Capital Is Not an Ecosystem
Spain’s entrepreneurial ecosystem is the subject here—not venture capital in isolation. The question is why a country can have more startups, funds and support programmes than it had a decade ago and still struggle to turn promising companies into scaleups. The answer matters beyond Spain: it offers a way to judge whether a proposed ecosystem intervention fixes a binding transition or merely adds another input. By the end of this discussion, the useful distinction is not between “pro-capital” and “anti-capital,” but between capital that reaches a company and the conditions that let that capital become a product, a customer, durable growth and eventually reinvestment.
A provocative title, but a more precise diagnosis
The phrase “broken startup ecosystem” is rhetorically attractive, but it is not an accurate description of the evidence. The OECD’s diagnosis is more interesting: Spain has a vibrant, evolving and relatively young ecosystem that has not yet reached maturity. Its general business dynamism is real. Between 2020 and 2023, new employer firms represented about 8.5% of the employer-firm population, close to the European OECD average of 8.6%. Roughly half of new employer firms remained active after three years. Spain’s churn rate—business entries and exits together—was about 18%, slightly above the European OECD average. That can indicate healthy Schumpeterian creative destruction, although very high churn can also signal volatility.
The picture becomes less reassuring when the outcome is narrowed to equity-backed and high-growth entrepreneurship. Spain had about 0.18 young equity-backed startups per thousand people in 2020–2023, similar to France and slightly above Germany but below leading European ecosystems. Its unicorn rate was growing, yet still below that of the strongest European comparators. These measures are not interchangeable. A new local service firm, a venture-backed software company and a deeptech scaleup do not require the same ecosystem, financing structure or time horizon.
This is the first correction to the capital debate. A healthy rate of entry does not prove that an ecosystem is producing enough innovation-led growth. Conversely, a lower rate of equity-backed startups does not prove that ordinary entrepreneurship is failing. It tells us that the question must be tied to an outcome: are we trying to create more businesses, more innovative businesses, more high-growth employers, or more companies that can scale without relocating? Spain’s challenge is concentrated in that last part of the path.
The denominator matters as much as the headline. The OECD’s employer-firm birth rate counts firms with at least one employee, while the equity-backed measure counts young companies captured in a commercial database. A churn rate combines entries and exits; a unicorn rate captures an exceptionally rare outcome. None of these measures tells us whether a particular founder wants venture growth, whether a firm has a model suited to external equity, or whether a company that remains small is underperforming. The right diagnosis must therefore ask what kind of entrepreneurship a policy is trying to support and what evidence would show progress toward that outcome. This is especially important in Spain, where broad business dynamism can coexist with a thinner pipeline of firms seeking or reaching large-scale growth.
An ecosystem is a conversion system
An entrepreneurial ecosystem is a set of interdependent actors and conditions that enables productive entrepreneurship in a territory. The OECD framework groups those conditions into institutions, culture, networks, infrastructure, markets, finance, knowledge, talent, leadership and intermediate services. The list is useful only if it helps explain a relationship. Otherwise, it becomes a catalogue in which every desirable thing is called a “pillar” and no one can say what is actually binding.
Finance is plainly one of the important elements. A new company must pay salaries, build products, buy equipment and develop customers before revenue is reliable. Knowledge-based ventures often lack collateral and predictable cash flow, which makes equity more suitable than ordinary bank debt. But finance is an enabling input, not a complete production process. A cheque can extend runway; it cannot, by itself, create a scarce engineer, turn a research result into a certified product, persuade a public buyer to change a procurement process or make a fragmented regional market behave as one.
The more useful model is a sequence with feedback:
The sequence is not a claim that every startup follows identical steps. It is a way to locate failure. A company may need capital before it has a product, but the next round will usually depend on evidence that the team can execute and that someone wants what it is building. A research spin-off may need patient funding long before it can show revenue. A non-capital-intensive business may need a loan or a participatory instrument rather than a large VC round. The right question is therefore not “How much capital does the ecosystem have?” but “Which transition is the next unit of capital supposed to unlock?”
There is also a timing problem. The same resource can be valuable at one stage and insufficient or badly matched at another. A grant may reduce the risk of proving a technology, but it cannot replace a customer willing to adopt it. A seed investor may help a founder recruit an initial team, while a later-stage investor may need evidence of repeatable sales, governance and international execution. An ecosystem becomes stronger when these handoffs are visible and connected; it becomes fragile when each programme or investor optimises its own entry point and assumes that another actor will solve the next transition. That is why the diagnosis must follow movement through the system, not count inputs at a single moment.
That distinction also changes what counts as success. The regional meta-analysis by Martin Queissner, Lennard Stolz and Matthias Weiss separates general entrepreneurial activity—new firm formation, self-employment and similar measures—from productive activity, such as innovative, knowledge-intensive or high-growth firms. Those outcomes overlap, but they are not the same. An ecosystem that produces many entries may still lack the knowledge transfer, support, culture and demand needed for productive scale.
What the broader evidence says about complements
The meta-analysis synthesised 257 regional-level quantitative studies, 431 entrepreneurial-activity data points and more than 2.2 million space–time observations. Its main random-effects estimates found positive relationships between demand, finance and talent and both general and productive entrepreneurial activity. For the total sample, the estimated correlations were about 0.23 for demand, 0.21 for finance and 0.16 for talent. In the productive-activity subset, finance was about 0.33, demand 0.28 and talent 0.16.
Those values are correlations, not promises that increasing a variable by a given percentage will increase startups by the same amount. They are also averages across heterogeneous regions and studies, not a causal equation for Spain. Their value is different: they challenge the idea that finance is the only generic condition. Market opportunity and human capital appear alongside finance as persistent requirements for entrepreneurial activity.
The outcome distinction is even more important. Knowledge, culture and support services had stronger positive relationships with productive activity than with general activity in the study’s main estimates. Knowledge can help turn research into a new technology; support organisations can lower barriers and provide specialised guidance; culture can make risk-taking, commercialisation and second attempts more acceptable. These conditions may matter less for the decision to open any business than for the difficult work of building something innovative and scalable.
The evidence is not a licence to replace one simplistic ranking with another. Networks and physical infrastructure were not significant in most of the main subsets. The authors suggest that regional network measures may be poor proxies for the actual connecting function, while infrastructure may have threshold effects: basic roads, electricity and transport matter greatly when absent, but additional investment yields less once a sufficient level has been reached. Spain’s OECD assessment, meanwhile, finds infrastructure to be a relative strength and networks to be mixed. The difference is instructive. A country can possess infrastructure without using it equally well, and it can host many networking events without producing enough collaborations, pilots or customers.
This is also why ecosystem policy should be read as a problem of interaction. A weak link does not always appear as a missing institution or an empty funding line. It may appear as a handoff that no actor owns: a university has research but no route to a spin-off, a corporate buyer has a problem but no process for testing a startup, or a founder has a product but no bridge to the investor who understands the next market. The broader evidence cannot identify every such handoff, but it gives a disciplined reason to look for them. It warns against confusing the presence of an element with the functioning of the relationship that connects it to an outcome.
The first place to look: the scaleup transition
Spain’s finance problem is therefore real, but narrower than the headline suggests. Bank credit is broadly available: the OECD reports that less than 7% of Spanish SMEs were credit constrained in the 2023 EIB Investment Survey. Early-stage VC has expanded and has nearly caught up with some large European economies. The sharpest gap appears later, when a company needs a larger, specialised and patient investor base.
More than 91% of domestic funding rounds between 2017 and 2024 were below EUR 5 million. For the companies that do need larger rounds, domestic funds financed only 33% of EUR 20–50 million deals and 12% of deals above EUR 50 million. Many small firms do not want to scale or do not require those amounts, so these figures are not a verdict on every Spanish startup. They do show why a promising company can reach a local ceiling after early validation and then look abroad for Series C or D capital.
The percentages describe the origin and size of recorded rounds, not the quality of the companies or the full amount of capital available to them. Foreign funds can fill part of the gap, and a Spanish company may benefit from that participation without becoming a failure story. But dependence on a foreign source at the point of scale can carry costs. If a company must relocate to obtain that capital, Spain risks losing part of the value and ecosystem learning generated at the scaling stage, while domestic investors have fewer opportunities to learn from later-stage companies. The policy question is consequently not whether foreign capital should be excluded. It is whether Spain can make its ecosystem attractive enough that international investors add capacity while domestic institutions, corporates and founders retain a strong reason to build the next generation of firms there.
That is where the title’s argument becomes precise. More venture capital could help if it arrives in the missing growth-stage form, with investors able to understand the technology, support international expansion and stay patient through a longer path to exit. But if the company cannot hire, cannot find a first customer, cannot move research across the university-business boundary or faces costly regulatory transactions, a larger cheque may simply finance a longer wait. The next question is not whether Spain needs capital. It is what makes capital usable—and where those complementary conditions fail.