Startup Guide has just launched its first book in Valencia where an easygoing way of living is matched with an affordable lifestyle and a thriving cultural scene. While Valencia’s ecosystem is small, its interconnectedness is a promising foundation for a future startup scene.

“Valencia is starting to become a hotspot for startups because of its Mediterranean lifestyle, relatively low cost of living and tight-knit entrepreneurial community,” says Sissel Hansen, founder and CEO of Startup Guide.

Valencia’s current success stories range from Barrio La Pinada, a sustainable eco-neighborhood development project, to Imegen, a pioneering genetic analysis lab. With efforts now focused on supporting the scaling of fast-growing companies, Valencia looks set to realize its potential as an alternative startup hub in Spain.

But what can Valencia offer that its older siblings Barcelona and Madrid can’t? And how does the city plan to support the fledgling enterprises that flock to its coast? To find out more about Valencia’s youthful and ever-growing ecosystem, we had a chat with Valencia Activa, a local government brand that supported the creation of Startup Guide Valencia.

Valencia's ecosystem is still in its infancy, according to Javier Mateo García, deputy director of entrepreneurship at Valencia Activa. This hasn't stopped the city from growing exponentially since its conception.

With 500 startups, 33 investment funds, 40 startup communities, 60 coworking spaces and an embedded culture of entrepreneurship, Valencia is well on its way to becoming the “startup factory” that its local government dreams of.

Alongside its traditional tourism and service-based economy, Valencia is creating a new economic model that utilizes the city’s talent, knowledge, technology and innovation.

“We are very strong in tourism, we are very strong in services, but we want to be strong economically too,” Javier says. “Our aim is to align all of Valencia’s stakeholders in order to create a common strategy, and establish the next steps to creating an international technology and innovation hub within the city.”

One of the ways in which the local government hopes to create a new economic model for technology and innovation is through the cultivation of expertise in its main sectors. And according to Javier, there is an abundance of experience in the coastal city.

Two of Spain's main universities are located in the city: the University of Valencia and the Polytechnic University of Valencia. Their primary source of talent, Javier says, is in the field of engineering.

Compared to other European cities, Valencia’s pool of talent is easy to locate, cheap to house, and affordable. But while Valencia’s universities produce a lot of talented professionals, many of them are lost to Spain’s more prolific startup cities, where jobs and investment are more accessible.  

Valencia has a number of business angels that can support early-stage funding, but the coastal city lacks the venture capital necessary to help companies scale. According to Javier, this is why businesses that start out in Valencia often have to move to other cities: “The big investment firms are not in Valencia, and the city needs to attract them to create the next round of funding for startups.”

Moreover, there are not enough jobs available to match Valencia’s volume of talent. “We create more than 3,500 certified engineers per year in the city, but we don’t have enough projects for them,” Javier says.

One of the ways in which the local government aims to resolve this problem is by creating an environment within the existing ecosystem that will attract larger companies to Valencia, creating jobs and retaining the city’s brightest minds.

“If bigger companies come here, it’s cheaper and they can have access to a factory of talent,” Javier says. “We want to create, together with the corporations and public entities, more specialized talent in the technologies that we need right now, like blockchain, and put one eye to the future to see what the next technological revolution will be, in order to create the next [generation of] talent here in Valencia.”

While Valencia is not often cited among the European cities best equipped to support emerging startups, the city has the right resources to build a strong ecosystem.

[ Read also: How to open a bank account as an entrepreneur in Spain ]

“Our city is startup-friendly, and the local government works hard to facilitate the creation of startups, support existing ones and promote the quality of our companies and entrepreneurs,” says Sandra Gómez, first deputy mayor of Valencia City Hall. “We are creating a city for experimentation, for startup development and the growth of ideas.”

Among the city’s obvious benefits such as a superior quality of life, abundant housing and office space, Valencia has a number of accelerator schemes, incubator programs and coworking initiatives that are strengthening its network of entrepreneurs and creating more opportunities for early-stage investors.

Incubators like Demium, featured in our Startup Guide Valencia book, create successful startups from scratch by building teams of like-minded individuals. Talented entrepreneurs enter Demium’s program and emerge six months later as part of a founding team with a business model they can implement.

The program includes mentoring, networking opportunities and preparation for investment. Instead of enrolment fees, 15 percent of equity from future companies is guaranteed.

Moreover, the Plug and Play acceleration program, based in Valencia, has become one of the most relevant in Spain, alongside others such as Lanzadera and Bbooster Ventures, one of the first accelerators in the country.  

Javier says that out of all the ecosystems he has experienced in Europe, Valencia has the most comprehensive, and easily accessible, network.

VIT Emprende, a local network managed by Javier that aims to connect entrepreneurs with key stakeholders in the city’s startup ecosystem, is like “the connector, or glue, in Valencia’s startup community.” In Javier’s opinion, it’s connections like these that foster the knowledge exchange and collaboration necessary for startups.

“We are trying to make it as easy and as attractive as possible for startups to set up in Valencia,” Javier says. “On November 17th, we are making it public that we will put more than €100 million from the public sector into the startup community.”

Recent statistics show that more than 100 new startups are created every year, enabling Valencia’s economy to compete in global markets.

According to Javier, Mr Jeff, a laundry and dry-cleaning company based in Valencia, is a prime example of a startup that has experienced “exponential growth.” What started off as a small group of people in Valencia has grown to a team of up to 50 employees. Mr Jeff recently closed a financing round of €2 million, according to Crunchbase, and is in the process of expanding to Mexico City and, later down the line, Sao Paulo.

Comprea, another Valencian startup, is making the process of buying groceries more efficient. Using a custom network of shoppers, Comprea is a same-day delivery service that lets users order groceries online and delivers their goods within an hour, or at scheduled times. Founded in 2015, the startup has secured €1 million in funding and aims to close further rounds to facilitate expansion into other European cities.

Moreover, companies like Zeleros, which is developing a sustainable hyperloop transport solution, have, according to Javier, “huge potential” to make millions in the future if they continue to develop their unique technology. Zeleros is one of the startups that Valencia is particularly proud of because they are, as Javier calls them, one of the city’s “unicorns of the future.”

Javier says that while Barcelona and Madrid are already well-established ecosystems, they have had their fair share of challenges. Valencia can observe the problems that their forebears have come up against and “learn from them to help [their] own startup scene to grow.”

While the city might be small, with a population of just 791,600, Valencia has something that is not easily replicated in larger cities like Barcelona and Madrid.

“What makes Valencia different to other ecosystems is its interconnectivity,” Javier says. Each facet of the community is closely connected in terms of the relationships they have with each other and their geographical proximity.  

According to Javier, meetings can be arranged in seconds through a call or WhatsApp message, and the city is small enough for spontaneous interactions to take place every day.

Javier believes that there is value in staying connected to peers, and he encourages experienced entrepreneurs to stay connected with the ecosystem, even as their businesses grow. There is also a lot that younger companies can gain from having more experienced entrepreneurs guide them through Valencia’s newly created startup scene.

Valencia Activa hosts over 100 events for startups every year that is characterized by participants’ openness and willingness to share their experiences.

“You can see the new businesses mixing with the old ones and they are happy to share the knowledge that they have. This is one of the pillars of our ecosystem,” Javier says. “We are competitors in the market, but in the city we are friends.”

For further insights into Valencia’s startup scene, Startup Guide Valencia can be purchased online here.

Main photo: Unsplash/Janis Skribans