Spanish start-ups an inspiration

A good book and a glass of good wine: it was an inspirational combination for three young friends back in 2007. The idea was simple enough, but making it a reality was another story. The notorious Spanish bureaucracy still had to be faced.

"It took us three years to get all the licenses, the guarantees for the bank loans, and other painstaking paperwork," says Francisco Curro Llorca, who is 31 like his two associates.

The result of their determination is a bookstore called Tipos Infames (or, Notorious types), which was highlighted in the November 12 issue of The Economist as an example of the type of business that needs to proliferate in Spain to overcome the crisis. The article defended the need for reforms to help business creation in the country, and noted that Spain ranks 133rd on the World Bank's list of how easy it is to start a business, after Kenya.

For now, the only people who work at Tipos Infames are its founding partners. They have not hired anyone because even though their revenues before taxes are "good," there is only five percent left over after expenses. And they need to repay 90,000 euros on a short-term loan.

Yet a morning spent at the bookshop reveals how a new business also creates employment in other ways. At 10:30am, the electricians show up to work on the ground floor, where the book presentations take place, not to mention the wine tastings. Around 10:45am, a sales representative from a soft drinks company comes by to enquire about new orders. The store opens at 11am and the first customers trickle in. The regulars greet the owners before ordering coffee and checking out the new releases. Tipos Infames stocks 5,000 volumes, meaning more work for authors, publishers, printers and so on.

Madrid Mayor Alberto Ruiz-Gallardón has made it clear that entrepreneurship is a key element of his economic strategy. The 2012 budget, which is defined by spending cuts, actually increased the allocation for the regional entrepreneurship agency, Madrid Emprende, by 40 percent, to nearly 10 million euros.

Iñaki Ortega, the managing director of Madrid Emprende, disagrees with The Economist that red tape is a major cause of the low number of business ventures. He notes that the World Bank report compares the necessary paperwork to open a company with five partners, 10 to 50 employees and rental business premises. Yet, he says, many business start-ups only require one person and one computer. In his opinion, the problem lies elsewhere. "It's a lack of work drive, compounded by the fear of running risks; that's what we really need to change."

"The entrepreneurial spirit is definitely important," says Lucía Fuentes, one of the four partners in GoCar Madrid, a company that opened last year and already employs four people. GoCar offers customers small yellow convertibles that take them on city tours, with GPS guidance and a voice recording that describes the various sights.

Fuentes' father was himself a businessman who imported books. "If you've seen it at home, you're less scared to start something yourself," she says. Fuentes, 34, and Rafael López, 45, have run the business together ever since she rode on a GoCar in Lisbon and decided to bring the idea to Madrid (the original business is from San Francisco, with franchises elsewhere, including Barcelona). To do so, both of them left their jobs at a multinational firm, where she worked as the head of human resources and he held another top management position.

"The greatest problem was funding," she says. "We invested 250,000 euros, and it is only this year, when we were expecting benefits, that a bank lent us some money. The investment came from partners' savings. It's tough when you can't earn a salary from the company and you still need to pump in money to keep it afloat."

Jon Lass is a 31-year-old veterinarian who used to work at a company specializing in cattle nutrition. "Things were not going all that well, and in Spain the last one in is usually the first one out," he says. "So I made a decision."

Over these last two years, Lass has done all the necessary legwork to open his own business: www.cienporcieneco.com, a website offering home delivery of organic food in Madrid and in a 30-kilometer radius. The brand new entrepreneur says the venture is starting to "really take off" now.

"Because of my earlier job, I met several organic farmers who lacked access to the market," he recalls. The solution came to him clearly: an online store where he would manage the deliveries himself. "The main thing, besides a top quality product, is that I don't depend on a courier company for the deliveries." The clients tell him when they're going to be at home, and if there is a change of plans, they simply call him.

"My girlfriend was scared about me not having a steady salary, and she still is," says Lass. But he seems quite confident, and hopes to make a space for himself in the market one step at a time. "I am not planning to get rich on this, but I do want some stability in my life."

Fear does not seem part of Rodrigo Fernández's vocabulary either. This week, he and two associates will launch a new casual wear line called Diplomatic. Fernández says their clothes will stand out for their quality, affordable prices within the higher quality spectrum, and little details such as plaid embroidery. Fernández, who "always liked fashion," devotes his afternoons to his new business. In the mornings, he attends Santa María del Pilar High School. He is only 16 years old.

"I see it like one more school course, one in which I can learn a lot," he explains. The other two partners are his 19-year-old brother and a "very close friend" who is 35 and has some business experience.

Fernández speaks with unusual self-confidence for someone so young, and he is clearly practiced at talking about his project. He admits he had help from family and friends to put together the initial investment of around 15,000 euros, and to deal with the red tape, but he likes to highlight the work that he has done, too. There were many days when he could not meet with friends because he was designing clothes or choosing fabrics, or else talking to producers at factories.

In less than 15 days, his tailor-made shirts (priced 50 to 60 euros) will be available online, and Fernández cannot conceal the fact that he places great hopes on the project's success. "I've been reading about other really young entrepreneurs who end up selling their companies for a fortune." Yet he knows the road will not be easy. "To get there, we're going to need a lot of luck and plenty of work."

All of these entrepreneurs agree that the key to success lies in hard work. "Whoever thinks that being your own boss means going on vacation whenever you feel like it is really mistaken," Lucia Fuentes of GoCar asserts strongly. Meanwhile, the owners of Tipos Infames joke about their "120 or 130-hour weeks" with no thought given to holidays. But they don't plan to give up anytime soon. "We're exhausted but happy," sums up Curro.