R&D and product
Research, prototypes and development through to a product ready for the market.
Pillar · The model
How a Volcano startup is built
We build startups in series along the thirteen-phase path, and we are the first investor in every project.
The participations this model distributes are set by the committee, within the declared range of each door.
19 min read · or go straight to the eight stages
Volcano does not sell services to other people's startups: it builds them. It invests first in the riskiest phases, contributes technology, people and infrastructure, and takes the solution from the laboratory to the market through a dedicated startup, with the risk reduced by public funding.
The model
Venture builder, not incubator
An incubator offers space, contacts and mentoring to startups that are left alone when the difficulties arrive, and it earns either way, whatever the outcome. A venture builder builds startups from scratch and systematically (it identifies the problem, generates the solution, develops it, protects it with intellectual property and takes it to market) and earns only if the startups succeed. It is a difference of interests, not only of method: Volcano already owns the substrate of capabilities and finance on which an idea grows, and loses everything if that idea does not arrive.
The scope
Venture building means building the whole company.
R&D is only one of the areas. A startup also needs a brand, customers, contracts, accounting and compliance: Volcano covers every function that makes up a successful company, with teams that have done it before.
Marketing and communication
Volcano designs the brand, the positioning and demand generation; the startup executes them in the market.
Sales and business development
Volcano builds the channels and the partnerships; the selling, from first customers to traction, is executed by the startup.
Administration and finance
Accounting, treasury, management control and investor reporting.
Legal and corporate
Incorporation, shareholders' agreements, contracts and intellectual property.
Tax and public funding
R&D and technological innovation, ZEC, Tax Lease and grants: the tax engineering that funds the whole.
Talent and organisation
Recruitment, teams and culture: a company is people before it is processes.
Technology and operations
Infrastructure, quality and processes to operate and scale on solid ground.
The path
The path, from problem to market
Every venture travels the phases of the path, and each phase reduces the risk of the next: the question that closes one is the door to the following one. The full journey, with its thirteen phases, its four macro-phases and its thermometers, is in The path.
The filter
The seven decisions of R&D.
Clearing a phase is a decision: from F1 to F7, the seven questions that close each phase are the seven filters of the process. The classic discipline of staged innovation: kill early and cheaply whatever does not deserve to continue, and invest more only once the risk has come down. The seven questions:
- Closes F1 · Capture: has a problem entered the network, brought by whoever suffers it?
- Closes F2 · Analysis: is it frequent, is it costly, and would anyone pay not to have it? This is the cheapest place to let an idea die, and for that reason the most valuable.
- Closes F3 · Ideation: is there a route that deserves to become a mechanism?
- Closes F4 · Concept: does the mechanism hold up, verified on paper?
- Closes F5 · Proof of concept: did the core mechanism work with real instruments?
- Closes F6 · Prototype: does the integrated system withstand the relevant environment?
- Closes F7 · MVP: does the minimum viable product hold up in front of real users?
The full state of the creature can be read in the thirteen phases of the path.
The journey
The thirteen phases of the path
A Volcano startup goes through thirteen phases, from problem to profit: the path does not begin with the idea, it begins with the problem, captured and analysed by Volcano before the startup exists. Its distinctive trait is that it is born already carrying value (because it inherits that work and has access from day one to resources, capabilities and network) and it is built to raise, at every step, its probability of success. The full journey, phase by phase, with its own diagram and its connection to the TRL pyramid, lives in The path.
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.
The funding
Where the money comes from.
Six different sources, with different rules. No project uses them all at once, and almost none uses only one: the combination depends on the project and the calendar, not on a fixed rule.
01
Volcano's own capital
It comes in first, in the phase where no third-party money is available: capture of the problem, analysis, ideation and technical concept. It is the part of the journey nobody funds, and the one that decides whether the project exists at all.
02
Tax capital
An investor with a tax bill to pay funds the research through the Tax Lease. Their return does not depend on the startup succeeding: it materialises through tax, within the year. It covers the most expensive stretch, TRL2 to TRL5, which is the one no other source covers.
03
Non-repayable public grant
Money that goes into the project and is not paid back. It dilutes nobody: it does not touch the startup's equity. National and European calls rarely fund the beginning, so it usually arrives from TRL5 onwards.
04
Public loan on soft terms
The other half of many calls: low or zero interest, long maturities and a grace period, but it is money that goes back. It does not dilute either, because it does not touch the equity, but it weighs on the balance sheet. The proportion between grant and loan is set by each call, not by us: that is why we publish no general percentage, it would be an invented number.
05
Private capital
The private investor comes into the startup through a convertible note, with the stake fixed on day one. It contributes working capital in the early phases and covers what public and tax funding does not reach.
06
Pure lender
Someone who puts in money as a loan without entering the equity: they receive no stake and do not depend on the future value of the company. It is the position with least risk and least upside, and the first to be repaid.
The calendar
When each kind of capital can come in.
Almost every source can come in at almost any point of the journey. What changes is what is customary, and that difference is what decides how much risk each one carries: coming in earlier means risking more.
When each type of capital can come in, by TRL level
The dark stretch is what is customary; the light one, what is also possible. The public loan follows the same calls as the grant, which is why it shares a stretch. No combination is closed in advance: it is decided project by project.
Private capital is not the last to arrive
It can come in from the very beginning if it wants to, and from TRL3 onwards that is customary. It is not a relay runner appearing once the others have worked the risk down: it chooses where on the curve it wants to be.
And it usually accompanies the Tax Lease rather than replacing it
That is the most frequent arrangement, and not by chance: the tax investor's deduction is calculated on the project's costs, so private capital added on widens the base against which the deduction is taken. The two routes do not compete; they reinforce each other.
The repayment
And if it never reaches the market?
The previous section says where the money comes from. This one says how it comes back when the journey is interrupted, which is where you really see how the risk is shared out.
It is worth saying first what «things going badly» means, because it does not always mean losing. A project may never become a startup, or never enter one: it may stop at TRL5 with a validated prototype, or reach TRL9 with a finished product and stay there, with nobody taking it to market. At that point there is no company selling anything, but there is something with value: the intellectual property, the documented technology and the validation that has already cost money to obtain.
That can be sold or licensed to a third party (a company in the sector, a competitor, an industrial group wanting to skip those years of work), and what is obtained recovers what was invested. It is rarely the best exit, but it is almost never zero: a validated prototype with its documentation is worth more than the idea it came from. That amount is what gets shared out, and it is shared out in this order, from the most protected to the least protected.
- The privileges the law reserves for anyone (employee and public claims). The startup is kept empty during construction, without employees or operations, so that they are close to zero.
- The private investors. While the convertible note is credit, it is the only debt the startup can have and the highest-ranking claim on it; the public co-financiers that enter the same note (SODECAN) are paid alongside, pari passu, and the public-fund loans of the operating phase come afterwards, after conversion.
- The promoter block: the founders and Volcano, last. Class B receives nothing until the investor's class A has recovered what it contributed.
The tax investor does not appear on that list, and it is not an oversight: their return does not depend on the startup's liquidation but on their own tax bill, and it materialises in the year the tax credit is applied, whatever happens to the project. It is the only figure whose outcome is not at stake here.
That order is not a courtesy: it is the concrete form the phrase «we take the risk first» takes. Volcano comes in before anyone else, in the phase where no third-party money is available, and leaves after everyone. If a project ends badly, we are the first to lose; if it ends well, we gain alongside the others and not before them.
The return
And how the upside works, if things go well.
The previous section describes the worst case: the startup does not reach the market and what there is to share out is whatever the knowledge generated fetches. This is the other scenario, and it works differently for each figure.
The tax investor
Gets paid twice, by separate routes. The first is the deduction and the negative tax bases, which are applied within the year and do not depend on what happens to the project afterwards. The second is the stake in the startup, for the part of their contribution that the credit does not return to them, converted with the same formula as the private investor's note; which follows the company's value like any other shareholder's. This is the double return: one part certain, the other not.
The private investor
Their convertible note turns into a stake, with the percentage fixed from day one. From there they gain like any shareholder: on a sale, whole or partial, or through dividends if the startup distributes them. The specific form of the exit is not decided in advance: it is examined startup by startup, when the moment comes and with the numbers in front of us.
The pure lender
Gains what was agreed in the loan, and nothing more: that is the counterpart of being paid first. If the startup multiplies its value, that upside is not theirs. Whoever wants a share of the value created comes in through the other door.
Volcano
It is paid twice, and in opposite ways. The small and unconditional: the development services it invoices to the AIE, at a market rate checked against comparables because the law requires it between related parties, and the structuring fee that the tax investors pay outside the vehicle. The large and conditional: its class B stake in the startup, a minority, without control and subordinated, which is worth zero until the investor has recovered what they contributed. That is why the phrase "we only win if the startup wins" describes where our money is, not a statement of intent.
None of this is a return forecast. A startup can be sold, can distribute profit, can sustain itself without doing either, or can fail to arrive: that is why both sections exist, this one and the previous one, and why the figures page stays empty until there are closed deals to report.
The risk
How the risk is reduced
Risk is reduced with six levers, and three of them do the heaviest work. The first is already validated problems: Volcano works with professionals who have known a sector for years and have identified its critical problems, and subjects them to rigorous validation before starting. The second is a complete ecosystem of capabilities, from research to industrialisation and to market. The third, and decisive, is public innovation funding, which removes much of the financial risk before private capital comes in. All six, one by one, with the specific risk each one disarms, are in how we reduce risk.
45% to 100%of R&D costs covered by public funds, depending on the call and the instrument (estimate)
3 to 4×total resources generated per private euro, between grants, deductions and subsidised funding (estimate)
The governance
Coordinator and guarantor, not head of a group
Volcano is not a group or a holding company: it is a network of independent companies. It does not hold control of the companies it builds: it acts as coordinator and guarantor of the network, like a head of a family who recognises everyone's contribution and rewards it fairly. It invests first, in the statistically most critical phases (validation of the problem, conceptualisation, protection of the IP), taking on the initial risk and reducing it for whoever comes in later. It then contributes base technologies under licence, technical and management staff, consultancy at cost and the operating infrastructure. For all of that it receives recognition, like any other contributor; but it does not command or own the startups.
The distribution of value
How contribution is recognised and rewarded
Value does not concentrate in Volcano: the stake in each startup is distributed among all the contributors (founders, technical staff, investors and Volcano itself) in proportion to the value contributed, as recognised by a committee with transparent metrics. Recognition arrives in two stages: during the building of the knowledge and afterwards, through the stake in the startup that takes the solution to market. In this way whoever creates the value owns it; Volcano's role is to bring it out and remunerate it, not to keep it.
The protection
How the intellectual property is structured
There are two intellectual properties, and they follow different rules. The base IP is what someone brings to the project: a recognised idea, a prior technology. It remains with whoever brought it and is licensed to the startup: the idea stays in the hands of whoever brought it. The IP the project builds is born in the project vehicle, the AIE that pays for the R&D, and ends up entirely in the startup. On completion, the AIE is dissolved and awards it all the intellectual property, at an expert value anchored to cost, before any act of commercialisation. The startup owns one hundred percent of what was built. The private investor's stake rests on that entire asset, with liquidation preference over the promoter block. If the project is interrupted before, the investor has priority over the partial intellectual property built up to that point. How it works, in the convertible note.
The result
The efficiency
The result of these levers is a leap in efficiency. A traditional startup needs in the order of 2 million euros of private capital to reach a 5 million valuation in two years, with a probability of success of around 15%. A Volcano startup aims at the same result with roughly 500,000 € of private capital and a noticeably higher probability: an efficiency factor in the order of ten times (internal, indicative estimates). Once the research is completed, the startup is incorporated wherever its market requires. As a rule, in the Canaries, under the ZEC regime, which reduces corporate income tax to 4% and increases distributable net margins. But the method does not chain it: it can be born anywhere in the world when the opportunity justifies it. Funding follows the same logic: the Spanish AIE can receive capital from foreign companies, and there are projects developed without an AIE, with private funds only or with public aid from other countries.
The core of capabilities, and the startups that intersect it
The barrier to entry
The multidisciplinary advantage
Volcano products integrate hardware, software, mechanics, chemistry and electronics into vertical solutions for niche markets that the large players dismiss as «too small» for their books. It is a defensible position: the technology giants become potential suppliers and partners, not direct competitors, and the barriers to entry rest on contextual know-how that is hard to replicate with capital alone.
Why this counts for more than it seems
Each discipline is a leg: the more there are, the more stableThe multidisciplinary part is usually sold as an ornament, «a diverse team», and it is not. It is a matter of structural stability. It helps to picture each discipline as a leg: the more legs, the more stable the project and the more stable the product that comes out of it. And the other way round, which is the uncomfortable part: a single missing class of knowledge is already a point of weakness, however much of the rest there is to spare.
This has a name in science, and it is worth saying because it lends rigour to an intuition. It is the law of the minimum, developed by Carl Sprengel in 1828 and popularised by Justus von Liebig: growth is determined not by the sum of the available resources, but by the scarcest one. It is illustrated with Liebig's barrel, made of staves of unequal height: the water spills over the shortest one, however tall all the others are. An innovation project behaves the same way. It does not perform according to the average of its capabilities: it performs according to the one that is missing.
Hence a practical consequence that changes how a team is assembled. It is not about reinforcing the discipline we are already good at, which is the comfortable thing and what everyone does. It is about finding the short stave before it shows. The five core areas (R&D and product, marketing and sales, legal and tax, administration, talent and operations) are exactly that: the legs already in place on day one. And that is the structural reason why a venture builder starts ahead of whoever assembles a new team every time: not because it is bigger, but because it is missing none. The drawing of the circles in the risk levers is literally that.
And it works as a selection criterion too, not only as one of organisation: if a problem demands a discipline we do not have and do not know where to get, that project does not open. It is the same logic as the third factor of the triad: outside the circle there is no void, there is insufficiency.
«It is not enough to have a good mind: the main thing is to apply it well.»
The thesis
An end for the operators, a means for Volcano.
For the classic Tax Lease operators the instrument is an end: they act as intermediaries between other people's projects and tax investors, and their remuneration is a percentage of the project's cost. For Volcano it is a means: we apply it only to our own projects, we manage the whole process at cost with minimal margins, and we shift our margin to the stake in the startup: we gain later, and only if the startup gains. The full comparison, category by category, is in the Tax Lease as a means.
Frequently asked questions
Frequently asked questions
The ones this page opens. The rest, in the frequently asked questions.
How is Volcano different from an incubator?
The incubator sells services and earns either way; Volcano builds the startups and earns only with their success, because it holds a stake in the value they create.
How long does all this take?
It depends on the project, and the range is wide: between one and five years of development. The stretch from TRL1 to TRL5, which is the most expensive and removes the most risk, usually takes two years, three at most. These are indicative orders of magnitude, not a commitment: the real duration is set by the technology and the regulation of each sector.
Who decides that a project stops, and at what price is the work sold?
Volcano decides, and does so by applying a criterion you can read before coming in: the four questions, always in the same order, and the decision window, which says when further analysis costs more than it is worth. It is not discretion: it is a declared protocol. The decision is communicated transparently to everyone who has taken part in the project, and it is taken respecting their rights, which are set out in writing from day one.
And if Volcano disappears?
The intellectual property the project builds ends up in the startup, which owns one hundred percent of it; the base IP remains with whoever brought it, under licence. The startup is an independent company, with its founders in control, its investors as class A shareholders and Volcano as a minority without control: if the coordinating company disappeared, neither the startup, nor the intellectual property, nor the results would disappear, and the startups do not depend on us to operate.
Can I choose which project I come into?
Yes. You are not investing in a fund or in a basket: you choose the specific project, and you can explore the ones in preparation in the portfolio.
If private capital can already come in at TRL1, why would it do that?
Because the convertible note's stake is fixed on day one, not when it converts: coming in earlier is worth more. In exchange more risk is taken on, which is exactly the trade the calendar chart describes.
The loan from public funds: who repays it?
The startup does, on the terms set by each call: low or zero interest, long maturities and a grace period. It dilutes nobody, because it does not touch the equity, but it is debt and it weighs on the balance sheet. It is set out in detail in where the money comes from.
Can I exit before a sale?
The convertible note converts into a stake at three moments: when the project formally reaches the startup, in a qualified round, or in a sale. Before that there is no market to sell into: it is risk capital, and illiquidity is part of the deal. The full terms are in the capital door.
If the Tax Lease is so advantageous, why doesn't everyone do it?
Because it requires having your own R&D projects that qualify, the structure to certify them and the capacity to execute them. For the classic operator it is an end and they charge a margin on the cost; for us it is a means, and that is why it is managed at cost on our own projects. The difference is in an end or a means.
Measure the model with your own numbers.
We choose to go to the Moon in this decade and do the other things, not because they are easy, but because they are hard.
John F. Kennedy, 1962
John F. Kennedy, 1962