SPECIAL REPORT

WWW.fDiINTELLIGENCE.COM puts itself on the tech map POST-CRISIS RECOVERY TURNS INTO A HI-TECH SUCCESS STORY

SPONSORED BY SPECIAL REPORT PORTUGAL A tech-fuelled turnaround

PORTUGAL’S ECONOMIC he Portuguese have witnessed ber of greenfield projects into Portugal since a start-up boom over the 2003, the majority of which went into software RECOVERY IS IN FULL SWING past seven years that has, and IT services, according to greenfield invest- AND FOREIGN INVESTORS ARE T and is, supporting the country’s ment monitor fDi Markets. TAKING MORE INTEREST successful and impressive THAN EVER, ESPECIALLY economic bounceback. Tech boom IN THE TECH SECTOR, AS Portugal is now one of Europe’s Portuguese tech is particularly hot right SEBASTIAN SHEHADI REPORTS economic and political success sto- now. The EU Startup Monitor 2018 says ries. Just 10 years ago, however, the London, Berlin, Paris, Copenhagen and the country was mired in a deep finan- Portuguese capital of are the biggest cial crisis. Unable to repay its govern- hubs for start-ups in Europe. Walking around ment debt in 2010, Portugal received a €78bn or Lisbon’s latest co-working spaces, and bail-out package, which it successfully exited speaking to a dozen leading tech companies in in mid-2014. slick new offices, one can feel the buzz. The past decade has witnessed rapid growth Back from the brink in the number of Portuguese tech start-ups, such The country’s impressive economic recovery as Farfetch, Talkdesk, Uniplaces and Unbabel. has since outshone fellow crisis victims Greece Farfetch, now publicly listed and headquartered and Spain, largely due to Portugal’s political in London, was the first Portuguese tech unicorn stability, tourism industry and technology (a company valued at more than $1bn), now boom, as well as a fiscal policy that has boosted joined by Talkdesk and Outsystems. business confidence, made investment easier, In terms of scale-ups in ICT, Portugal grew and accelerated growth in exports and, twice as fast as the European average in 2017, increasingly, services. Subsequently, the job according to a report from the Startup Europe market has significantly improved, with unem- Partnership initiative, which defines ‘scale-ups’ ployment falling to 6.7% in June 2018, the low- as start-ups that have raised more than $1m. est since 2004 and a big improvement from International investors have played a central role 2013’s all-time high of 17.5%, according to in this, accounting for 62% of capital made avail- research company Trading Economics. able to scale-ups, and 86% of later stage rounds. Meanwhile, Portugal’s GDP hit 1.9% annual growth in 2016 and a 2.1% budget deficit, the Feel the space lowest since 1974, according to BBVA Research. Reflecting and fuelling Portugal’s tech boom is The following year witnessed the country’s the rapid growth in new office space. “There’s highest GDP growth rate since 2000, at 2.8%, an incredible amount of co-working space for while 2018 hit 2.1%. start-ups in Lisbon, they keep popping up. We Foreign investment figures reflect this pos- have a Factory co-working space, from the same itive trend, with 2018 seeing the highest num- people [behind] Factory Berlin”, says Alexandre Vaz, managing director of Mercedes-Benz.io, a tech arm of Mercedes-Benz, based in Lisbon. Another example is Hub Creative do Beato, a former factory that is being transformed into a 35,000-square-metre mega-start-up cam- pus, thereby competing with Paris’s renowned THERE’S AN INCREDIBLE Station F incubator in terms of size. In the longer term, Portugal’s tech boom AMOUNT OF COWORKING has been made possible by several decades of high-quality education and strategic govern- SPACE FOR START-UPS ment funding in traditional and modern engi- neering. In the shorter term, however, it seems IN LISBON, THEY that the economic crisis has been a catalyst. Mr Vaz says: “The start-up economy in Portugal started with the crisis. There weren’t enough KEEP POPPING UP jobs, so people started to test out new ideas and companies. The push from the government worked quite well too, creating a system for seed

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New homes: Lisbon’s Factory is a co-working space for start-ups, one of many of a new wave of such sites capital, and then private players jumped in.” this BMW, Mercedes, Volkswagen, BNP Paribas, When the economic crisis hit Portugal, Natixis, Zolando, Bosch and Siemens and many young, highly qualified people had two Euronext in recent years, among many others choices: emigrate or create their own jobs, who are moving or expanding their tech func- according to João Barros CEO of Veniam, tions in Portugal. Microsoft and Amazon are one of Portugal’s most successful start-ups. also scoping the market. The arrival of Web Summit to Lisbon, “I’ve seen a tremendous change in inves- replacing Dublin as host, was another game tor perception about Portugal since my first changer. As one of the hottest tech conferences fundraising seven years ago. Increasingly in in the world, it attracts more than 80,000 places such as Silicon Valley, London and attendees from more than 170 countries. New York, Portugal is perceived as a start- Impressed by Lisbon’s digital infrastructure, up nation and a hard-tech location,” says ecosystem and more, Web Summit recently Veniam’s Mr Barros, who founded the agreed to stay in Lisbon for another 10 years. company with the creators of ZipCar.

Hello Google Investment rationale Numbers talk, and the fast-rising value of So why are foreign investors getting involved Portugal’s burgeoning tech ecosystem is in Portugal? “IT talent, geography, timezone shown by the 15% increase in foreign tech and culture; everyone speaks English, and there companies active in the country, according is a nice cost [of living and of labour],” says to Aicep, the Portuguese government’s trade Margarida Marques, president of Hitachi and investment promotion agency. Consulting in Lisbon. Talent is key, however. Portugal has seen four years of consecutive “Portugal’s universities are top ranking, provid- greenfield FDI growth in software and IT – ing a pool of highly qualified engineering talent both in capital expenditure and project num- in multiple areas thanks to government invest- bers – with 2018 setting historic highs, accord- ment in a lot on tech [apprenticeships] and uni- ing to fDi Markets. versity courses,” adds Ms Marques. Moreover, Faber Ventures, one of the main Indeed, the country has the second institutional investors seeding Portuguese start- highest rate of engineering graduates ups, sees 75% to 80% of its investment coming in Europe, according to Eurostat. from abroad, according to Carlos Silva, an exec- Portugal was ranked 17th out of the utive at Faber. “From an investor’s perspective, world’s 63 leading economies in IMD’s World Portugal is one of the fastest growing ecosys- Talent Report 2018, coming fifth in language tems in Europe, but we still have to reach matu- skills, eighth for skilled labour and 14th for rity. So, things tend to be undervalued, which university education. English is widely spo- means there’s some very interesting investing ken across Portugal, more so than in Spain or opportunities under the radar,” he says. France, as shown by the English Proficiency Google has recognised this, opening a sup- Index 2018, which ranks the Portuguese 19th port centre on the outskirts of Lisbon and cre- best in the world among non-English speak- ating 500 tech jobs for skilled workers. Add to ing countries. ■

April/May 2019 www.fDiIntelligence.com 59 SPECIAL REPORT PORTUGAL An international fintech stage

INITIALLY DRIVEN BY LOCAL ortugal’s blossoming start-ups An international recipe - are thriving in several fields, The flair with which Portugal’s economy has START UPS, PORTUGAL’S especially fintech. As well as for- recovered has boosted its reputation and inves- BURGEONING FINTECH SECTOR P eign venture capital funding, investors tors’ business confidence, helping to position IS NOW ATTRACTING FOREIGN in financial services are moving tech the country as a growing hub for financial ser- COMPANIES AND FUELLING functions to Portugal in their droves. vices, especially in fintech. “[Accenture] believes GLOBAL DEMAND FOR TOP- Behind all of this lies Portugal’s stellar the tech movement is generating critical mass CLASS STAFF. SEBASTIAN R&D and educational institutions. The in Portugal, [making it] one of the spots to inno- SHEHADI REPORTS country’s overall innovation output is vate and provide services internationally,’’ says ranked 32nd in the world by the Mr Duarte. Accenture employs 3000 people in Global Innovation Index, conducted Portugal, half of which export high-value tech- by Cornell University, Insead and the nology services. In 2017, the company launched World Intellectual Property Organization. a technology centre in Braga. Portugal’s economy has witnessed a para- Portugal’s shift towards service exports has digm shift over the past 10 years. Rather than just been driven forward, in large part, by its start-up exporting goods, the country has also looked to community. The crisis led to the Portuguese cre- export its services. The internationalisation of ating their own jobs, solutions and markets away Portugal’s economy was accelerated by the crisis, from an old economic system that had failed. which undermined the domestic markets, Start-ups were the answer to providing interna- according to Luís Pedro Duarte, managing direc- tional clients, talent and investor efficiency. tor of financial services at Accenture in Lisbon. “The economic crisis rewarded efficiency “Since the crisis, our governments have and [innovation]. It benefited the Portuguese been hungry and proactive for foreign business. tech ecosystem that bloomed from 2012 Having foreign workers in Portugal is normal onwards. [Moreover], for Portuguese start-ups, now [and tourism is booming]; this wasn’t hap- the domestic market is too small, so they imme- pening 10 years ago. Portugal was hidden, now diately look abroad and that helps attract inter- it’s being discovered. Those Portuguese who left national investment and talent,” says Carlos during the crisis are coming back,” he says. Silva, co-founder of Seedr, a leading Portuguese Companies’ strategies have also internation- fintech that facilitates international crowd- alised. Like Accenture before the crisis, Hitachi funding for start-ups on a global level. in Portugal was focused on the domestic mar- This international mindset was furthered ket. However, after losing its local clients, the by the fact that many of the successful multinational turned to its international net- Portuguese start-ups have been founded by work, receiving added-value projects and grow- Portuguese citizens who studied or lived ing exponentially since 2014, according to abroad. As Portugal reaches out, the world has Margarida Marques, vice-president at Hitachi reached back. Considering the global clamour Consulting in Lisbon, who adds: “The crisis was to recruit quality tech talent, especially in a blessing, in this sense.” Europe, Portugal has become an alternative to Like many countries, however, Portugal’s the crowded fintech scenes in London and increased globalisation does mean it is more Berlin, according to Mr Duarte. vulnerable to international market volatility. Moreover, since physical location matters

FOR PORTUGUESE START-UPS, THE DOMESTIC MARKET IS TOO SMALL, SO THEY LOOK ABROAD

60 www.fDiIntelligence.com April/May 2019 For the people: Portuguese start-up and software engineering company Blip has designed its offices with talent retention in mind less within the digital world – which enables the universities that attracted Euronext. [Like remote working – the importance of ‘liveabil- Lisbon], international companies are in Porto. ity’ has risen. Portugal’s tech cluster offers a The investment support was good from the happy balance between geographic proximity local and national government. The set-up to Europe’s economic hubs, accompanied by a time was quick,” says Manuel Bento, CEO of high quality of life and infrastructure. Euronext Technologies. BNP Paribas and Crédit Agricole also opened Pack your bags technology centres in Portugal in 2018, and fin- Fintech in Portugal now boasts several local com- tech company Revolut recently opened a sup- panies that have a global profile, with Feedzai, port centre in Porto. “Accenture is working James, Syndicate Room, Switch, Seedrs, UTrust, with some major international banks – I cannot Magnifinance, MB Way and Didimo among the disclose more – that are moving their corpora- most prominent examples. Scenting an opportu- tion to Portugal, as it becomes a nearshore cen- nity, foreign companies have been responsible tre for their operations,’’ says Mr Duarte. for a significant flow of investment in fintech and financial services in the country recently. Foreign recruitment Amsterdam’s Euronext, a European stock Online bookmaking giant Paddy Power Betfair exchange operator, and Paris’s Natixis, a corpo- recognised Portugal’s tech potential early, rate and investment bank, are just two exam- acquiring local start-up and software engineer- ples. In its first ever nearshore investment out- ing company Blip in 2012. Visiting Blip’s head- side of Paris, Natixis set-up a global IT service quarters in Porto and seeing its offices – which centre in Porto in 2017. The centre’s 550 employ- include perks such as games and nap rooms ees include business analysts, developers, data and a massage parlour – signals the emphasis it scientists and a digital transformation centre. puts into attracting and retaining the best staff. “We were [impressed] by the entrepreneur- As Portugal attracts more foreign tech compa- ial ecosystem in Portugal. We find very highly nies, the demand for talent will also increase – qualified people here. Geographical and cul- so the country may also require foreign talent. tural proximity was also important since we’re “One thing that might be holding back working closely with Paris. Another key aspect some of the very biggest tech players is the pool was the international mindset, especially of available talent. At the moment, if you invest English language skills,” says Nathalie Risacher, in Portugal, you’ll most likely have to steal the senior country manager of Natixis’s Porto cen- best from other companies,” says Helder Costa, tre. “Portugal’s bureaucracy is definitely pain- director of development at Blip. ful but the local help we got was great thanks to João Barros, CEO of Veniam, one of Portugal’s Porto municipality and [Portugal’s IPA]. I’ve most successful start-ups, believes large corpora- been impressed by the way we’ve been wel- tions think of Portugal as a place of untapped comed. It makes a big difference.” talent. “However, it is very important and neces- sary to further expand our talent base [through Talent pool education], as I’ve discussed with Portugal’s Similarly, Euronext opened a technology centre president,” he says. “But the most promising in Porto in 2017 consisting of 150 employees in IT avenue to increase our talent base is to attract development, engineers, cyber security and 24/7 talent from abroad, and Portugal is uniquely IT operations that keep Euronext’s markets open. positioned to do that because of [benefits such “It was the huge talent pool in Porto from as] our quality of life and infrastructure.” ■

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Hitting the road: Bosch’s Braga plant employs 3700 people producing electronic products such as car navigation systems In the driving seat

PORTUGAL IS PROVIDING ortugal is enjoying a tech boom sors and software for automated vehicles. Bosch in various specialist areas also has R&D sites in Aveiro and Ovar. DIGITAL SOLUTIONS FOR including mobility tech, an THE AUTOMOTIVE INDUSTRY, P area that has seen a flurry of foreign Veniam’s fine mesh COMBINING THE COUNTRY’S investment in recent years. Reflecting Veniam provides another example of EXPERTISE IN TRADITIONAL this boom, the country was ranked Portugal’s young but world-class start-up AND MODERN ENGINEERING. ninth out of 38 leading economies in scene, especially in mobility tech. The com- SEBASTIAN SHEHADI the 2018 International Innovation pany creates networks of interconnected vehi- REPORTS Scorecard, conducted by the cles via cloud computing that enables automo- Consumer Technology Association. biles to self-update their software and transfer In the 1990s, Portugal was known huge amounts of data. In Porto, Veniam has as a low-cost manufacturing location. deployed the world’s largest mesh network of Two decades on, it is home to cutting-edge R&D vehicles, connecting buses and other vehicles in deep tech. The country’s rising added value is that act as internet hotspots for the public and exemplified by German engineering and elec- gather terabytes of urban data for smart city tronics company Bosch, which entered Braga in applications. 1990 to assemble radios. In 2002, however, the “Porto offers a living lab for testing our net- facility pushed for innovation projects, and in works, due to its excellent [digital and trans- 2010 began a partnership with Braga University, port] infrastructure and open-minded authori- according to Carlos Ribas, Bosch’s Portuguese ties. There’s a cluster of players making the city representative. a focal point of innovation for the auto indus- “The university became an extension of try,” says João Barros, who founded Veniam our plant. Since 2010, the growth in R&D has with the creators of ZipCar. “Portugal’s start-up been tremendous, and the next phase of and tech scene is still very nascent, but Silicon research will represent more than €100m into Valley likes nascent, and venture capital in Bosch and our partner universities in Silicon Valley, in general, has started investing Portugal,” he says. more outside of the bubble in California, and In 2015 the Braga plant employed 1700 peo- this is providing good results. They’re seeing ple; today, a workforce of 3700 produces elec- there’s talent everywhere.” tronic products such as car navigation systems. Veniam also boasts commercial mesh net- German chancellor Angela Merkel opened the works in New York and Singapore, and the com- site’s Technology Centre in 2017, now home to pany’s team is equally international. “As an several hundred researchers who work on sen- [American] engineer in deep tech, I was signifi-

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THE MARKET HERE IS BECOMING MORE GLOBAL, SO WAGES WILL INCREASE OVER TIME

cantly impressed by the depth of knowledge in for [FDI]. The auto industry is quite interesting. engineering in Portugal. Additionally, the The war for tech talent is worldwide, and there’s country’s English skills are tremendous and I good availability in Portugal. Then there’s qual- have had no problems integrating,” says Jane ity of life, English speakers, [political stability], Hoffer, chief business officer at Veniam. etc,” says Alexandre Vaz, managing director of Mercedes-Benz.io. “I wouldn’t, however, give the Welcome to Portugal argument of ‘low costs’. The market here is The past two years have seen an impressive becoming more global, so wages will increase slew of foreign investment in mobility tech in over time. [Moreover], Lisbon has completely Portugal, with the arrival of BMW, Mercedes changed over the past 10 years, in terms of and Volkswagen. BMW and Portuguese com- nightlife and entertainment. The city is increas- pany Critical Software teamed up in 2018 to ingly attractive to foreign people [and tourists].” create Critical TechWorks, a 400-person com- pany providing next-generation software sys- The price of popularity tems at BMW. With Portugal’s tourism and tech boom in full Martin Zierheim, chief operating officer of swing, the cost of rent in Lisbon and Porto has Critical TechWorks, says: “The BMW group [is risen sharply in recent years. In the capital, transitioning] into a mobility tech company. rental prices hit an eight-year high in 2018, Everything is being disrupted by IT. In Germany according to a report from Confidencial it was really hard to find the people, so we Imobiliário. looked for companies abroad and had 270 can- “Over the past five years, the transforma- didates. We wanted an area where IT competen- tion of Lisbon and the [tech] boom has been tre- cies were growing and were state of the art. mendous. [There’s a contest] for available “I’ve felt welcome in Porto. The officials and offices that has [never] been witnessed before. city have really helped me, as has Aicep (the New space that comes to the market is very national trade and investment agency). often gone within a couple of days, costs by Whenever we had questions it was always there square metre are increasing constantly,” says to help us, especially with some legal issues.” João Delgado, head of communication and gov- Local partner Critical Software is a pioneer ernmental affairs at Volkswagen Autoeuropa. among Portugal’s hi-tech start-up community. To make the most of this wave of investor Spinning off from the University of interest, the Portuguese government has made more than two decades ago, the company sells significant efforts over the past decade to cutting-edge safety test software for critical sys- address the country’s ageing bureaucracy, as tems in sectors such as automotives, health and reflected in the World Bank’s 2018 Ease of space, and to customers such as NASA. Doing Business survey, which ranked Portugal 29th out of 190 countries. For example, attract- Opportunities abound ing non-EU tech talent to Portugal has become Through local talent such as Critical Software, easier thanks to the Startup Visa, which was Volkswagen also saw a tech opportunity in recently complemented by the new Tech Visa. Portugal, and in 2018 opened its first software Initiatives such as these are supported by the development centre outside Germany, in Portugal Tech programme that has already Lisbon. The 300-person team will build user- spent €330m since its inception. driver-centric software. Volkswagen has been in In terms of increasing local talent, the gov- Portugal for more than 25 years, and its plant at ernment has boosted universities’ annual Palmela boasts 5900 people. capacity for IT-related courses – however the Similarly, Mercedes-Benz established its output is behind the needs of the market, first digital delivery hub outside Germany in according to Mr Delgado. Lisbon in 2018, Mercedes-Benz.io, which is part Portugal’s task now is to retain its highly of an effort to develop Mercedes from an auto- skilled talent and attract more foreign exper- mobile maker and into a leading provider of tise. Achieving this should see the country premium mobility services. remain among the European, and global, lead- “I think Portugal’s market is still very good ers in the tech stakes. ■

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