One of the main industry themes at this year’s San Sebastian Festival, taking place from 18 to 26 September, will be the presentation of SETT, the Spanish Ministry of Digital Transformation’s venture capital fund.
SETT Director General Javier Ponce and its Audiovisual Director María Coronado provide a practical guide on Spanish government investment to boost Spanish businesses: what is being done, why it is being done and where it lies in the future. The companies in which it invests (more information to be disclosed) are probably among the most dynamic in Spain.
Explain briefly, what are the goals of the SETT Spanish Audiovisual Center strategy?
Javier Ponce: SETT is a public investment entity that manages investments in strategic and transformative industries, including the audiovisual industry. It is a public catalyst for growth, jobs, innovation and talent – all core elements of the audiovisual industry. SETT manages the Spanish Audiovisual Center Fund, which was established under the Spanish Recovery Plan and financed through the EU Next Generation Fund.
Through the Spanish Audiovisual Center programme, SETT provides financing and equity or quasi-equity investments directly to companies in the sector or through financial intermediaries active in the audiovisual sector. Its goal is to attract private investment and improve financing pipelines for projects related to film, television, animation, multimedia and interactive content. Priority is given to high-impact projects focused on creating audiovisual content and intellectual property rights, while ensuring that these rights remain with the production company.
What is the rationale for a co-investment model for sovereign venture capital funds?
ponce: It launches transformative initiatives based on public-private partnerships that, due to their innovative nature, involve additional risks and make it difficult to attract pure private funding. Only markets with high liquidity, scale and a long history in the audiovisual industry can mobilize sufficient capital to fund major new productions or industry-changing initiatives.
SETT’s Spanish AVS Hub fund could draw up to 1.5 billion euros ($1.75 billion) from Next Generation EU funding. According to María Gonzalez Veracruz, the investment amount is just under 250 million euros. Her explanation was that you just ran out of time. Can you comment?
ponce: Indeed, European funds are crucial to Spain, and the recovery plan has played a key role in promoting major structural reforms and stimulating economic growth. However, these funds do have specific requirements, including strict execution deadlines, making optimal execution more challenging.
For the audiovisual industry, the possibility of co-investment with public entities represents a major innovation. Timing, therefore, becomes a critical factor as market participants first need to understand the role and implications of working with public investors who share risks and rewards.
The next challenge is to ensure that these investments continue to thrive, identify new opportunities and maintain confidence in the talent and ambition of Spanish audiovisual companies that now benefit from SETT’s support.
However, I believe SETT is not over yet. Clearly, it must govern the investment agreements that have been reached. I also believe that there are plans to launch a new project, España Crece, with a budget of €13.3 billion ($15.6 billion), held by an ICO, but if I understand correctly, its investment will be partially handled by SETT. Can you comment?
Ponce: The audiovisual sector will remain one of SETT’s strategic areas of activity and will continue to develop with the support of the new fund “España Crece”. We have begun discussions with the ICO to determine the procedures and framework for cooperation between the two institutions to ensure continued joint investment in strategic technologies and areas.
SETT represents a major shift in the approach to public investment in strategic industries. Through SETT, the country acts as a catalyst and partner in the most innovative sectors of the economy, with the goal of placing Spain at the forefront of transformative industries. This is why we invest in audiovisuals and why we will continue to do so.
Its ability to generate industrial activity, jobs and broad economic impact makes it a strategic sector that will continue to receive our support.
Can you explain the rationale for SETT’s co-investment model in one or two investments and the clear benefits it can bring to companies in the Spanish film and television industry.
Coronado: The SETT model is built on three pillars. First, it adopts an industry-wide approach rather than a project-based approach, covering the entire audiovisual business ecosystem. Second, its investment facilities target companies’ equity capital or regulated investment vehicles. Third, it promotes medium- and long-term public-private partnership instruments.
Under this model, sponsors must convince genuine private investors that their company represents a valuable investment opportunity. SETT co-invests with private investors palipasu Rationale: Public investment is intended to support companies, but always on the same terms and conditions as private capital.
This approach has strengthened domestic and international private investment in Spanish companies, while also attracting foreign businesses that see Spain as an attractive location to do business. Notable examples include South African deals involving The Refinery and Moonlighting, with a total investment of €25 million, and two leading examples from the Spanish animation industry, Amuse Labs and Milo, which raised €13 million and €19 million respectively.
My sense is that SETT investors can really help companies scale, create more of this expertise and build infrastructure. But would you agree?
Coronado: In my opinion, the main challenge in the coming years is to consolidate the model that we have been promoting and supporting. Supportive policies must continue to be strengthened and diversified so that Spain can become a global center for the audiovisual industry in the long term. This means providing support based on the specific needs of each segment of the industry.
Scale is certainly part of the challenge, as is ensuring the infrastructure required for medium- and large-scale productions is available, enhancing technical training and developing talent across the industry. It is also important to continue strengthening the tax framework and the legal and regulatory environment to maintain Spain’s competitiveness, while further developing public and private investment instruments.
In addition, understanding the cash flow financing needs of the project is also critical to meeting the company’s full range of financing needs. Finally, the industry’s ability to adapt and diversify remains critical, both in terms of technology and creativity, and in terms of business models and company structures.
Do you think that the introduction of sovereign venture capital into the Spanish film and television industry will lead to a change in industrial concepts?
Coronado: Yes, absolutely. It creates new opportunities. You must consider mid- to long-term business strategies rather than just focusing on immediate projects. It enables companies to strengthen their capital base, enabling them to be more ambitious, better able to protect their intellectual property rights, diversify, expand internationally and bring products to market more efficiently.
What did you learn during your two years at the Spanish AVS Center Phase II that you hope to apply to SETT’s future investments under España Crece?
Coronado: The main lesson here is to confirm that SETT has clear and necessary objectives for industry, whether that is attracting private investment and foreign companies, or creating opportunities for local industry. It is important to allow more time for the business plan to mature and for the company to secure private investment.
Can you give a brief overview of what the SETT activities at the San Sebastian Festival will include?
Coronado: As you would expect we will have a strong presence at the festival with a wide range of events. On September 20, the Secretary of State for Digitalization and Artificial Intelligence, through the Ministry of Digital Transformation and Civil Service, which leads the government’s Spanish Audiovisual Center programme, will host an event where SETT will present the great progress we have made in financing the audiovisual sector and new ongoing projects. Additionally, on September 22nd I will be participating in a panel discussion at the conference organized by CAA as part of Screening Investment and Technology in Spain. On the same day we will also host an exclusive roundtable with investment funds and banks specialized in the audiovisual sector, bringing together international and Spanish participants. We have also prepared many more surprises that we will reveal during this very important holiday for the industry.
