While startup valuations have plummeted since the bull run of 2021-2022, a factor that’s hit the European startup ecosystem particularly hard, there’s one region of Europe where the correction has slightly worked in its favor: the South.

Evidence for this was apparent during Mobile World Congress in Barcelona earlier this year, as time and time again your TechCrunch reporter bumped into Northern European VCs scouting startups on the ‘Iberian peninsula’ (Spain and Portugal). These young companies bring a killer combination which VCs love: significantly lower operating costs and far less punchy valuations.

Further evidence of this ‘Southern trend’ arrives with news that a new Venture Capital fund, Plus Partners, is being launched by Enrique Linares, one of the co-founders of breakout European unicorn letgo, along with Oriol Juncosa, a veteran of the Barcelona VC scene. While Plus Partners hasn’t released a figure for the launch of their new fund, the rumour I’m hearing is it will be in the $30M-$50M range.

Looking at the fund’s co-founders, Linares led letgo, a used goods marketplace, to become the first Spanish startup to achieve unicorn status, attracting investment from Accel, Insight Partners and Prosus, among others. Prior to letgo, he co-founded Captalis, a fintech company with a significant presence in LatAm.

While Juncosa started his VC career at Nauta Capital in Barcelona and went on to co-found the early stage VC firm Encomenda Smart Capital. He then become CFO of Carto, a data vizualization SaaS company based in the US and Spain, which has raised over $100M. As an investor/shareholder he’s invested in more than 75 startups — such as Carto, Cobee (which exited to Pluxee), Holded and Housfy among others. 

So what’s the Plus Partners thesis? It will concentrate on ‘health and nutrition’, ‘finance and property’, and ‘future of work and productivity’, per Juncosa. The fund will focus on pre-seed and seed-stage startups in Southern Europe with a significant percentage of them coming from Spain. 

Juncosa told me the fund is backed by founders and former C-Level execs drawn from companies including Carto, Luzia, Kantox, Redpoints and Typeform, among others.

He said he thinks Spain and Portugal sorely need more professionally run VC funds because too many early-stage investors, especially non-professional Angels and family offices, tended to “do more harm than good” in the nascent tech scene there, because they either blew-up valuations excessively or entered rounds on punitive terms to the founders.

“The big news in Spain for me is that we have role models. Also the tech community in Spain and Portugal is extremely open, everybody’s happy to support everybody,” he told TechCrunch over a call. 

Which country does the new fund think is ‘hotter’ in terms of startups? “I would say, overall, we have three great entrepreneurial cities in Barcelona, Madrid and Lisbon. If you went back 10 years, Barcelona was the biggest tech city. But Lisbon and Madrid have played catch-up very well. Now, entrepreneurs have a choice of where they want to set up their company.”

Linares reiterated that Southern Europe is now “packed” with entrepreneurs who are role models for new startup founders, emphasizing: “We have a lot of talent and founders can internationalize very successful startups from here.”

“Barcelona and Madrid are on a par with each other as ecosystems, but Valencia is growing,” he added. “There is a summit in October that is called Valencia digital Summit. We were speakers last a year and it was fantastic. I was very surprised. It was my first time there.” 

The fund will also look at startups coming out of Italy, completing its ‘Southern Europe’ thesis. 

“We’ll have a significant share of our investments in Spain, but, within [Southern Europe], Italy is greatly overlooked. Rome and Milan are catching up. We’re very excited about it,” said Linares.

Plus Partners arrives at a time when VCs are dialling up their attention on Southern Europe. 

Yellow, a new VC firm created by Oscar Pierre and Sacha Michaud (the founders of Glovo), as well as Adam Lasri (a former investor for VC giant Atomico), recently put their bets on the region, with a €30M fund raised in less than five months.

Furthermore, Spanish VC Kfund raised $75M to fund tech projects earlier this year. 

According to a Dealroom report on the Spanish tech ecosystem, the combined enterprise value of Spanish startups surpassed €100 billion in 2023. It also found venture investment into Spanish startups held up last year, with €2.2B raised across some 850 funding rounds. 

The annual “State of European Tech” report for 2023 found Spain’s ecosystem to be in fourth place overall and had the highest number of startup fundings last year.

Lastly, the European Investment Bank’s venture capital arm also backed a new fund in Spain this year which aims to invest €1B ($1.1B) in growth-stage tech startups.