Financial support mechanisms reinforce Portugal’s status as the birthplace of Europe’s finer startups.
One difference between the business landscape of Portugal and that of its fellow South European economies lies in the lineup of companies each sector. Portugal has considerably more start-ups in each industry than anywhere else in Europe, and it has been the birthplace of far more interesting start-ups over the last few years than any country in the Mediterranean region.
While other European economies may have a handful of well-known, long-established brands, Portugal is home to dozens and dozens of exciting start-ups which are trying to find their feet in the country’s economic climate.
A large percentage of these are tech-related, which has led to people making comparisons between the roles of Silicon Valley, California, in the US economy and Portugal in Europe’s. Over the last decade, Portugal has seen the rise of 7-9 start-ups to the unicorn status by passing the USD1 billion mark. There are hundreds of more reasonably successful start-ups, too. Unbabel, for example, has made some breakthroughs in AI-assisted translation; CrowdProcess, also known as known as James, employs AI to provide its users with credit risk analysis; and Codacy offers an AI-powered solution for the troubleshooting and improvement of software codes—computers improving computer codes! Now, that is something interesting. These former start-ups have now matured into established businesses, venturing into the US market as well as the European market. Indeed, teaming up with American partners has become something of a signature move for Portuguese start-ups that move beyond the initial stages.
To support this trend, Portugal has launched a new start-up program in collaboration with the European Investment Fund (EIF). Announced at Web Summit 2021 in Lisbon, the joint program is intended to raise funds to the tune of EUR250 million. The government alone has promised EUR50 million, and EIF has matched the contribution with another EUR50 million, according to Portuguese Minister of Economy and EIF’s vice president. The remaining sum will be raised through solid venture capital investment programs in 2022, including the Portugal Tech II initiative, which is currently looking for fund commitment.
Portugal Tech II is an initiative to mobilize investments toward high-potential tech start-ups that are working on technology-transfer programs. Start-ups focusing on hot topics such as fintech, digital healthcare, and AI are particularly favored. Portugal Tech II is being announced after similar initiatives such as Portugal Blue, Portugal Growth, and—its direct predecessor—Portugal Tech I, which were met with varying degrees of success.
The initiative is expected to be a success if the experience of Portugal Tech I is any indication. “Launched in 2018, the program successfully mobilized private capital and generated about EUR5 of investments for each euro of national funding,” according to EIF.
Fundraising for Portugal Tech II, which will in turn empower tech start-ups, is perfectly in line with Portugal’s identity as Europe’s most start-up-friendly hub. This is also what EIF is after. “Building on the European Investment Fund’s unique track record in supporting European tech hubs and unicorns, this initiative crowds in private investors’ resources and will help transform disruptive ideas into successful businesses that can give Portugal and Europe a leading edge in the global tech race,” said EIF’s Ricardo Mourinho Félix.
The introduction of a robust financing mechanism nicely completes a set of other enabling factors which are already in place. “Portugal has a high quality of engineering talent at a competitive cost; an extremely high level of English language proficiency,” notes TechCrunch’s editor-at-large, Mike Butcher.
These observations are also shared by others including Stephan Morais, founder and managing general partner at Indico Capital Partners, who believes despite Portugal’s small ecosystem, “the talent pool is high and growing with talent pouring in from all over the world over the last five years.” Morais also mentions three challenges of the start-up scene in Portugal, one of which is the “lack of founders turned angel investors given limited exits until now.”
Fortunately, however, supportive schemes by the government and the EIF, such as Portugal Tech II, are filling the void perfectly. The government’s spending on start-ups is easily justifiable, as there is a huge upside to having a vibrant start-up scene: they are units of pure potential that have not yet collapsed into a corporate form, which gives them agility in challenging times such as this.
To keep a stream of new start-ups popping into existence in the start-up scene, there is an incubation mechanism. Science and technology parks take promising start-ups under their wings in the very early stages, and some of these incubated companies do go far. “Talkdest, which is the latest Portuguese unicorn, left our incubator. It was created by two students,” recalled Eduardo Baptista Correia, CEO of Tagus Park in an interview with TBY.
Many are confident that a combination of incubators such as Tagus Park and funding initiatives like Portugal Tech II more than compensates for the absence of angel investors and is likely to keep Portugal the home of Europe’s finer start-ups.
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