Around an entrepreneur gravitates a number of players who may be essential to the process of creating and consolidating their business project. As stated in a previous article in Value (see “Entrepreneurs in 2020”), six main figures can be identified: promoters, financiers, investors, advisers, incubators, and franchisers. The role of each of these players will be specified below as well as their real contributions to each case.
Los promotores del emprendimiento.
Promoters of entrepreneurship.
Their role is based on encouraging entrepreneurship through informative and educational actions and efforts in order to generate and strengthen the entrepreneurial spirit both among new generations and people in the second phase of their careers who have had to stop or would like to stop working for others.
There are public and private institutions that promote different initiatives: promotional campaigns, idea contests, organizing funding rounds with potential investors, training sessions, motivational publications and speeches, testimonial and expert conferences, etc.
The education system (schools, universities, professional centers) also must contribute to encouraging entrepreneurial interests and abilities. Fiscal and administrative measures applied from the government in this regard should also incentivize and not discourage.
-In Spain, the official CIRCE (Company Information and Creation Network) portal provides a great deal of information and facilitates the process of creating companies remotely. Bodies like the CDTI promote and support tech-based entrepreneurial projects.
-Several well-known companies also have entrepreneurial platforms or campuses, with Google Campus being the most well-known example. There are also contests and support programs like those organized by Microsoft (aimed at women entrepreneurs), Orange (“Lánzate,” business building and mentoring for entrepreneurs), and Repsol (aimed at innovative energy projects).
-Autonomous communities and municipal institutions also create entrepreneurship platforms and centers that aim to encourage the creation of new entrepreneurs (with the creation of programs such as “Madrid Emprende,” “Andalucía Emprende,” etc.) but they don’t always have the desired results, if you consider the opinions of the self-employed and small to SMEs.
-Another important focus is the organization of conferences and events. Every year, international conferences take place with participation from promoters, investors, incubators, and start-ups, such as the highly recommended Vivatech (www.vivatechnology.com), to be held in May in Paris (with 1,900 potential investors registered and 9,000 start-ups).
-Worth noting is the wide variety of specialized publications that contribute to fomenting entrepreneurship such as the magazine Emprendedores and the digital newspaper El Referente.
They are responsible for providing the financial resources through loans to entrepreneurs with the corresponding payment of interest, which, depending on the conditions, may add a significant amount of debt and financial costs to the project.
There are several banks and private institutions in Spain with lines of credit for new businesses, although they are usually selective and a number of demanding requirements must be met, so it is not easy to access that financing, especially if large amounts are required.
There are also contests for entrepreneurial projects with financing as the prize. The new companies can also access leasing or renting to acquire assets as well as reciprocal guarantee companies to guarantee entrepreneurial projects.
-Officially, ICO lines are also notable as well as some forms of accessing preferential financing, as is the case with Avalmadrid for SMEs in Madrid. Entrepreneurs can also request public subsidies specific to certain sectors and investments.
-In certain cases, they can also use crowdfunding and crowdlending systems, which are forms of collective financing through specialized platforms, where investors/financiers provide small amounts to cover the total amount requested by a company, which receives the funds and returns them under the conditions agreed upon with financiers.
Investors differ from financiers because they provide money in exchange for involvement or a stake in the capital of the business. Entrepreneurs are often recommended to turn to the “three fs,” i.e., friends, family, and fools as their first investors. Then the entrepreneurs move to the second level: so-called business angels and patrons. And if the business starts to take shape, they move to the third level: investing partners and venture capital firms.
Investments are considered venture capital when the contribution is made in a company in its initial stages or early development (it is usually given to tech companies with a strongly innovative component). When the investment is allocated to companies that are growing or already consolidated, the investment is called private equity.
There are initiatives from promoters and different institutions, where investment rounds or meetings with investors are organized in order to facilitate meetings with entrepreneurs so that they can present their ideas and projects. There are also conferences and meetings where all sides come together, such as the above-mentioned Vivatech.
-In order to meet and contact business angels, entrepreneurs should contact these associations: AEBAN (Spanish Business Angels Association, www.aeban.es), BAE (Business Angels Europe, www.busineesangelseurope.com), and EBAN (European Business Angels Network, www.eban.com). There are also online platforms for investors such as the Angel Investment Network (www.angelesinversionistas.es).
-To meet and contact venture capital firms: ASCRI (Spanish Association of Capital, Growth, and Investment (www.ascri.org). Their site has a search engine that allows visitors to filter by fund type and sector.
-There are several venture capital funds that provide what is known as “seed capital.” They are, for example, investment funds like Nautea Capital and Inveready.
-Informational publications such as the following are also notable: El Referente. Guía de inversión para start-ups [El Referente Guide to Investment for Start-Ups] (including over 120 Spanish investment funds and 70 European funds).
Under this category are the many different types of consultants (who may be specialized in a particular business sector) and consulting services for entrepreneurs with regard to issues of planning and starting the new company.
Seeking their assistance is highly recommended, especially in cases of businesses within highly regulated or competitive sectors, entry into foreign markets, situations involving new investors or venture capital (here a good lawyer or legal advisor is advantageous), or, selection and acquisition of a franchise.
These services are worth it in order to avoid larger problems, thereby mitigating the damage caused by initial difficulties and entrepreneurs’ lack of knowledge in certain areas.
-There are institutional bodies that provide consulting on the process of creating companies, especially with regard to issues of processing (CIRCE, chambers of commerce, business associations, etc.), as well as other entities, such as ICEX, for international projects.
-Entities that carry out actions that promote entrepreneurship also often provide consulting to potential entrepreneurs through their platforms, centers, and campuses.
-Co-working spaces for freelancers and entrepreneurs also offer additional consulting services from experts in different areas.
Unlike promoters and advisors, their actions focus on the process of definitive growth for the company with more direct and proactive involvement from the creation or conception of the project. Their role is to drive development and encourage the success of the business with different resources and services: providing physical spaces, coaching, networking, promotion, searching for funding, strategic management, brand management, etc.
While promoters carry out work that is more general and informational, incubators select companies to mentor them. These companies are usually start-ups (emerging companies with a great deal of potential, based on new technology and innovative ideas). In addition, these incubators take on functions similar to promoters and advisors in certain cases.
The interest for companies that create incubators is usually limited to supporting these new companies within their corporate social responsibility policies. However, they can also become involved in their capital if necessary, become part of their business units, receive revenues from the innovations developed, or hold stakes in intellectual property.
-A few examples of incubators include: Wayra (Telefónica group start-up incubator), Intercom (specialized in online projects), Lanzadera (program backed by the President of Mercadona, Juan Roig), and Topseedslab (mainly aimed at technology projects).
-As was mentioned above, with regard to the role of promoters, some companies and entities have entrepreneurship centers and campuses (Google Campus). Other firms have launched specific programs to support and encourage entrepreneurs, although they are usually specific and one-off actions.
The franchise is a different option for entrepreneurs who, in order to reduce risk, prefer to build a business on a previously-tested and proven format, under the umbrella of a well-known, prestigious brand, subject to certain conditions and payments (initial fee and royalties).
In this case, the franchising company’s insight should be combined with adequate management from the franchisee. Many entrepreneurs have subsequently become franchisers, using this formula to grow and expand their profile. The rates of new business closures decrease significantly when this system is used.
-The leading Spanish franchiser brands operating abroad notably include DIA (despite its current crisis with 7,500 stores worldwide), Lizarran, Naturhouse, No+vello, and 100 Montaditos. These five appear on the ranking of the 100 most successful franchises published by Franchise Direct.
-If an entrepreneur wishes to invest in a franchise, doing due diligence beforehand and checking with specialists is so highly recommended it is often considered essential. There are consulting firms with a great deal of experience in this area such as Tormo y Asociados, Barbadillo y Asociados, and T4franquicias.
-For more information, see the numerous web portals available (AEF [Spanish Association of Franchisers], Franquicia Directa, Mundo Franquicia, La Franquicia, Franquicias Hoy, Top Franquicias, etc.). There are also specific fairs held where franchisers provide information and advice for anyone interested. These fairs include Expofranquicia and Franquishop (both in Madrid).
Differences aside, entrepreneurs are like Formula 1 drivers:
1. They’ve built their passion and know-how with different training actions and informational activities related to racing (promoters).
2. They’ve gotten an initial loan to finance their career as drivers and the costs arising from their first few races (financiers).
3. They’ve found entities and people who invest resources and believe in them, allowing them to make the leap to the professional realm (investors).
4. They’ve received advice and training that has helped them prepare throughout the different phases of development as a driver (advisors).
5. They’ve had organization behind them with partners, trainers, and a specialized team that has allowed them to access the Formula 1 environment (incubators).
6. They’ve received the accreditations and licenses necessary to participate and compete in official championships and racing circuits (franchisers). The role and work of each of these players involved in entrepreneurship and business activity must contribute to strengthening the creation of businesses that add value and drive the growth of emerging companies, providing, in turn, higher-quality employment, and having an effect on the increase of wealth and sustainable economic development.