Emilio Ayanz and Luis Berruete for El Economista
Emilio Ayanz and Luis Berruete, Managing Partner and Partner & Co-Founder of Creas: “We’re opening a new chapter after more than 10 years leading impact investing in Spain”
Rocío Casado for El Economista
After 10 years of experience and growth in the impact sector in Spain, Creas wants to continue its path towards building "a meaningful world", focusing on empowering and caring for people and promoting a regenerative economy. Looking ahead, "we want to go further by going deeper", emphasize the responsible partners, who have launched a new fund manager in the process of being approved by the CNMV.
After more than a decade, Creas is preparing for a new stage, what major challenges do they face?
We are finishing the investment period of our current fund, Creas Impacto FESE -endowed with 30 million- with the latest investments which we hope to close soon in the field of circular fashion, the second most polluting industry on the planet, and precision agriculture. These operations complete a portfolio of 12 investments in which we have already made one disinvestment, in a self-consumption photovoltaic firm sold to Greenvolt, a listed Portuguese company. To consolidate Creas's position as a reference in early-growth impact, we have recently launched a fund manager, currently in the approval process and we expect a green light from the CNMV after the summer. Once we have the approval and we conclude the investment period of the current fund, our idea is to launch a new vehicle for 2023, at least doubling the size of the previous fund.
Growing and launching a fund that doubles the resources of the previous one represents a significant qualitative and quantitative leap...
This leap in size is consistent with what has happened in Europe, where other pioneering European impact funds, in the Netherlands, Germany or France, have also doubled their resources with their new vehicles. In reality, the great leap for Creas was to go from the first pilot vehicle of just over a million euros to the 30 million fund. This growth in size is explained by a dual path: the market context and investment opportunities.
Creas was born in Zaragoza in 2008, by of Luis Berruete, Javier Armentia and Sergio Sanz, at a time when no one in Spain was talking about social entrepreneurship. Now we are starting a new chapter, with great enthusiasm, in which we want to delve deeper into those really transformative sectors where we have experience, such as education, elder care, mental health or the circular economy. We started raising the 30 million fund in 2017, when the world of impact investing in Spain was very different. Then, the hypothesis was to prove that it was possible to invest 30 million in impact companies, that is, that there was deal flow, and that impact was scalable. We have seen that there are increasingly more investment opportunities and impact startups with size and traction. Our focus is to delve deeper into value creation from impact, demonstrating that it is transformative and that it creates differential value.
The funding rounds have grown, along with the capital needs of the startups...
Yes, and they are going to grow even more due to the upcoming change of cycle. The path to growth and profitability will be more demanding, and our ambition is to be leaders and to play an increasingly active role in Europe. Our current average tickets are around 2 million per company, and the leap will be to make average tickets of between 4 and 5 million. In Spain and Europe there are more than 40,000 startups that have not yet raised a round A and only in our country there are more than 125,000 SMEs below 10 million euros in turnover. Even though the percentage of impact investment over this reality is small, it already speaks to the large number of existing investment opportunities.
How has impact investing evolved in Spain, and how does this change influence Creas' strategy?
The impact ecosystem in Spain is growing, professionalizing, and maturing, but there is still a long way to go. With the current fund, we have already made two investments outside of Spain (in France and Austria-Germany) - the mandate was to invest 80% in Spain and 20% abroad - and most of the portfolio sells its products or services abroad. We have co-invested with over 15 European and North American funds. Our mission is to invest primarily in Spain, but also to look outside to Europe for companies and business models at the forefront of social or environmental innovation and transformation. We seek companies that propose solutions to challenges such as school dropout, structural unemployment, elderly care, social inclusion, circular economy, agriculture and adaptation to climate change. At Creas, we have an element of innovation, of going where others are not, generating impact and looking for scale and depth in companies that are performing well, either in more "venture" or more "growth" contexts. We also see that projects are becoming more global. Over these ten years, we have worked hard to build an international network, especially in Europe, with a group of more than 15 leading European funds with whom we exchange knowledge, deal flow and also co-invest.
Your investor base includes the EIB, ICO, family offices, private investors... Will they join you in this challenge of taking a bigger leap? Will this leap to Europe allow Creas to expand its base to foreign LPs?
The closing of the previous 30 million fund caught us in the middle of a pandemic and this one we are going to start in a changing macro environment: inflation, energy conflict, Ukraine war, etc. In this market context, impact investing has a point of resilience. We will build the new fund on the basis of our anchor investors and private investors adding other axes of growth such as the Spanish institutional investor (financial institutions, pension funds, etc.) and foreign investors. The interest in impact has grown exponentially. From a European point of view, we’ve had conversations with several investors with mandates to invest in impact in Europe and some other conversations, still just toe-dipping, but encouraging about a possible path. We are a medium and long-term project and we strongly believe in patient capital and sowing. From an institutional point of view, impact fund of funds are also beginning to emerge, such as Arcano's and another that make us optimistic.
I understand that the returns from the first fund are around 10% IRR. How do you see the evolution of profitability in the future?
The maturity of the market and the current context push us towards returns higher than those of our current vehicle. In Creas Desarrolla, we have made five exits, four of them with a gross IRR above 10% and one a little below. The vehicle was born in 2012, with just over a million euros. It was a pilot vehicle, a proof of concept to demonstrate that impact investing was possible and profitability could be obtained. In Creas Impacto, we have already completed one exit with very good profitability, which for confidentiality reasons we cannot make public, and follow-ons with new investors that have significantly revalued our portfolio.
In which companies from the portfolio are you preparing upcoming funding rounds?
In Qida, we are working on a round after a follow-on last year to consolidate it as a reference for socio-health assistance at home in Spain. Also on an upcoming round in the circular economy firm Refurbed. In Rediv (formerly Patatam), we just closed a round bringing in a very well known Spanish family office in addition to Creas. In Mimbox, we are planning a bridge round this year to consolidate the company before a major round of funding next year.