and higher interest rates, American and Asian funds with high liquidity and not specializing in technologies reduced their presence, after having invested very actively in late stage venture rounds in Europe during 2021 and 202210. Investment momentum adjusted to the valuation adjustments resulting from market performance. Nevertheless, the Spanish entrepreneurial ecosystem continues to build on a solid base: Venture Capital investments in 2023 were made by 97 domestic firms (88 in 2022) and 103 international firms (125 in 2022). The reputation of all agents contributing to the system, public and private investors and advisers is recognized worldwide. Spain also benefits from competitive leverage for investment in start-ups thanks to the Law on the Promotion of the Startup Ecosystem11. Likewise, fundraising has reached record highs in recent years thanks to public support and the returns12 earned by domestic Venture Capital funds. On the demand side, new projects continue to emerge with potential for receiving funding as well as other more consolidated projects (scale ups) with a promising trajectory13. Looking ahead to 2024, the uncertainty surrounding the United States elections and the impact of geopolitical tensions combined with monetary policy developments and valuation performance will determine the rate of large funding rounds and, thus, of total volume invested at EoY 2024. International GPs set the Venture Capital investment levels in Spain. International funds are playing a key role in the Spanish entrepreneurial ecosystem, attracted by the confidence, strength and opportunities offered by start-ups (full of talent and increasingly innovative, scalable and global projects), having positioned Spain in recent years as a priority geography in which to invest. Nevertheless, following two great years, investment by international GPs totaled €430.4M (-73% compared to 2022) due to the reduced number of large funding rounds led by international GPs given the significant capital managed by these funds. The €430.4M invested were distributed across 121 investments in 75 companies14, compared to 167 investments in 87 companies in 2022. The majority of these investments were made in companies at more advanced stages, albeit down by over 30% compared to 2022. Investment in seed capital15 stood out, reaching a record high in number of investments closed. Private domestic Venture Capital GPs led funding of Spanish start-ups. The complex environment did not prevent private domestic Venture Capital firms from continuing to inject the ecosystem with new funds totaling €330M, compared to €403M in 2022. This volume was distributed across 438 investments (-11% compared to 2022) with a clear focus on smaller rounds: 66% of these investments were below one million euros. The public sector is a key piece of the Spanish innovation ecosystem. The role of the public sector has evolved over the years and currently channels funds into the innovation ecosystem across two channels: on the one hand, direct investment by public funds16 which, following several years of reduced investment, reached a record high of €138.3M (+39% from 2022) across 128 investments (11 more than 2022). On the other hand, they are increasingly investing in Spanish start-ups through Venture Capital funds by means of the public funds of funds programs led by, among others, ICO/Axis, the Catalonian Institute of Finance (Instituto Catalá de Finances - ICF) and CDTI, more recently joined by the Next Tech initiative, promoted by ICO/Axis and the Secretariat of State for Digitization and COFIDES. All of the above are key agents for endowing domestic Venture Capital funds with investment capacity. In 2023, the public sector17, in its role as an investor (LP) in domestic Venture Capital funds,18 was the second main contributor with €190,5M,19 behind family offices. There’s no doubt that the public sector is a key player in the development of the entrepreneurial ecosystem in Spain and a best expression of a successful public-private collaboration. In 2023, the most active private domestic investors (by number of investments) in Spain were: Inveready, Think Bigger Capital, Easo Ventures, Clave Mayor, Bullnet, Ship2B Ventures, Adara Ventures, Kanoar Ventures, Faraday Venture Capital and Encomenda Capital Partners, among others. And among public firms: CDTI, Gestión Capital Riesgo País Vasco, Sodena, Seed Capital Bizkaia or Sociedad Regional del Principado. As regards international funds, the following stood out by number of investments: Bynd Venture Capital, FJ Labs, Brighteye Ventures, Elaia, Shilling Ventures, Advent France Biotechnology, among others. Support for start-ups in the portfolio of Venture Capital funds stood out. In 2023, for the first time in 20 years, the number of follow ons surpassed new investments20, while still promoting new projects. 687 Venture Capital investments were closed in a total of 424 companies, a strong figure and the third best on record behind the consecutive highs reached in 2021 (773) and 2022 (779). Of these 424 start-ups, 45% received Venture Capital funding for the first time, while 55% of the investments received were intended for second or further rounds. The combination and balance of both trends is required to maintain a healthy ecosystem. As of 31 December 2023, Venture Capital GPs have a portfolio of 2,772 start-ups headquartered in Spain. Large funding rounds disappear, while the flow of scalable projects remains strong. Following the exceptional years of 2021 and 2022 with 4 and 6 large rounds respectively, no large rounds above €100M were recorded in 2023. In the range of medium-sized funding rounds (€10–€100M), 16 start-ups received funding in 2023, compared to 22 the year before. There’s no doubt that slower international investment activity was particularly evident in these two investment ranges, as domestic Venture Capital funds are less able to invest in these ranges due to their lower funds under management. The next lowest segment stood out, with 27 start-ups receiving between €5M and €10M (compared to 22 in 2022), and 117 start-ups receiving between €1M and €5M (16 less than in 2022). This ensures a substantial flow of companies with growth projections for the coming years. Notes Venture capital activity in 2023