Under General Francisco Franco and António de Oliveira Salazar, Spain and Portugal endured two of Europe’s longest 20th-century dictatorships. Whilst memories of the secret police, censorship and poverty are fading, these regimes still cast a long shadow on both economies. 

But today, this shadow could finally be shaken off by Iberia’s startup community — an early-stage ecosystem that, with its Latin American connections, could prove to be the single biggest growth opportunity in European tech. 

Suppressing innovation

Like any authoritarian regime, these dictatorships were based on top-down structures with no room for disagreement. People were less open to creativity and public services were limited as laws were built to protect the few, not the many. 

When democracy finally came to Portugal in 1974, nearly a quarter of the population was illiterate. This is not ancient history — consider your parent’s generation, and imagine one in four of your parents’ friends, or your uncles and aunts, being unable to read or write. Spain was in a better position, but still took a century longer than northern European countries to achieve widespread literacy levels.  

The combination of a closed economy and a poorly educated population meant that Spain and Portugal were particularly ill-equipped to realise the economic potential of democracy, let alone the digital era. 

“Once again, it looked like Spain and Portugal were going to be left behind whilst another industrial revolution swept across the rest of Europe”

Then the 2008 financial crash happened. In Spain, unemployment reached 27% by 2013. In Portugal, 200k people emigrated between 2011 and 2014 and, shockingly, 24% of the population — equivalent to 2.5m people — were officially classified as below the poverty line. I was one of those who left Portugal at this time. 

In the 2010s, scaleups, many of which are fast-growth tech firms, were responsible for the majority of job creation. We didn’t see this in Iberia. 

People who graduated from 2010 onwards were by far the most highly educated to ever emerge from Spain and Portugal but, instead of building their own companies, they ended up working in outsourced hubs for other tech companies or even making deliveries as gig workers. 

Once again, it looked like Spain and Portugal were going to be left behind whilst another industrial revolution swept across the rest of Europe. 

A new era

However, over the last few years we have started to see signs of change. 

The young people who enjoyed a strong education but had to emigrate for work are now starting to return. Portuguese and Spanish cultures are very family-oriented. People who left to study and work across Europe and the USA and are returning in their 30s and 40s because they want their children to be close to their families. 

With them comes the know-how and willingness to build world-leading companies. Coming back, they find a more educated and more multicultural country.

“Spain and Portugal are seeing an economic opportunity that could finally solve the social and economic questions that democracy alone has been unable to answer”

Entrepreneurs and investors are also now recognising the huge growth opportunity to expand from Iberia into Latin America. For decades, people in Spain and Portugal were desperate to learn English. The irony is that our Spanish and Portuguese languages are now one of the keys to one of the world’s biggest emerging markets.

We have already seen 19 Iberian unicorns and I expect that number to increase — creating jobs and attracting sustainable economic growth in the process. For the first time, Spain and Portugal are seeing an economic opportunity that could finally solve the social and economic questions that democracy alone has been unable to answer.

Why is this important?

It is not easy to throw off the shackles of illiteracy, poverty and repression, especially when they are replaced by emigration and economic instability. 

Spain and Portugal now have all of the constituent parts for a globally competitive tech ecosystem — high-quality education, a concentration of world-class talent, openness to the outside world and a significant market opportunity for entrepreneurs. 

The key players within the ecosystem — founders, investors, service providers, governments — now need to celebrate local success stories and highlight their growth potential to attract and retain this talent. 

If we can realise this opportunity, tech unicorns will continue to be a welcome product of 50 years of reshaping of national identity in Spain and Portugal.

Sergio Massano is a Partner at Antler.