Portugal lists as one of the European countries most severely hampered by the 2008 global recession. Following the austerity measures implemented in 2011 as a consequence of the country’s economic precarity, unemployment boomed and triggered all-time high emigration in the following years, particularly among younger and highly qualified people, leading to the so-called brain drain. This phenomenon greatly dampened Portugal’s more innovative sectors, making the country lag other economies regarding innovation, and consequently the startup ecosystem.
More recently, in 2016, the Portuguese government implemented StartUp Portugal, a startup acceleration initiative aimed at rejuvenating the country’s industries, boosting economic growth and fostering foreign investment, as well as creating an international hub for innovation.
Still in 2016, Prime Minister António Costa announced in the first edition of Web Summit in Lisbon a €200M fund to co-invest alongside VCs (venture capital) in local startups and foreign enterprises that reallocate to Portugal. Moreover, this event alone (which has been contractually ensured to remain in the country until 2028) has been creating fiscal revenue of over €45M and stimulating venture capital injection into local initiatives. This resulted in venture capital investments of around €44M in that year which, despite not being comparable to the vast majority of the top entrepreneurial countries, was a big increase from the €29M in 2015.
Indeed, a report conducted by Startup Europe Partnership stated that the Portuguese startup ecosystem is growing twice as fast as the European average. The cases of unicorns Farfetch, the online luxury retail platform, the cloud-based call-centre software Talkdesk or the low-code platform for private application creation Outsystems, reiterate the fertility of the Portuguese soil for the creation of valuable global market conquerors.
This month, the American startup accelerator Techstars partnered up with Semapa Next, in order to invest and enhance ten Portuguese newly founded companies that are bringing digital transformation to the areas of Industrial & Environmental Tech and Smart Transportation. This program clearly depicts how accelerators and venture-capital investors are increasingly focusing their efforts on startups that seek competitive advantage through the development of innovative technologies. Among the chosen are “Apres”, a data-driven company that focuses on providing AI solutions to enterprises, and “Qsee”, which devotes itself to the development of advanced analytics to address critical challenges in quality and productivity throughout the production process of firms.
Today, Portugal has a more developed entrepreneurial ecosystem and as a result is becoming a hub for innovation and startups, ranking at #31 on the Global Innovation Index. This progress is a consequence of factors such as Education, Expertise, and Support. The startup ecosystem benefits from a qualified workforce, as well as high quality Universities, with special focus on business and science, also emphasising on entrepreneurship. In fact, Portuguese universities such as Nova SBE, Universidade Católica SBE and Instituto Superior Técnico are ranked amongst the best in their areas of expertise.
Furthermore, partnerships between universities and their respective sectors, which provide students with a more “hands-on” experience, benefit not only students, but also startups, especially those in the growth stage, as more often than not they need access to specialist knowledge, which they lack in-house.
When it comes to support for startups, Portugal is characterised by a great number of initiatives. The number of incubators and accelerators, for instance, has grown to more than 150 throughout the country. They prove to be successful as well: the Lisbon Challenge was named as one of the top accelerators in Europe, and incubators like Startup Lisboa are also key players. Besides the typical startup amenities, there is a wide offer of services for starting and growing companies, ranging from co-working spaces and support services for intellectual property and product development. Consequently, Lisbon is listed in the top 5 best performing startup communities in Europe.
Despite the support in non-financial resources, the country still lacks monetary investment. Difficulty in raising funds helps to explain the higher percentage of startups in the earlier stages of development and the fewer in more advanced stages, in comparison with the European average.
So far, remarkable improvements have been observable in the startup ecosystem in Portugal, but there is still a long way to go until we reach the same level of entrepreneurship development as our European peers. Venture capital is a valuable source of investment for newly founded companies and, as of 2019, Portugal was still ranked at the bottom (out of 28 countries) in VC funds raised per capita, at only $4 per capita, This value doesn’t even come close to the $771 per capita raised by Luxembourg. In terms of job creation, on average, each Portuguese startup employs 8.8 people, when the European average is 12.8. This fact may compromise the growth of the national enterprises.
Evaluating the stage of development of Portuguese recently-founded companies, the majority of them (51.3%), are in the “Startup stage”, meaning they have completed a marketable product or service and report first revenues/users, and that is the most prominent stage of development for a large proportion of European countries. It is also noticeable that there are still many companies in early stages of development, the “Seed stage”, which accounted for 16.7% of the startups in 2018. These values follow the European trend.
5 startups to look out for
This atmosphere has resulted in a myriad of exciting innovation. As a result, Tech5 was created, with the aim of serving as a community for the most promising startups in Europe and Israel. Each year, the top 5 startups of each participating country are chosen and brought to Founders Day, an event that brings these companies, top-tier investors and global press altogether. The criteria for selection are based on performance, investment rounds, growth, media coverage and social impact, among other factors. This year’s finalists were:
20tree.ai (founded in 2018, raised $120k): with resort to satellite imagery, AI and computing power, 20tree.ai provides an in-depth analysis of natural resources to companies, in order to ensure a sustained and productive exploration of such resources. From their platforms, they are able to provide insights on growth predictions, harvesting analysis, plagues, damages, predictions on short and long-term impacts, as well as asset monitoring and much more.
Barkyn (founded in 2017): an e-commerce website focused on man’s best friend. The platform allows for the creation and purchase of food adapted solely for each dog’s needs with the aid of an expert. Moreover, online veterinary appointments are also a feature of the startup.
DefinedCrowd (founded in 2015, raised $12.9M): DefinedCrowd is an artificial intelligence service to train and accelerate data through a combination of human-in-the-loop procedures and machine-learning techniques.
Jscrambler (founded in 2014, raised $2.3M): the startup serves the purpose of bringing security solutions for webpages and apps, ensuring tailor-made decisions based on data extraction to ensure maximum compatibility, performance and protection.
SWORD Health (founded in 2013, raided $14.1M): the first digital therapist ever, this program allows for physical therapy to be performed at home, while ensuring real-time feedback from the digital therapist and analysis of the rehabilitation process from clinical teams.
Despite Portugal’s initial setback, due to the community and government’s hard work, what was once the country’s Achilles heel is now one of its most attractive factors. The startup ecosystem improved considerably, more and more money is being invested and, consequently, that hard work is beginning to show results. As the country starts to roll out its first unicorns, the future looks promising…
Sources: “An overview of the Portuguese Entrepreneurship Ecosystem”, Halbe & Koenraads. Financial Times, Startup Europe Partnetship, Dealroom.co, OECD, Tech5, Statista.