Mapping Against Global Trends

According to Spain Cap data, Spain closed 2025 with EUR1.731 billion invested across 654 transactions, representing a 57% increase over 2024 and the third best result historically. This trajectory mirrors the global recovery, with artificial intelligence, deep technology and defence-related dual-use applications attracting the largest share of capital, reflecting both investor appetite and the growing strategic importance of technology sovereignty at national and European levels. Technology transfer has also emerged as an increasingly critical dimension, as Spanish companies seek to commercialise deep tech capabilities in collaboration with the world’s leading technology ecosystems. International investors contributed a record amount of investment, reflecting sustained appetite for the Spanish market.

Two Spanish projects were selected as Important Projects of Common European Interest (IPCEI), carrying significant ministerial funding allocations aimed at retaining strategic technologies domestically. The increase in FDI prior authorisation requests from non-EU investors similarly reflects higher inbound investment.

Landmark Transactions

Multiverse Computing’s EUR189 million raise was among the largest rounds ever closed by a Spanish deep technology company. The Spanish Society for Technological Transformation (SETT) participated in its first two financing rounds as a strategic public investor, with portfolio companies Wootpix and SENSIA – early benchmarks for the SETT co-investment model. On the exit side, Hotelbeds’ IPO was the most significant public market exit of the year, at EUR2.84 billion, alongside Vlex’s trade sale at EUR850 million. Total divestment volume reached EUR4.562 billion in 2025, which was 25% above 2024 and the best result historically.

The Spanish venture capital market continues to attract strong international investment, particularly in larger and later-stage rounds, while domestic capital remains more active at early stages. Mixed rounds involving both domestic and international investors have shown the strongest growth, reflecting the increasing integration of the Spanish ecosystem into global capital networks. Venture capital funds represent approximately 70% of transactions, alongside a growing presence of public funds, corporate venture capital and business angels.

The market shows a broad base of smaller and mid-sized transactions combined with a limited number of large deals accounting for a significant share of total capital. Most transactions fall in the EUR1 million to EUR15 million range, reflecting strong early-stage and Series A activity.

Secondary transactions gained further traction as a mechanism for portfolio rotation and partial liquidity, reflecting the continued scarcity of large exit events and pressure on fund managers approaching end-of-life to return capital to limited partners. Venture debt and convertible facilities were increasingly used alongside primary equity in growth rounds, as companies sought to optimise dilution while meeting larger capital requirements.

The increased involvement of non-EU strategic investors triggered more frequent FDI prior authorisation requirements, adding a regulatory dimension to the transaction timelines that practitioners increasingly factor into deal structuring from the outset. Pay-to-play provisions appeared with greater frequency in follow-on rounds, and the breadth of reserved matters in shareholders’ agreements expanded as investors sought stronger governance protections.

Exit activity remained broadly stable in terms of transaction volumes, while the market continued to generate a limited number of high-value events, including several transactions above EUR200 million, confirming the capacity of the Spanish ecosystem to produce scaled liquidity events and attract international interest in exit processes.

Investment activity in Spain in 2025 was concentrated in a small number of high-growth sectors. Software and artificial intelligence led by volume, attracting approximately EUR516 million across 60 transactions, driven by the rapid expansion of AI-native companies and the adoption of AI capabilities across enterprise software platforms. Biotech and life sciences ranked second, with EUR345 million across 38 transactions, reflecting sustained investor confidence in science-based innovation and the maturation of Spain’s research-to-market pipeline. Business and productivity software, fintech and insurtech, and travel and tourism completed the list of most active sectors by both volume and transaction count.

Defence-related technologies and dual-use applications emerged as a growing area of investor interest, consistent with the broader European reorientation towards strategic technology investment in the current geopolitical context. Technology transfer transactions generated an increasing share of early-stage deal flow, supported by public funding frameworks and IPCEI participation (see 1.1 Venture Capital Market).

A meaningful distinction can be drawn between the industries that generate the highest volume of financing rounds and those that produce the most significant exit events, reflecting the different maturity profiles and liquidity dynamics of each sector.

Sectors with the highest number of financing rounds include software, AI, fintech and business productivity – areas characterised by relatively faster development cycles, lower capital intensity in early stages, and a broader base of domestic and international investors comfortable with the risk profile. These sectors generate consistent deal flow across all stages, from pre-seed to Series C, and account for the majority of transaction count in the Spanish market.

Exit activity, by contrast, is more concentrated in sectors with greater scale and international strategic relevance. Travel and tourism have produced some of the most significant liquidity events in recent Spanish market history, including the Hotelbeds IPO at EUR2.84 billion and the Vlex trade sale at EUR850 million. The legal technology and marketplace sectors have also generated notable exits. Biotech and life sciences are active in terms of financing rounds but have a longer development horizon and tend to produce exits at later stages, often through trade sales to international pharmaceutical or medtech acquirors rather than through domestic public market listings.

How Venture Capital Funds Are Organised in Spain

Spain offers a mature and well-regulated legal framework for venture capital activity, governed primarily by Law 22/2014 on Venture Capital Entities (Entidades de Capital Riesgo, or ECR). This framework enables fund managers and investors to structure their vehicles in a variety of ways, depending on their investment strategy, investor base and operational needs. All regulated entities are subject to authorisation and ongoing supervision by Spain’s securities regulator, the Comisión Nacional del Mercado de Valores (CNMV), which provides investors with a meaningful layer of transparency and institutional credibility.

The Two Main Regulated Vehicles and Other Alternatives

The two dominant structures used by venture capital managers in Spain are the venture capital fund (Fondo de Capital Riesgo, or FCR) and the venture capital company (Sociedad de Capital Riesgo, or SCR).

FCR and SCR

The FCR is a closed-ended investment fund without separate legal personality. Investors participate through fund units and take a passive role throughout the fund’s life. All management functions, including portfolio oversight, risk control, valuation and regulatory compliance, are delegated to an external management company (Sociedad Gestora de Entidades de Inversión de Tipo Cerrado, or SGEIC). The SGEIC is itself a regulated entity, subject to authorisation by the CNMV and strict conduct and organisational requirements.

The SCR is incorporated as a public limited company (sociedad anónima, or S.A.). Investors participate as shareholders and exercise governance rights through a Shareholders’ Meeting and a Board of Directors. Unlike the FCR, an SCR may appoint an external SGEIC or operate on a self-managed basis, in which case it simultaneously assumes both the investment vehicle role and the management company obligations. This self-managed structure offers greater operational flexibility but entails a broader and more demanding set of regulatory requirements.

Both FCRs and SCRs must invest at least 60% of their computable assets in their core investment activity, namely temporary equity stakes in unlisted companies that are neither financial nor real estate businesses. Beyond this mandatory investment coefficient, they may also extend participating loans, provide advisory services to portfolio companies, and invest in other venture capital entities. The holding period for these investments is typically several years, consistent with the closed-ended nature of the vehicle and the exit horizon expected by investors.

Alternatives

Law 22/2014 also provides for a specialised subtype known as the ECR-Pyme, which is designed to channel investment specifically into small and medium-sized enterprises. ECR-Pymes are subject to a higher mandatory investment coefficient of 75% of computable assets, and their target companies must meet specific size criteria at the time of investment, including fewer than 499 employees and annual turnover not exceeding EUR50 million. This vehicle is particularly relevant for managers focused on early-stage or growth-stage SME investment strategies.

Spain also recognises the European venture capital fund label (Fondo de Capital Riesgo Europeo, or FCRE), established under EU Regulation 345/2013. This voluntary, harmonised designation is available to eligible funds that invest at least 70% of their committed capital in small, unlisted and innovative companies. The EuVECA label enables managers to market their funds across EU member states under a single registration, without the need for re-authorisation in each jurisdiction. It is increasingly used by managers seeking to attract institutional and international capital into Spain’s innovation ecosystem.

Investment decisions

Decision-making structures vary depending on the vehicle chosen. In FCR structures, investment decisions are taken by the SGEIC, often with input from an advisory committee that may include key investors or limited partners. In SCR structures, decisions typically rest with the Board of Directors, supported where applicable by an internal investment committee. Self-managed SCRs must also comply with the governance and conduct obligations that would otherwise apply to a separate SGEIC, including requirements around conflicts of interest, risk management and investor reporting.

The documentation framework for each vehicle reflects its legal nature and the relationships between the parties:

• FCRs are governed by fund regulations (reglamento de gestión), an offering memorandum or information document, and investor subscription agreements; and
• SCRs and S.R.L. structures are governed by their by-laws (estatutos sociales) and a shareholders’ agreement (pacto de socios), supplemented where applicable by an offering memorandum and subscription agreements.

Fund principals in Spain participate in the economics of a venture capital fund through two primary mechanisms: the management fee and carried interest.

Management Fee

The management fee is typically set at around 2% per annum on committed capital during the investment period, transitioning thereafter to a fee calculated on invested capital or net asset value. This fee covers operational costs of the management company, including staffing, deal sourcing and compliance. While the 2% standard remains prevalent, fee negotiations have become more common as institutional limited partners seek to align cost structures with fund size and performance track record.

Carried Interest

Carried interest represents the performance-based compensation that fund principals receive upon successful realisation of investments. The market standard in Spain, consistent with international practice, is a 20% participation in profits above a preferred return threshold (hurdle rate), typically set at 8% per annum. Carried interest is usually subject to a claw-back mechanism to protect investors against overpayments in the event of underperformance in later portfolio realisations, subject to contractual negotiations.

A landmark development for fund principals operating in Spain was the introduction on 1 January 2023 of a specific personal income tax regime for carried interest under Ley 28/2022 (the “Startup Law”). The new provision classifies carried interest as employment income but permits only 50% of the amount received to be included in the taxable base, provided certain conditions are met. Key requirements include a minimum five-year holding period for the relevant rights and the satisfaction of a minimum return threshold for fund investors. Prior to this reform, the tax treatment of carried interest in Spain lacked express regulation in the general tax territory, creating significant legal uncertainty for fund managers. The 2023 reform aligned Spain’s framework with comparable regimes in neighbouring jurisdictions, and represents a meaningful step towards the country’s competitiveness as a fund domicile.

Continuation funds remain an emerging feature of the Spanish market but their use is growing steadily, with several established managers now operating their fourth or fifth fund vintage. Specific regulatory treatment does not yet exist under Law 22/2014, meaning these vehicles are structured under the general closed-ended entity framework. Divestments increased by 113% in 2024, reaching EUR2.9 billion across 211 transactions, creating conditions favourable to fund recycling and continuation structures.

Public bodies – including Innvierte, SETT and ICO Crecimiento – participate both as direct co-investors and as limited partners in private funds, reducing risk for private investors and expanding available capital (hereinafter, “Public Investors”). For international investors, this public co-investment infrastructure is an increasingly relevant factor in deal structuring.

Documentation

Spain has no standardised documentation framework equivalent to the NVCA model agreements. Each round is negotiated individually, and while certain terms have become consolidated market practice, they remain subject to deal-by-deal negotiation.

At a European level, there have been efforts to develop greater harmonisation. Initiatives such as the model term sheets promoted by Invest Europe and various national associations have sought to reduce documentation complexity and transaction costs across the continent. However, their adoption in Spain has been gradual, and the Spanish market continues to operate primarily on the basis of bespoke negotiated documentation, drafted by legal counsel and adapted to the specific circumstances of each transaction.

Within this framework, the following terms have become widely recognised as consolidated market practice in Spanish venture capital transactions, even if they are not codified in any standard form.

• Liquidation preference: 1x non-participating is the dominant standard. Participating structures are considered off-market for early-stage deals but may appear in later-stage or bridge rounds.
• Anti-dilution: broad-based weighted average is the accepted standard. Full ratchet provisions are rare but have reappeared in crisis situations since 2023.
• Governance: investor board seats and observer rights are standard from Series A onwards.
• Information rights: audited accounts, quarterly reporting and material event notifications are standard, increasingly enforced by international investors.
• Veto rights: standard across the vast majority of transactions. Pay-to-play clauses have gained traction to align investor commitment in follow-on rounds.
• Founder vesting: four-year schedules with a one-year cliff are most common, though longer periods are negotiated in technology-intensive or research-driven sectors, to reflect extended development horizons.

Venture capital funds in Spain operate within a well-defined regulatory framework, primarily governed by Law 22/2014 on Venture Capital Entities (Entidades de Capital Riesgo, or ECR). This law established a specific regime for closed-ended collective investment vehicles focused on private company investment, transposing into Spanish law the requirements of the Alternative Investment Fund Managers Directive (AIFMD, Directive 2011/61/EU). All regulated venture capital entities are subject to authorisation and ongoing supervision by the CNMV.

The two main regulated vehicles, the FCR and the SCR (see 2.1 Fund Structure), must be registered with the CNMV prior to commencing activity. Registration requires the submission of constitutional documents, an investment policy, governance structure documentation and, where applicable, details of the appointed management company (SGEIC). The SGEIC itself is a separately authorised entity subject to its own regulatory requirements, including minimum capital, organisational standards, conduct of business rules, and ongoing reporting obligations to the CNMV.

The ECR-Pyme (the specialised subtype designed for SME-focused investment strategies) is subject to the same supervisory framework but operates under its own specific investment coefficient requirements, as described in 2.1 Fund Structure.

In 2025, the CNMV enacted Circular 1/2025, which introduced enhanced reporting, transparency and oversight requirements for venture capital entities. This represents the most significant regulatory development for the sector in recent years, and increases the compliance burden for both fund vehicles and their management companies.

Funds operating under the European venture capital label (FCRE) established under EU Regulation 345/2013 are subject to a harmonised European regulatory framework that operates alongside the national regime. Registration under EuVECA enables cross-border marketing across EU member states without the need for re-authorisation in each jurisdiction, making it a particularly attractive option for managers seeking to raise capital from international institutional investors.

Not all vehicles used for venture capital activity in Spain fall within the regulated perimeter of Law 22/2014. Sociedades limitadas (S.L.), when structured as pledge funds, operate entirely outside the CNMV supervisory framework and are governed by private contractual arrangements between the parties under the general regime of the Capital Companies Act (Ley de Sociedades de Capital). While these structures offer meaningful advantages in terms of flexibility, speed of set-up and lower compliance costs, they carry important risks that participants should carefully consider, including that investors have no access to the regulatory protections afforded to participants in regulated vehicles; there is no mandatory investment policy or diversification requirement, which increases concentration risk for investors; and there are limitations in terms of the ability to market the vehicle to certain categories of institutional investors. For these reasons, managers with ambitions to scale or raise capital from institutional limited partners typically migrate to regulated structures as their platform grows.

AIFMD II

A significant regulatory development currently in progress is the transposition into Spanish law of Directive (EU) 2024/927 (AIFMD II), which entered into force in April 2024 and whose transposition deadline was 16 April 2026. Spain did not meet that deadline. On 24 March 2026, the Council of Ministers approved a draft bill that includes, among other measures, the transposition of AIFMD II alongside other European legislative packages, including the Listing Act, MiFID/MiFIR reforms and EMIR 3.0. The legislative process is therefore underway but remains incomplete at the time of writing.

AIFMD II introduces targeted but significant changes to the existing framework in areas including governance, transparency, liquidity risk management, delegation arrangements and depositary rules. The full impact on the Spanish venture capital market will depend on the approach taken during the remaining legislative process, but market participants should anticipate increased compliance requirements and potentially higher operational costs as a result of the reform.

Public institutions have become a structural pillar of the Spanish venture capital ecosystem, participating both as direct co-investors and as limited partners in private funds through programmes such as Innvierte, SETT and ICO Crecimiento. Public funds represented approximately 8.6% of total venture capital investment in Spain in the first half of 2025, reaching EUR260 million, with particular concentration in deep technology and science-based sectors. For international investors, this public co-investment infrastructure is a material factor in deal structuring, reducing risk, extending investment capacity and providing market validation for early-stage opportunities.

Impact Funds

The impact investing segment has grown steadily. A significant number of fund managers have incorporated ESG criteria and impact measurement frameworks into their investment processes, driven both by LP demand and by evolving European regulatory requirements, including the Sustainable Finance Disclosure Regulation. While impact investing is not yet as mature in Spain as in certain northern European markets, the trend towards purposeful capital allocation is firmly established and growing.

Fund-of-funds structures are present in the Spanish market primarily through public sector initiatives. Public Investors and other similar entities have been the most prominent vehicle of this type, providing anchor LP commitments to domestic fund managers.

Structure Strategies

The maturation of the Spanish ecosystem, the emergence of capital-intensive sectors such as life sciences, deep technology and industrial innovation, and a more selective exit environment have all contributed to the need for structures that can accommodate longer investment horizons. Common strategies are:

• extension of fund life subject to investor approval, providing a contractual mechanism to delay exit without restructuring the vehicle;
• the use of continuation fund structures to transfer high-potential assets beyond the original fund’s life cycle;
• follow-on reserves to ensure capital availability for portfolio companies with longer development trajectories; and
• flexible vesting and governance arrangements aligned with the development cycles.

Public co-investors, whose mandates are less constrained by return timelines, provide additional patient capital that complements private fund structures.

The depth and scope of due diligence vary by stage, round size and investor profile. Early-stage transactions involve a lighter process focused on founder background, product validation, and basic corporate and IP review, while later-stage rounds involve more structured workstreams with external advisers.

Legal due diligence is the most consistently present workstream, covering corporate matters, IP ownership, labour arrangements, data protection, tax and sector-specific regulatory requirements. Red flag reports are the most common format in venture capital deals.

Financial due diligence covers historical financials, revenue quality and projection assumptions, shifting towards unit economics and burn rate in early-stage companies.

Technical due diligence – covering technology architecture, scalability and technical debt – has become standard, given that technology typically constitutes the primary asset of a venture-backed company. Depending on the sector, due diligence may extend to commercial validation, ESG, cybersecurity or regulatory licensing, with outputs directly informing the representations and warranties framework.

The timeline for closing a venture capital financing round in Spain varies depending on the complexity of the transaction, the stage of the company, and the level of prior preparation on both sides. As a general reference, a standard growth-stage round with a new lead investor can be expected to take between two and four months from the execution of a term sheet to closing.

The process typically unfolds across three broad phases.

• The first phase covers negotiation and execution of the term sheet, which in practice takes one to three weeks, depending on the parties’ alignment on key economic and governance terms.
• The second phase covers due diligence, which in growth-stage transactions is the most time-intensive workstream and typically runs four to eight weeks.
• The third phase covers documentation, negotiation and closing, including the drafting and negotiation of the shareholders’ agreement, subscription agreement and amended by-laws, together with any required corporate approvals and notarial formalities, which typically adds a further three to six weeks. Several factors can extend this timeline materially (cap table structures, pending corporate housekeeping, IP issues, etc).

New anchor investors typically drive the terms of the round, presenting a term sheet that serves as the basis for negotiation with the company and existing investors. Existing investors become active participants once the term sheet is agreed, particularly where the new round triggers pre-emption rights or anti-dilution adjustments, or requires amendments to existing governance arrangements.

Spanish venture capital transactions use a range of instruments beyond ordinary shares. Preferred participations (participaciones preferentes) are standard in venture rounds, typically carrying liquidation preferences structured as a waterfall, veto rights, board appointment rights, drag-along and tag-along rights, pre-emption and pro-rata rights, and other protective provisions. Not all these rights can be incorporated into the by-laws – those that cannot must be regulated exclusively through the shareholders’ agreement.

Convertible loans and SAFEs are widely used in pre-seed and seed transactions to defer valuation to a future round. A key structuring decision is whether the convertible loan takes the form of an ordinary mercantile loan or a participating loan, with material differences in subordination, interest treatment and accounting implications. SAFEs require specific adaptations under Spanish law to be valid and enforceable.

Warrants are used as equity kickers in venture debt and facilities agreements, although they carry tax risks requiring specialist advice. Venture debt itself is more common in growth-stage than early-stage transactions, providing capital without immediate dilution and typically including warrants or an equity kicker. Public financing instruments – including Empresa Nacional de Innovación (ENISA) loans, NEOTEC grants and regional aid schemes – are frequently structured alongside private rounds.

Secondary transactions typically involve a discount to the primary round valuation, with the secondary purchaser obtaining conversion rights into preferred participations equivalent to those of primary investors. Other instruments used in specific contexts include non-voting participations, cuentas en participación (joint ventures) and subordinated debt arrangements.

A venture capital financing round in Spain requires the execution and, where applicable, the notarisation of a set of interdependent documents. The core package typically comprises:

• a term sheet;
• a cap table reflecting the evolving ownership structure;
• a due diligence report identifying risks and quantifying those identified during the review process; and
• an investment agreement formalising the terms of the investment, conditions to closing, representations and warranties, and the liability regime.

The transaction is completed by a shareholders’ agreement governing the ongoing relationship between shareholders (covering governance, transfer restrictions, exit mechanisms and investor protections that cannot be incorporated into the by-laws), together with amended by-laws reflecting new share classes and governance changes, which require notarisation and registration with the Commercial Registry. Ancillary documents complete the closing package, including corporate resolutions, founders’ agreements and employee incentive plan rules.

Investor protections in downside scenarios depend on whether the event involves a valuation reduction or a severe deterioration leading to winding up or insolvency.

In down rounds, the primary protection is anti-dilution. Broad-based weighted average anti-dilution is the market standard, producing a balanced adjustment without excessively penalising founders. Full ratchet – which adjusts the conversion price to the new round price regardless of size – is more aggressive and less frequent, being reserved for higher-risk transactions. Pre-emption and pro-rata rights complement these protections by allowing investors to maintain their ownership percentage in follow-on rounds.

In winding up or insolvency scenarios, the key instrument is the liquidation preference, whose effectiveness depends critically on a well-drafted definition of liquidity event that expressly includes dissolution, winding up and insolvency proceedings. Additional protective mechanisms include:

• the exit option at nominal value (opción de salida a 1 euro), an irrevocable put option allowing the investor to exit for EUR1 where the company has no recoverable value;
• preferential acquisition rights over assets or shares in distressed scenarios; and
• preferential exit or offer rights entitling investors to respond to any acquisition offer ahead of other shareholders.

Venture capital investors in Spain exercise influence over portfolio companies through a combination of rights embedded in the shareholders’ agreement and the company’s by-laws, operating across several layers of governance.

Reserved Matters and Veto Rights

The primary governance mechanism is the reservation of key corporate decisions to reinforced majority requirements, giving investors effective veto power over matters of strategic relevance. At shareholder level, these typically cover amendments to the by-laws, issuance of new shares, changes to the management body, approval of incentive plans, and disposal of essential assets. At board level, reserved matters subject to qualified majorities requiring investor-appointed director approval commonly include the annual budget and business plan, transactions involving intellectual property, and the disposal of significant assets.

Board Composition and Observers

Following the entry of professional investors, the management body is frequently restructured as a Board of Directors. The lead investor of the round and, where applicable, the majority holder of preferred participations from a prior round typically hold a formal director appointment right, depending on stake size and cap table composition. Investors with smaller positions are often entitled to appoint a board observer instead, who attends and participates in meetings without voting rights and without assuming the legal responsibilities and liability exposure that attach to board membership under Spanish corporate law.

Information Rights and Active Influence

Lead investors typically negotiate enhanced information rights beyond statutory minimums, including periodic financial reporting, audited accounts, and advance notice of material events. While governance rights are primarily structured around veto mechanisms, board representation also enables active influence over strategy, fundraising and key hires, particularly in early-stage companies where the boundary between governance and management is less clearly defined.

Representations and Warranties

In Spanish venture capital transactions, representations and warranties are typically given by the founders and/or the company. These are structured around two categories.

• Fundamental warranties cover corporate existence, accuracy of the cap table, share ownership and authority to enter into the transaction.
• Business warranties address the operational reality of the company and typically include the accuracy of financial statements, the absence of undisclosed liabilities, ownership and enforceability of intellectual property, the absence of material litigation or regulatory proceedings, compliance with data protection and labour regulations, and accuracy of material contracts.

In technology-driven companies, IP warranties covering ownership, freedom to operate and the absence of third-party claims are the most heavily negotiated, given their centrality to the investment thesis.

Investor representations are limited in scope and typically cover authority to enter into the transaction, the absence of conflicts and, where relevant, confirmation of qualified investor status.

Covenants and Undertakings

Post-closing covenants that are binding on the company and founders commonly include obligations to maintain adequate insurance, preserve key licences and IP registrations, provide periodic financial reporting, and notify investors of material events. Negative covenants restrict actions such as incurring material indebtedness beyond agreed thresholds, disposing of significant assets, issuing new shares, modifying incentive plans, or entering into related-party transactions, all without prior investor consent.

Recourse and Liability Regime

Since there is no specific statutory framework under Spanish law, liability is essentially contractual and governed by general contract law principles. Investment agreements typically include limitations such as baskets, de minimis thresholds and aggregate caps, together with provisions defining recoverable damages and applicable limitation periods. Claim procedures establish notification requirements, time limits and mechanisms for handling direct and third-party claims. Available remedies include contractually agreed indemnification, and subsidiarily those under general contract law, including termination for breach or annulment for misrepresentation. Arbitration is valued for its confidentiality and the availability of specialist arbitrators, and is increasingly included in shareholders’ agreements, although ordinary court jurisdiction remains a common alternative in domestic transactions.

Spain has developed a broad ecosystem of public programmes designed to incentivise investment in growth and innovative companies, operating through a combination of direct equity co-investment, fund-of-funds participation, non-dilutive grants and subsidised debt instruments. These programmes play a structural role in the Spanish venture capital market, as described in 2.4 Particularities.

• Equity and co-investment programmes – public funds (supervised by the CNMV and operating under the general framework of Law 22/2014) operate both as a direct co-investor alongside private venture capital funds in individual transactions and as a limited partner in private fund vehicles. Examples include the Public Investors.
• Non-dilutive grant programmes – NEOTEC, also managed by CDTI, provides non-reimbursable grants to technology-based companies with fewer than three years of operating history. The programme is competitive and sector-agnostic, provided the company’s business strategy is based on the development of proprietary technology.

• Subsidised debt instruments – ENISA (a public entity under the Ministry of Industry and Tourism) is the most widely used source of public financing for start-ups and innovative SMEs in Spain. ENISA financing is particularly valued by founders as a mechanism to extend runway and leverage private investment rounds without additional equity dilution.
• Regional programmes – in addition to the national programmes described above, Spain’s autonomous communities operate their own financing initiatives for growth companies, including grants, subsidised loans and regional co-investment funds. These programmes vary significantly in scope and conditions across regions, but are a relevant complementary source of capital.

Public financing instruments – including ENISA loans, NEOTEC grants and Innvierte co-investments – are routinely structured alongside private rounds, increasing available capital while reducing dilution. International investors should note that public financing conditions, including use-of-funds restrictions, reporting obligations and transfer restrictions, require careful management in transaction structuring. The Startup Law’s tax incentives provide an additional driver of investment activity, as described in 2.2 Fund Structure.

Spain’s tax framework for venture capital deviates materially from the default applicable to ordinary companies in several respects.

Regulated vehicles (FCRs and SCRs) benefit from a near-full exemption: capital gains on portfolio disposals are 99% exempt from corporate income tax, and dividends from portfolio companies qualify for the participation exemption – a significant incentive for structuring investment through Law 22/2014 vehicles.

At portfolio company level, the default corporate income tax rate is 25%. Qualifying empresas emergentes under the Startup Law benefit from a reduced 15% rate for the first four profitable tax periods and are exempt from instalment payments during their first two years of positive taxable income.

Individual investors in qualifying companies benefit from a 50% IRPF deduction on amounts invested up to EUR100,000 per year, plus a capital gains exemption on exit proceeds reinvested in another qualifying company within one year. This deduction applies only to direct investments; fund-level investment does not qualify – a structural gap the industry continues to advocate reforming.

For fund managers, carried interest is taxed as employment income but with only 50% included in the taxable base, subject to a five-year holding period and a minimum return threshold for investors – a reform that aligned Spain with comparable European regimes and resolved prior legal uncertainty.

Spain’s public innovation policy is increasingly aligned with European strategic priorities, with sectors including artificial intelligence, cybersecurity, quantum computing, defence technology and biotechnology identified as areas for intensified investment. Regional governments complement national programmes through their own innovation financing initiatives.

The most significant legislative initiative in recent years is the Startup Law, which established a specific legal and fiscal framework for innovative growth companies in Spain for the first time. Beyond the tax incentives described in 4.2 Tax Treatment, the law streamlined administrative procedures for foreign investors, simplified the certification process for qualifying companies, and improved the regulatory environment for employee equity incentive plans.

On the public investment side, the government operates through a comprehensive network of vehicles that directly co-invest alongside private capital or participate as anchor limited partners in private funds.

Securing Long-Term Commitment From Founders and Key Employees

In the Spanish venture capital market, the long-term commitment of founders and key employees is typically secured through a combination of contractual mechanisms, equity-based incentive structures, and governance arrangements negotiated at the time of each financing round.

The primary mechanism for securing founder commitment is a vesting schedule applied to their existing shareholding or to newly issued participations. Vesting in Spain is typically structured as a reverse vesting arrangement, whereby the founder holds the full shareholding from the outset but the company or other shareholders hold a contractual right to repurchase unvested participations at nominal value in the event of a leaver event. The leaver regime – distinguishing between good leavers, bad leavers and intermediate categories – is one of the most heavily negotiated aspects of Spanish venture capital documentation, as it determines the economic consequences of a founder’s departure under different circumstances.

Beyond founder vesting, equity-based incentive plans for key employees are a standard feature of venture-backed companies in Spain. The main instruments are described in 5.2 Securities.

In addition to economic incentives, investor commitment from founders is also reinforced through governance arrangements. Lock-up provisions are also commonly included in the shareholders’ agreement, restricting founders and key employees from transferring their participations for a defined period.

Equity Incentive Instruments

The main instruments used in Spanish venture-backed companies are stock options, phantom shares, warrants and direct share awards.

Stock options grant the right to acquire participations at a predetermined price upon vesting. Prior to the Startup Law, their use was limited due to an unfavourable tax regime requiring income recognition at exercise. The Startup Law raised the annual IRPF exemption to EUR50,000 and deferred the tax event to a liquidity event or IPO, making stock options more attractive. Standard terms include vesting aligned with but shorter than founder schedules, fair market value exercise price, exercisability upon a liquidity event or vesting expiry, and good/bad leaver provisions.

Phantom shares provide synthetic economic exposure without actual ownership, cap table entry or corporate rights. Payment is made at a trigger event based on the notional shareholding value. Such shares avoid notarial formalities and shareholder approval requirements, making them structurally simpler. Payments are taxed as ordinary employment income at progressive IRPF rates. For these reasons, phantom shares remain more widely used in practice than stock options in Spain.

Founder commitment is typically structured through reverse vesting, whereby the company or other shareholders hold a call option over unvested participations exercisable at nominal value for bad leavers and at fair market value for good leavers.

Equity for services to collaborators and advisers is typically structured through direct share awards, stock options or phantom shares subject to vesting conditions, with careful attention to tax treatment, as non-employee collaborators do not benefit from the EUR50,000 IRPF exemption available to employees of qualifying companies.

The tax treatment of equity incentive instruments in Spain is one of the most critical factors in determining how an incentive pool is structured, as it directly affects both the net economic benefit received by the beneficiary and the timing of the associated tax liability. The key considerations are the following.

Stock Options

For employees of certified empresas emergentes under the Startup Law, the first EUR50,000 of value delivered annually through share awards or option exercises is exempt from IRPF. Amounts exceeding this threshold are subject to IRPF as employment income, but the tax event is deferred until a liquidity event or IPO, or in any case within ten years of delivery. For non-qualifying companies, the taxable event arises at exercise, not grant, and the taxable amount is treated as employment income subject to progressive IRPF rates of up to 47%. Where the period between grant and exercise exceeds two years, a 30% irregularity income reduction may apply, subject to a maximum base of EUR300,000.

Phantom Shares

Payments are treated as ordinary employment income taxed at progressive IRPF rates at the time of payment, with no exemption or deferral available regardless of the company’s qualifying status. Where the generation period exceeds two years, the 30% irregularity income reduction may partially mitigate the tax burden.

Structuring Implications

The tax differential between instruments has a direct impact on incentive pool design. The choice depends on qualifying status, stage of development and expected timeline to a liquidity event. Companies are also subject to withholding tax obligations at the time of each taxable event, which must be carefully managed in the administration of any incentive plan.

The creation or expansion of an employee incentive pool is almost invariably negotiated as part of the investment round rather than implemented independently. Incoming investors typically require that an option pool of a defined size be established or topped up prior to or simultaneously with closing. This sequencing is deliberate: by creating the pool before the new investor’s entry, the associated dilution is absorbed by the pre-money cap table, falling on existing shareholders rather than on the incoming investor. Pool size is therefore a key economic negotiation point, typically ranging between 5% and 15% of the fully diluted post-money cap table, depending on the stage of the company and anticipated hiring needs.

From a process perspective, where the plan involves the issuance of actual participations or options over newly created participations, a capital increase authorisation must be approved at a Shareholders’ Meeting, the relevant plan rules must be adopted by the board, and the constitutional documents (including the by-laws and shareholders’ agreement) must be updated to reflect the new share class or option pool. These steps require notarial formalisation and registration with the Commercial Registry, adding a procedural dimension that must be planned for in the closing timeline. Where the incentive programme is structured through phantom shares, the corporate formalities are significantly lighter, as no actual participations are issued and no Commercial Registry filings are required.

Investors typically insist on a fully diluted cap table calculation, meaning the option pool is included in the denominator when calculating ownership percentages at closing. Founders must therefore be attentive to the cumulative dilution arising from the combination of the new investment and the incentive pool, which together can represent a significant reduction in effective ownership.

Exit provisions in Spanish venture capital transactions are governed primarily by the shareholders’ agreement and, where applicable, the by-laws. The relatively limited number of large exit events in Spain has shaped exit-related market practice. The key mechanisms that regulate shareholder rights in the context of a trade sale, IPO or other liquidity event are the following.

• Liquidity event – the breadth of this definition determines when liquidation preferences and other exit-related rights are triggered, making it directly relevant to investor downside protection as well as upside participation.
• Drag-along – the threshold required to trigger the drag-along, and whether founder consent is required in addition to investor consent, are heavily negotiated points that directly affect the balance of power between founders and investors in an exit scenario.

• Tag-along rights – preferred investor classes frequently negotiate preferential tag-along rights that entitle them to participate ahead of ordinary shareholders in any partial exit, preserving their economic priority in the distribution of sale proceeds.
• Transfer restrictions – these control cap table composition and prevent unwanted third parties from acquiring participations. Standard mechanisms include rights of first refusal over proposed transfers, rights of first offer (entitling existing shareholders to make an offer to acquire participations before the holder initiates a sale process with third parties), prior consent requirements for transfers outside permitted categories, and lock-up periods restricting founder transfers for a defined period following closing. Transfers to affiliates, holding companies or family members are typically permitted without triggering pre-emption rights, subject to the transferee assuming all obligations under the shareholders’ agreement.
• Exit triggers – these entitle investors to initiate or compel an exit upon defined events. Upon trigger, investors may initiate a sale process, exercise drag-along rights or, in certain cases, exercise put options at a predetermined price.

Spain offers a tiered structure of listing venues adapted to companies at different stages of development, all operated by BME (Bolsas y Mercados Españoles).

• BME Growth is the most established alternative market for growth companies in Spain, operating as an SME Growth Market under European regulation. It is designed for small and mid-cap companies with a proven and scalable business model seeking access to equity capital markets. Its regulatory requirements are significantly lighter than those of the main Continuous Market, making it the reference venue for venture-backed companies considering a domestic listing.
• BME Scaleup is a newer multilateral trading facility launched in 2024, designed specifically for earlier-stage companies that are not yet ready for BME Growth, including start-ups, scale-ups and innovative SMEs. It operates with even more flexible admission requirements and lower costs, and is explicitly positioned by BME as an attractive exit route for venture capital investors. It also connects with the Entorno Pre Mercado programme, which prepares companies for the listing process through education and networking. BME Scaleup functions as a stepping stone towards BME Growth and, ultimately, the main market.
• The Continuous Market (Mercado Continuo) remains an option for larger, more mature companies, though it is rarely a realistic near-term objective for venture-backed growth companies given its more demanding capitalisation, governance and disclosure requirements.

The decision to pursue an IPO and the timeline for doing so are shaped by several converging factors. From a company perspective, key prerequisites include a demonstrated revenue track record, a credible growth narrative, audited financial statements under IFRS or Spanish GAAP, and a governance structure capable of meeting the ongoing disclosure and reporting obligations of a listed company. The conversion of all preferred participations into ordinary shares – required for listing – must be carefully co-ordinated with existing investors, as it eliminates the preferential rights that have governed the investor relationship throughout the private phase.

Pre-IPO liquidity demand is growing as fund managers approach end-of-life, early employees seek to monetise equity, and angel investors face extended holding periods without liquidity. Transfer restrictions – including rights of first refusal, lock-up provisions and consent requirements – create friction for secondary transactions, requiring qualified majority waivers. Valuation in the absence of a market price typically results in discounts, and tax implications require careful management.

Company-facilitated tender offers are gaining traction as a controlled liquidity mechanism, allowing the company to manage its cap table actively while providing structured liquidity to departing shareholders through treasury share purchases, additional stakes by existing investors, or new secondary investors entering on pre-agreed terms.

The legal framework governing the offering and transfer of equity securities in Spanish venture capital transactions differs fundamentally depending on the corporate form of the investee company. As the vast majority of venture-backed companies in Spain are incorporated as sociedades limitadas (S.L.), the starting point for any analysis is the Capital Companies Act (Ley de Sociedades de Capital, or LSC) rather than securities markets regulation.

Shares in an S.L. are not classified as securities (valores mobiliarios) so are not subject to the securities offering regime applicable to listed or publicly offered instruments. Any transfer of participations or capital increase must be executed by public deed before a notary and subsequently registered with the Commercial Registry. This requirement applies to every financing round, every secondary transaction and every exercise of options resulting in the issuance of new shares. These formalities add time and cost to each transaction.

Where the investee company is incorporated as a sociedad anónima (S.A.), which is less common in early-stage venture capital but more frequent in later-stage or pre-IPO contexts, shares may qualify as securities under Spanish law. In that case, larger or more widely distributed offerings may trigger the application of securities regulation, including prospectus requirements under EU Regulation 2017/1129. The Prospectus Regulation provides a number of exemptions that are routinely relied upon in Spanish venture capital transactions – such as addressing the offer exclusively to qualified investors, fewer than 150 investors per EU member state, less than EUR8 million over a 12-month period, employee share schemes, and others.

Rounds exceeding EUR8 million and involving investors from multiple EU member states require careful assessment of whether any prospectus obligation is triggered, and whether the transaction falls within the qualified investor exemption across all relevant jurisdictions.

The offering of equity incentive instruments to employees in an S.L. context is also subject to the LSC formalities described above (any capital increase required to satisfy option exercises must be authorised in advance at a Shareholders’ Meeting, and each individual issuance requires a notarial deed and Commercial Registry filing). In practice, companies manage this by obtaining a standing authorisation for a defined option pool at the time of each financing round, allowing individual grants to be made within that pool without requiring a separate shareholders’ resolution for each exercise.

Spain operates a broadly liberal regime for foreign investment, with no general currency exchange controls or banking-related restrictions applicable to venture capital transactions. However, a significant layer of prior authorisation requirements applies to foreign direct investment, and prior authorisation from the Council of Ministers is required for non-EU/EFTA investors whose ultimate beneficial ownership corresponds to non-EU/EFTA residents acquiring 10% or more of the share capital of a Spanish company operating in a strategic sector, including critical infrastructure, critical and dual-use technologies, artificial intelligence, semiconductors, cybersecurity, biotechnology, energy, telecommunications, financial services, healthcare, sensitive personal data and media.

Defence sector investments are subject to an additional specific regime involving the Ministry of Defence, which may impose conditions including requirements to maintain the company’s headquarters in Spain, restrictions on technology transfer, and obligations to preserve employment and research capacity – all requiring early integration into deal structuring.

The past 12 months have seen two notable developments:

• first, the lapse of the transitional EU/EFTA investor regime following the parliamentary rejection of its extension in January 2025 has reduced the regulatory burden for European investors deploying capital into Spain; and
• second, the growing emphasis on defence technology, artificial intelligence and dual-use technologies as strategic sectors – driven by European geopolitical priorities and the influence of the Draghi and Letta reports – has increased the practical relevance of FDI screening for venture capital transactions in these sectors, even at relatively early stages of company development.

International investors active in these areas should ensure that FDI analysis is integrated into the investment process from the outset rather than treated as a closing condition.