In mid-2019 COFIDES launched its new venture capital line to support technology companies’ foreign investment. With a yearly allocation of M€20 (enlargeable as required by the market), it participates in companies with global products and strategies on the brink of internationalisation. It consequently supports venture capital companies with acknowledged asset management capacity and solvency.
COFIDES undertook its venture capital business by investing M€6 in Fondo para Inversiones en el Exterior [Spain’s foreign investment fund] assets in Adara III, a vehicle created to invest in early-stage, deep tech information technology companies furnishing digitisation support for medium and large enterprises.
Alberto Gómez, one of the Adara Ventures partners, explains that the category includes sectors such as cybersecurity, applied artificial intelligence, cloud infrastructure, vertical applications and similar. “All are companies focusing on B2B markets that may cover several industries or specialise in just one, such as banking, insurance, retail or publicity.“
“The quality of the investment proposals we’re analysing now is much higher than 5 or 10 years ago"
Given that for Adara market opportunity entails the ability to scale globally, “we only invest in companies with a clear and sound growth and internationalisation plan“.
Adara Ventures staff. (Alberto Gómez fifth from left) Adara engages with the companies in which it participates, but does not interfere with routine operations, which are deemed a management responsibility. “We attempt to support them and assist in key decisions, their organisational development, the establishment of high value priorities and targets, strategy definition, additional fund-raising rounds and internationalisation“, says Alberto Gómez.
Technology and digital start-ups are increasingly prone to international growth and today any technology company views the market globally, identifying competitors the world over and drafting a long-term international development plan. “It’s a must for all funds investing in technology, for we’re required to “monetise” our investment, which is practically impossible if a company fails to acquire a global position.“ Furthermore, in over 80 % of global software company purchases the buyer is a Silicon Valley company. Adara successes such as the sale of AlienVault to AT&T and Playgiga to Facebook “could never have happened without a globalised business, for otherwise those Spanish companies would have lain underneath their possible buyers“ radar’.
“We only invest in companies with a clear and sound growth and internationalisation plan“
The mean entry ticket size ranges from €300 000 to €500 000 for seed and M€1 to M€2.5 for Series A fund-raising. A much larger sum is reserved for future rounds whichthese companies may need to undertake as they develop. In addition to COFIDES, other institutional investors in Adara III include the European Investment Fund and Fond-ICO Global, which also participated as the most prominent references in the first two funds. Red Eléctrica de España, Prosegur and Bankinter are other significant corporate investors “with which we have strategic relations“, according to Mr. Gómez. “That helps us both assess opportunities jointly and add to investee company value.“ Adara also has a host of private investors and family offices, many of which have re-invested in Adara III after having participated in the earlier funds.
Adara III will follow the same investment line as its predecessors. Although digitisation embraces nearly the entire economy, outside the traditional sectors (such as banking, insurance and telecoms) penetration is low and growth potential consequently high. The company sees opportunities in the tourist, health and infrastructure, as well as in critical industries “where specific solutions may have a huge impact with greater penetration of the use of the cloud and mobility“.
The technology industry in Spain
In Alberto Gómez’s opinion, the industry has developed extremely well in recent years in terms of new investment volume (50 % higher in 2019 than in 2018), divestment (record volumes in 2018 and 2019) and internationalisation (growing participation of international investors in fund-raising rounds). “The quality of the investment proposals we’re analysing now is much higher than 5 or 10 years ago. Even so, much has yet to be done“.
“Large hubs (Madrid and Barcelona) will have to be further supported and new ones fostered. Both approaches are warranted in light of Spain’s entrepreneurial talent, technical quality and (corporate and end consumer) market".