Door 05 · Risk capital
Risk capital looking for a meaningful return.
Relevant returns, because the solutions answer big problems; and reduced risk, because grant funding covers a high share of the cost. The two together make a project or a startup of Volcano a very attractive investment.
The reason
Why do we need private investment?
We do not always need it. Between grants and the Tax Lease, grant funding can cover the whole project. Private capital is needed in two cases: when grant funding does not reach the sum required, and when, even if it does, it is not collected before starting but only on completing and justifying each activity. In those cases your capital enters the startup as a convertible note or as a simple loan. The startup is incorporated where its market demands: as a rule in the Canary Islands, under the ZEC regime at 4%.
Couldn't Volcano invest on its own? Of course it could, and it already does in the initial phases, the riskiest ones. But with its own capital you cannot run many projects in parallel, and parallelism and a shared core of base technology are the soul of a venture builder: what makes developing the solution cheaper, faster and less risky. Besides, once the startup reaches the market, Volcano's role becomes marginal: the development phase is over and the startup opens up to the market to industrialise and scale the solution, like every startup.
Who it is for
Is this you?
Individuals and companies with capacity to invest who want to take part in early-stage technology ventures: business angels, family offices and industrial profiles who want to invest in their own field, where their judgement is worth more than anyone else's. Spanish tax residence is not required. This gate does not depend on any Spanish tax mechanism, and it is the same for a domestic or an international investor.
Step by step
How it works
- You get qualified
A few questions to understand profile, horizon and intention; with no sensitive data and no commitment.
- We analyse the fit
In a technical video call: the project, the structure, the timetable and, only then, the figures for your specific case.
- You invest in an already de-risked project
Public funds covering part of the research cost, independent validation and a founding team with thirty years of track record reduce the project's risk before your capital comes in.
The result
What you get
A stake in the startup that commercialises the technology, in a project whose risk of failure has been reduced from the outset (prior validation, public funds, an experienced team).
Why do we need you? The non-repayable funding, between the Tax Lease and public funding, can reach even 100% of the project; but it does not always arrive, and sometimes it is paid only against expenses already incurred. Your capital is the working capital that keeps the project running, and it comes in where the risk has already been reduced by the structure.
And why is it good for you? Because you invest in solutions that have a market, that enter it in an original way and that are executed by an experienced team. And because, being largely funded by grants, the risk of losing all the capital drops a great deal: the intellectual property produced can always be resold, and the loss only materialises if its market price ends up far below its cost price. That is the floor you can explore in the risk and reward map; the full order of the decision, in the four questions of risk.
The convertible note: your real entry
Stake fixed on day one, with no discount and no capYour money is, at first, a loan to the startup. You enter one of the project's seven rounds; when the startup completes it, the loan converts into a stake, at the value the company had on the day you came in. Before that, the startup may return your capital with 10% for each year. If the project does not reach the market and is sold as know-how, the private investor is paid before the founders and before Volcano. The essentials, in the convertible note; the detail for your adviser, in the documents in the buttons below.
And if you would rather lend than take a stake?
It is a different route, and it exists too, in the operating phase. The pure lender lends money to the startup once it already owns its technology, after the notes have converted, and does not enter the capital: they receive no stake, do not depend on the company's future value and are paid as a creditor, according to their contract, ahead of the shareholders. During construction it does not exist, because the only possible debt of the startup is the convertible note.
It is the position with least risk and least upside: the return is the one agreed in the loan and does not grow if the project flies. It makes sense for whoever wants exposure to innovation with a conservative profile; if what you are after is a share of the value created, the convertible note described above is your route. The specific terms depend on the project and the moment: write to us and we will look at them.
And besides
What an investor alone does not have- Proprietary deal flow. Access to a portfolio of projects in preparation generated by Volcano's engine: explore it.
- Class A rights. After converting: liquidation preference over the promoter block, drag-along and tag-along rights in sales, information rights and vetoes over related-party transactions, agreed from day one.
- Your judgement counts. Investing in your own industrial domain turns your knowledge into an advantage: you see before anyone whether the project makes sense.
- You can come in at any moment, and earlier is worth more. The startup exists before its projects: it is created as a container and goes on absorbing the projects that are born each time a problem of its class appears. Coming in when there is only a problem inside means coming in at the lowest valuation of the journey, before that content has become a concept, a prototype and a product.
- Much of the risk, borne by others. The capital of the tax investors and public funds cover a good part of the cost of the research. What they do not cover is, precisely, your place: your note funds the startup in the early phases, the ones with the highest multiplication factor.
- Regular information. Regular reporting on the progress of the project you have come into, through to the outcome.
- From €10,000. The entry ticket starts at that figure: you explore the indicative stake in the private simulation; the exact one is set by the note's formula.
- The full context. The comparison with bonds, housing and equities, with sources and charts: investing in innovation.
Notice. The content of this page is informational and does not constitute tax, legal or investment advice. Figures and percentages are indicative: the rules change and this page may not reflect the latest legislative provisions. The values applicable to each specific case are reviewed and discussed in the video call, after qualification.
Your route
Five questions, in this order.
All the information you need to decide is on the site, but spread out. This is the order in which it is best travelled: each question rules out or confirms, and there is only any point moving to the next if the previous one comes out well. It is the method by levels: the macro first, and detail only where it can change the decision.
- Is there a market, and is it growing?
It is the question that decides ahead of the other two: with a market that is not growing, neither the best idea nor the best team is enough. Start with market, idea and team, which is the framework, and continue with the map of risk and reward, where the size and the margins of the sector are two of the eight controls you can move yourself.
- Does the idea win in that market, and can it be defended?
Good does not mean clever: it means it wins there, against what already exists. And if it wins without being able to protect itself, it wins for a short time. In each project card you have the concept and the point it has reached; the reason for patenting before building, in the markers of the path.
- Is the team up to it?
Two teams work on every project. The first is Volcano's team, the same for all projects: it carries out the research and development, and it already exists. The second is the startup's team, which will take it to market: it is formed when the solution is ready, with the people each project needs. Who makes up Volcano's team, in the team; how one team serves several projects at once, in the model.
- How much risk is left when you come in, and in return for what?
When you come in, part of the risk has already been reduced by the method: prior validation, the patent before building, the public funds and the tax capital that pay for the research. What that part is, in the six levers. The part that remains is the normal risk of a startup, and you can see it in the risk and reward map. In return you receive a stake in a startup that is born validated and that the structure has made cheaper to build. You put in the numbers of your case in the private simulation; they are scenarios, not promises.
- Do you already have enough to decide?
Almost always, yes. Nobody ever has all the information, and waiting for it has a cost: each project has few places, and whoever waits to be completely sure comes in late or does not come in. Why it pays to decide with what there is, in the decision window. And what we cannot yet prove with facts, because we do not yet have a track record, we say openly in our figures.
When a specific project interests you, there is no need to explain which one: every card has an «I am interested in this project» button that notes it for you.
Who pays for the uncertain part.
Everywhere, the most uncertain part of an innovation project is paid for by public money. The economist Mariana Mazzucato documents it in The Entrepreneurial State: the internet, GPS, the touchscreen and much of pharmaceuticals were born with public funding. Our model does not invent this: it uses it.
For you it means a privilege: you enter a project with the risk already reduced. Before your first euro, the project has been technically validated by independent experts and by the Ministry of Science, and your capital is only a part of a budget that is already largely covered by public money.
Reference: M. Mazzucato, The Entrepreneurial State. Debunking Public vs. Private Sector Myths (2013).
Your capital, where the risk has already been reduced.
John F. Kennedy, 1962