FORTUNE Small Business
Small and Global Full coverage

Gateway to Europe: Starting small in Spain

With Old World charm and a modern approach to encouraging entrepreneurship, Madrid is winning over businesses seeking a European presence.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)

going_up.03.jpg
Dave Gray doubled the size and revenues of his European office in its first year.
When not running your business, how do you typically unwind?
  • Play in organized sports
  • Exercise alone
  • Meditate
  • Catch up on reading
  • Watch TV and videos
  • Chill with friends
  • Capitalize on family time

MADRID (FORTUNE Small Business) -- Marc Michel, director of digital marketing firm Greater Than One, based in New York, needed a local office to run European ad campaigns for U.S. medical firms. So he spent July 2007 scouting London, Hamburg, Zurich, and other cities. But Michel, 33, soon settled on Madrid.

Why? Because of a meeting with the last source he expected to be helpful: a local government agency.

"I rattled off a list of legal issues, office space, how to find the right people," Michel says. "The next thing I knew, they'd prepared a 100-page customized kit with answers to everything, all in English" - plus a list of local headhunters.

The Spanish capital has a long history of nurturing small business: 99% of companies in the Madrid region have fewer than 50 employees (in the U.S. as a whole it's about 94% of companies). Now, amid a small-business boom in the area, two government-funded groups - Promo-Madrid and Madrid Emprende - are hunting for foreign investment and winning high marks from U.S. companies.

Take a taxi into Madrid from the airport, past rows of 1970s apartment buildings, and it's easy to dismiss the city as the poor relation of Barcelona or Bilbao. But once in the old center, with its lively nightlife, you can understand why Madrid has emerged as a European hot spot.

"It has a low cost of living and a high quality of life," says Aric Wood, 37, CEO of design consulting firm Xplane, based in Portland, Ore. "You can attract people from all over Europe. Everybody wants to move to Madrid."

Xplane, which has 57 U.S. employees, opened a Madrid office in January 2007. Wood accelerated the process by acquiring a smaller Spanish design firm.

That turned out to be a smart move for Xplane, whose revenues increased 70% last year, to $5.4 million. Much of the growth came from European clients, Wood says. Xplane doubled the size of its Madrid staff from six to 12 in the first year.

Xplane's graphic communications campaigns require a lot of face time. Few of its European clients, which include BP (BP) and InterContinental Hotels (IHG), are based in Spain. But Madrid "makes a fabulous jumping-off point for all of Europe, the Middle East, and North Africa," says Wood - not to mention the Spanish-speaking world of Latin America.

As in most European countries, setting up shop in Spain isn't designed to be simple. The paperwork can be a nightmare, says Xplane founder Dave Gray, 44: "It's been a steep learning curve."

But Madrid appears to be embracing free enterprise. The regional economy grew 4% last year, more than double the rate in the rest of Europe, and growth is projected to be just as strong this year. Madrid's GDP per capita of 27,000 euros is 30% higher than the overall European Union average.

The Madrid city and region created PromoMadrid in 2004 and Madrid Emprende in 2005. Funded with an ample budget of 25 million euros, they assist foreign entrepreneurs with everything from work permits to corporate taxes to commercial real estate.

"We are a one-stop shop," says Vittorio Ortiz, director of investment at PromoMadrid.

PromoMadrid helped OpciónDos Energía Natural, a Spanish solar energy company co-founded in 2005 by American Greg Lukens, land a contract with Spain's largest mall. The key: PromoMadrid provided introductions to key energy policy officials in the provincial government.

"In Spain it's still a relationship market," says Joseph Geman, 35, a San Francisco-based consultant who opened a Madrid office in early 2007. "I've seen a lot of foreign companies underestimate that. You need a door opener to have sustained success."  To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
Some Converse copycats cost big bucks A few bargain brands got swept up in Chuck Taylor's net, but others cost a pretty penny. More
Urban infrastructure gets a second life Railroad beds become parks, power plants become aquariums and slaughterhouses are now art centers as an industrial past turns people-centric. More
Boomtown moms From working mothers raising their kids in RVs to stay-at-home moms who spend their days organizing events for the Oil Wives club, meet the moms of North Dakota's oil boom. More


Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.