Portugal, the best place 1 PORTUGUESE MINT AND OFFICIAL PRINTING OFFICE 1. Executive Summary | 6 Index 2. Our world today | 8 Key market trends and the impact of the Covid-19 pandemic 3. Definitions | 15 4. Where are we today? A snapshot of the ecosystem | 21 Startups & scaleups Enablers Policy, regulation & incentives Talent Knowledge Corporations Capital 5. KPIs at a glance | 76 6. How do we compare to Spain, Israel and Singapore? | 78 7. The voice of the founders | 82 8. The wisdom of the crowds | 99 9. Emerging trends | 113 10. Now what? | 125 11. Portugal is a Digital Nation | 135 12. Sponsors panel | 140 2 Foreword by Portugal’s Secretary of State for the Digital Transition André Aragão de Azevedo Secretary of State for the Digital Transition The role of entrepreneurship as an accelerator of the digital transition Our vision for the ecosystem is clear and not restricted to our country. and a source of innovation for our economy is unavoidable. The Portuguese presidency of the Council of the European Union aims to mark a new cycle for the European entrepreneurial ecosystem, based We are aware of the importance of this sector as a source of new, more on a greater capacity for retention and attraction of startups, talent competitive companies, based on digital business models and qualified and investment. human resources. We need a better knowledge of the ecosystem at national and European The ecosystem of startups and scaleups is particularly resilient, agile, level, for the benefit of public policy decisions based on objective and eective in adapting to adverse conjunctures, like the one we go information. through, thus having the ability to operate on an economic countercycle. That's why this study is so important. We can't manage what we don't Entrepreneurship can be the catalyst for a faster economic recovery know. and for a structural change in the European economic model that makes it globally more competitive. 3 Foreword by IDC Gabriel Coimbra Group Vice President and Country Manager, IDC Welcome to the final edition of the “Startup & Entrepreneurial Ecosystem Based on the data and insights provided in this report, we can say Report, Portugal 2021”! Portugal is today one of the nations with the greatest potential for attracting and developing startups and scaleups. There are several aspects The purpose of this study is to provide a comprehensive and in-depth related to the ecosystem that can and should be improved, but the growth view of the Portuguese startup and entrepreneurial ecosystem. It provides we have seen in the number of startups, unicorns, existing capital, and a detailed view of where we are today, who are the major players, what are talent in the last 5 years has been impressive. the key KPI, how Portugal compares with other nations. It is also the voice of entrepreneurs that chose Portugal as the best place to start-up. If we add other contextual factors - such as the fact that Portugal is considered the country with the best quality of life in the world, In addition to the number of startups and information about policies, the second friendliest country for foreign investment, and the third safest regulation, public incentives, capital, talent, corporations, and key enablers country worldwide, with one of the best communication’s infrastructure of the ecosystem, this report analyzes key emerging trends, challenges, in Europe - Portugal is probably one of the best places to startup! opportunities, and what is next for the Portuguese ecosystem. This report was developed based on existing IDC research, public data, a survey carried out among more than one hundred startups founders, and more than 30 in-depth interviews with key ecosystem’s stakeholders. 4 Based on the data and insights provided in this report, we can say Portugal is today one of the nations with the greatest potential for attracting and developing startups and scaleups. There are several aspects related to the ecosystem that can and should be improved, but the growth we have seen in the number of startups, unicorns, existing capital, and talent in the last 5 years has been impressive. If we add other contextual factors - such as the fact that Portugal is considered the country with the best quality of life in the world, the second friendliest country for foreign investment, and the third safest country worldwide, with one of the best communication’s infrastructure in Europe - Portugal is probably one of the best places to startup! Ecosystem Innovation Catalysts Partnerships Corporate Venture Capital Customers Venture Capital Local Corporations Business Angels Capital Talent Attracted Public Capital Startups Scaleups Universities Policy, Regulation & Knowledge Incentives Regulation R&D Enablers Incentives Infrastructure A hexagon is the shape that best fills a plane with equal size units and leaves no wasted space. Quality of Life Hexagonal packing also minimizes the perimeter Incubators/ Accelerators for a given area because of its 120-degree angles. 5 Executive Summary Key KPI of the Portuguese Startup Ecosystem The Portuguese startup ecosystem is still young, but it is one of the best assets Portugal has, with small-scale but fast paced and steadily 4 UNICORNS growing companies representing over 1% of the country’s GDP. 2159 STARTUPS 2020 13% ABOVE THE AVERAGE Nº OF STARTUPS PER Quality of life, the sun and sea, cost of labor, and specialized talent CAPITA IN EUROPE RANK: 28 / 132 166M IN 2019, GLOBAL TALENT GREW 150% RANK: COMPETITIVENESS have obviously something to do with it, but there is significant From 2018 #12 FOR LISBON IN THE Insead, Adecco, Google, 2020 TOP 100 EMERGING progress on the development of the startup ecosystem. ECOSYSTEMS 28% OF GRADUATES RANK: RANK: Startup Genome IN S&T AREAS #26 / 63 IMD #17 IN EUROPE 2020 INE, 2020 (Sciences, WORLD TALENT It has become a highlight in the European startup scene, especially ON INVESTED ICT, Engineering) RANKING CAPITAL IMD 2020 Dealroom after hosting the WebSummit in 2016, putting the country on the RANK: #7 / 88 91% OF THE ENGLISH map as one of the hippest places to be in. STARTUPS’ PROFICIENCY 17,7M INVESTED FOUNDERS HAVE INDEX BY PUBLIC CAPITAL A UNIVERSITY EF 2020 IN +59 STARTUPS Capital Talent DEGREE The arrival of international and experienced capital, together with Portugal Ventures 2020 EU Startup Monitor, 2018 the maturing of local investors has also attracted the attention of Startups Scaleups some talented engineers with a global mindset. RANK: #39 / 190 ON EASE OF DOING BUSINESS Policy, 1,4% OF GDP IN Regulation & EXPENDITURE ON R&D The proverbial local capacity to improvise and find unconventional The World Bank 2019 Knowledge Incentives IN 2019 solutions probably also play a role in terms of originality of some DGEEC 2nd MOST OPEN COUNTRY FOR of the startups, with plenty of good ideas and originality. “FOREIGN DIRECT INVESTMENT” Enablers 2 BUSINESS SCHOOLS OECD, FDI restrictiveness index 2019 RANKING ON THE TOP 25 BEST FULL-TIME MBAS IN EUROPE st The Financial Times A weakness turned strength, as the local market is quite small, it forces 1 IN 3rd MOST RANK: QUALITY PEACEFUL nascent startups to address international markets by design. This an #1 / 190 ON “TRADING OF LIFE COUNTRY ACROSS BORDERS” Internations Global Peace Expat 2019 Index 2020 important dierentiator when looking at other ecosystems with bigger The World Bank 2019 158 INCUBATORS RANK: #21 / 141 critical masses, where most often the internalization part comes quite 2576 ROOMS IN INFRASTRUCTURES Grew 31% (2016-2019) The Global Competitiveness later in the path. It is usually more ecient to build for the world from RNI, 2019 Report 2019 the very beginning, with global product validation. RANK: #12 / EU28 IN CONNECTIVITY DESI 2020 6 Some of the Key Players of the Innovation Catalysts Portuguese Startup Ecosystem Partnerships Corporate Venture Capital Customers Despite the very positive evolution, the ecosystem Venture Capital Corporations should not rest on its laurels, as there is still a long Local way to go. The world changes quickly and Portugal Business is not yet directly comparable to London, Paris, Angels Capital Talent or Berlin, for example. In fact, some international Attracted investors estimate that the country is probably Startups Public close to a decade behind these reference Capital Scaleups ecosystems, and competitors like Poland, Romania Universities Policy, Regulation & Knowledge and Baltic countries are closing in. Incentives Regulation Ironically, perhaps the most relevant threat to the R&D Enablers ecosystem is the very same one that startups face Incentives Infrastructure on a daily base: failing to embrace change, learn with Quality their mistakes and grow with a sense of urgency. of Life Incubators/ Accelerators 7 Our world today Key market trends & impact of pandemic 8 Our world today The pandemic changes everything With the accelerating pace of changes, TECHNOLOGICAL business and technology leaders need to be Increased advantage of real-time data and insights Expansion of simulators, digital twin, online learning prepared for disruptions and opportunities. Enhanced roles for 3D printing, robots, and drones ENVIRONMENTAL POLITICAL Massive COVID-19 pandemic Instability, unrest, misinformation Energy industry disruption Loss of faith and trust in institutions and leaders Global food supply disruption Increase in nationalism, closed borders, trade wars, shifting alliances LEGAL Agreements and contracts in limbo ECONOMIC Chained failures, force majeures Recession, massive unemployment,