SPECIAL REPORT WWW.fDiINTELLIGENCE.COM Portugal 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 Lisbon 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 Porto 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 58 www.fDiIntelligence.com April/May 2019 SPECIAL REPORT PORTUGAL 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].