It is Thursday at 8am and Santiago Arano’s colleagues in the Barcelona office of Softonic are already waiting for him on the videoconference line. It’s the internal deadline for them to align on new methods to monetize content on Softonic’s web site. Since folks leave the office early on Friday, this will be the last opportunity to connect until Monday. Arano rubs his eyes and forces a smile. “Buenas tardes.”
Arano, who has created Softonic in the US from scratch, is part of a new generation of Spanish entrepreneurs who are earning their stripes in Silicon Valley, the California region that is home to the world’s largest concentration of tech companies and investors. He is finding more opportunity than at home.
The advantages of doing business in the US are well-documented. It takes just 6 days, on average, to start a firm compared with 28 in Spain. Employees are more expensive, but they are easier to fire if they underperform or if the business fails. And firms seeking funding maximize their chances by being in Silicon Valley since the ‘general solicitation ban’ limits the ways they can broadcast their funding need.
That said, to succeed in the US requires hard work.
“Our business plan for US entry was orientative.” Arano says, “but we arrived with a strategy based on what worked in Spain and we had to adapt it. We had to negotiate better – if you don’t close on a client, someone else will.” The first year, he worked 15 hours a day.
Carles Cabre, leader of the Inspirit Group’s US operations, comments, “In the US you compete with PhD’s from Stanford and Berkeley – experts in their field, entrepreneurs with successful track records.
Inspirit has a unique model drawing on the strengths of each of its hubs. Founder Didac Lee dreams up new products in Barcelona, they are developed in Buenos Aires, and then they are commercialized between Spain and the US.
Silicon Valley helps Inspirit connect with angels investors and venture funds. “With just an idea, you can get meetings,” Cabre marvels. “It’s not like Spain.” With an angel / venture capital market of $34bn in Silicon Valley alone (comprising 50% of the US total), compared to a market of $22bn in Spain, Silicon Valley is most unlike Spain indeed. A 2008 study by IESE Business School placed Spain in the bottom half of the EU in terms of attractiveness for Venture Capital firms, between Poland and Bulgaria.
But Silicon Valley is not just a place to meet deep-pocketed investors. Cabre notes, “Every North American client brings us the credibility we need to get financing or sell the company.”
The North American market forces Spanish companies to up their game, Cabre and Arano say. Regulatory standards in certain sectors are more strict. There is a larger variety of business models to compete with so companies need a unique launch and distribution strategy in order to stand out. And the language in English releases must be impeccable. This emphasis on quality creates a stronger product.
Julio Casal, co-founder of Alienvault, the world’s leading provider of Security Information and Event Management solutions, confirms this: “Our go-to-market strategy was disruptive because of our bottom-up, open-source model, but since we arrived to Silicon Valley (in 2010) we’ve changed everything.”
The results are showing for all three companies. Softonic is close to displacing CNET as the top download hoster in the US, having long been the global leader. With 120 million unique visitors per month, it is one of the 50 most visited web sites in the world.
Inspirit has three high-potential companies: Zyncro, a corporate social networking tool to foster innovation; Leadzer, an SEO tool that creates lead generation landing pages using long tail keywords; and Matrix, an SEO platform that automates key functions. By virtue of its US presence, Zyncro has signed a contract with the large North American bank Wells Fargo and Leadzer has secured partnerships with Adobe and Endurance International Group (EIG).
AlienVault, though, is the greatest story of Spanish success in Silicon Valley. Over the last 12 months the company raised $30 million in venture capital money from Kleiner Perkins Caufield & Byers, among others, over two rounds of funding. It was the most ever raised by a Spanish tech startup and the first time Kleiner Perkins had invested in a firm founded in Spain. AlienVault’s headcount and revenues have roughly doubled in the last year.
Jordi Argente, co-founder of the California-Spain Chamber of Commerce, estimates that in addition to established companies like Softonic and AlienVault, as many as 60 Spanish startups are currently located in Silicon Valley. Most are affiliated with the Spain Tech Center or Acc1ó Silicon Valley.
Meanwhile, an entire ecosystem of support companies and professional associations has sprouted up in Silicon Valley to serve the Spanish niche. The California-Spain Chamber of Commerce reaches 1200 people with its newsletter and also hosts networking events and a jobs forum. Another example is the Bay Area Spanish Entrepreneurs (BASE) Group on LinkedIn, which has 200 members. A recent post gushed, “I’ve just arrived in San Francisco to launch the two tech companies I created in Spain!”
On the professional side, there is StepOne, which facilitates networking through visits with potential clients during a weeklong immersion trip, and Wikreate, a communications company that serves Spanish companies internationalizing into the US market. There is even a company – called San Francisco Relocate – that helps workers find homes and schools for their children.
So, is this trend luring innovation away from Spain? Argente, a serial entrepreneur himself who has lived in Canada, Hong Kong, and now the US, is adamant that companies need to thrive in a big market rather than aim for small or medium size within Spain. Besides, he says, multinationals can still maintain the design team and commercial presence in Spain.
“In the early years in Spain,” recalls Alienvault’s Casal, “our biggest contract was for $250k annually; Arcsight, the American leader, had an $80mn government contract. Our global presence allows us to aspire to this scale.”
All this is not to ignore that the Silicon Valley – Spain connection brings challenges. For one, the nine-hour time difference makes it difficult to schedule meetings and there are no direct flights.
Then there is the culture shock. Spanish managers tend to watch their subordinates closely, where Americans expect freedom to work from wherever they choose. In Spain, budgets are improvised; in America, they are pre-established. American CEOs also expect to be able to distribute equity to attract top talent, which is uncommon in Spain.
But the high potential and velocity of industry change – known as clockspeed – keeps these Spanish entrepreneurs excited.
“Softonic is in a sector that was mature for perhaps 10 years and now is upside-down again. Business models are constantly changing,” Arano says, also noting the threat of entry from software giants. “But I am passionate about technology and I hope we can be the ones to generate some of that change.”