Target Global has a €1M ‘super seed’ pot incoming to switch on laid off tech talent in Spain during COVID-19

Target Global and a number of Spain’s startup founders are allocating a €1 million pot of money to support local tech talent laid off or furloughed as a result of the coronavirus crisis.

The aim of the initiative is to provide pre-seed financing to help local, crisis-hit tech workers switch gears and build out a startup concept over the next four to six months, covering living expenses plus enough funds to get going on a business idea.

The VC firm, which now has some €800M under management, says it’s putting €500,000 towards the initiative — allocated out of its existing early stage fund.

A further €500,000 is being chipped in from a number of local founders, including entrepreneurs behind AlienVault, TravelPerk, Job & Talent, Badi and Adyen.

They’ll be cutting checks of up to €200k for “qualified applicants”, per the VC firm, which says the initiative could initially support around 10 aspiring entrepreneurs who have found themselves sat at home without a job as a result of the COVID-19 pandemic.

“The idea is to cap it at €1M for now,” says Target Global investment director, Lina Chong. “We don’t know where the end of the tunnel is but for now let’s say we cap it at that.”

She says the aim is for each check to cover the living costs of one or two people for four to six months, along with “initial startup costs” — aka: Founding an entity, working with a designer and engineer, developing an idea or concept to beta or prototype and testing some early assumptions — to get it ready for a pre-seed round.

“We’re calling it super seed,” she adds. “It’s like a real first check just to get you started.”

The VC firm will be putting up a landing page for the initiative shortly — this week or next, per Chong — to begin taking applications for the ‘safe notes’.

In terms of requirements, applicants must be located in Spain, and will be asked to specify a few categories their concept falls into; plus whether they’ve built anything yet; whether they have users; whether they’ve incorporated yet, and so on.

“All of those things can be ‘no’ — that’s totally fine,” Chong tells TechCrunch. “We will ask for your LinkedIn because we do want to have this go towards people in tech. We want to see some minimum amount of experience in startups or in technology — but you yourself don’t have to be an engineer.

“And of course the idea has to be pretty bold and ambitious… That’s going to be the bulk of our work — filtering through candidates where we feel they have the relevant background, plus what they’re thinking about it something really relevant and big.”

“We’re not looking to fund the next sunglasses shop,” she adds. “But if you have a different way to engage with government… [or] think about even media. There’s so many things up for grabs right now. There’s going to be a host of security, identity, so many issues. And that’s the stuff we’re looking for — real, big, global problems.”

Chong confirms that some of Target Global’s own portfolio startups have had to lay off or furlough staff themselves during the crisis — including flatshare finder business Badi and business travel booking platform TravelPerk. Both of which are types of businesses that are very exposed to the national population lockdowns that have been imposed over most of Europe. (The travel sector has of course been especially hard hit.)

“Every business that’s been affected by shelter in place have had to let go of staff,” adds Chong, suggesting portfolio layoffs have been up to around a third for the worst affected startups.

Local founders have therefore been keen to support the initiative, not only to help the wider tech ecosystem in Spain, but as something they can point furloughed or laid off staff to as an opportunity.

“Everyday we’re getting more sign ups,” she adds, noting that founders can also choose offer mentorship/advice as well as chipping into the fund.

Target Global dialled up its focus on Spain last year, when it opened a country office in Barcelona. Though Chong, who is normally based in Barcelona, has been spending the lockdown period in Berlin, after returning to Germany from a trip to the US in March.

“For me this [crisis] is super unfortunate because one of the reasons we made a bet so early on Spain is because of exactly this talent — Typeform and all the gaming studios, and Facebook and Amazon in Madrid. Let’s say priming the early generation workforce. And giving them the ideas how to be in a tech company, how an organization runs, how to build product, how to think of marketing — all of this stuff. So I think it’s a big shame,” she says.

“Clearly Spain has a highly entrepreneurial spirit. They’ve come out of the last crisis… with a very ‘we make our own reality’ view of the world. And I think the same will happen in this crisis so we thought why won’t we just allocate a small amount of money — for our early stage fund it’s a relatively small check — it’s a very exploratory one.”

In terms of the business opportunities that may open up as a result of the societal and economic disruption caused by the COVID-19 pandemic, Chong suggests “a new way of thinking about consumer products and service” is certainly coming down the pipe.

“I would be shocked if there isn’t a plethora of ideas coming on how to rethink brick and mortar and rethink retail or consumer goods,” she says.

“This is a clear trend that brick and mortar, as a model, is not working. In the US, around the world, you see everything from massive shopping malls to main street small shops, owner-operated shops, all shuttering doors. And I think it’s a big opportunity — whether the entrepreneur decides to tackle this opportunity from a pure digital play to maybe it’s a turn on real estate? Maybe there’s a new model of thinking about shop ownership or what to do with that space? Because consumers are pretty fickle. They’re used to entirely new experience with Amazon. I think there’s a lot of opportunity there for sure. The specific form or shape of that opportunity — I leave it to the wild imaginations of entrepreneurs.”

She also points to the whole value chain around retail — from supply chains to marketing, to manufacturing to getting the goods and services into consumers hands — as ripe for rethinking right now, adding: “I’m hoping there’s going to be a lot of innovation around even the supply chain aspects.”

Entrepreneurs in the country may also do well to focus their energy on ideas around reskilling/upskilling the large numbers of people who suddenly find themselves unable to do their usual work because of the impact of social distancing on traditional businesses and ways of working. Spain’s bar culture, for example, looks set to be very heavily hit by the coronavirus.

“How do we manage ourselves? How do we manage others in a remote working environment?” posits Chong. “There’s such a huge population of people where — it’s becoming pretty clear — that if you can’t work remote, if you’re not a knowledge worker, there’s a huge question mark over your ability to maybe more into those knowledge worker/desk type roles. And that’s a lot of value that’s left on the table. That’s human brains and muscle — just so much energy and potential that’s just kind of left out there.

“I would argue that a real forward thinking entrepreneur can think of ways to help utilize and bring meaning to these people’s skill sets.”

The terms of the safe notes will be “flexible”, according to Chong, though there will be a provision for investors to get a discount on the next round, i.e. if there is one. 

“You don’t have to pay it back if there’s no financing afterwards,” she says. “So far we really do want to keep it case by case — so it’s super flexible. It’s essentially like ‘hey, we want the option not the obligation to follow on in the next round’.

“Clearly, we’ll decide on that case by case. Anything beyond that we want to make sure that terms of the next fund — it’s likely going to be seed funds that come in at that next stage of the company life — we want to be able to keep the slate relatively clean in order for those funds to feel comfortable coming on board. So there’s not too much stipulated at the moment in the safe note.”

“It’s an amount. We can help you incorporate. It’s an option to the next round. There’s going to be a minimum discount — probably pretty standard, like 20%. And that’s pretty much it,” she adds.

This report was updated with a correction: We originally stated that Target Global has €700M under management — in fact it now has €800M. We also updated our report to clarify that the €500,000 which the VC firm is contributing is being allocated from its existing early stage fund. We were also originally told that the checks would be smaller and more numerous; we’ve now been told the evolving plan for this pot of money is to write fewer but, larger checks