Ponte 25 de Abril, Lisbon, Portugal. Photo by Antoine LE on Unsplash

Why the entrepreneurship boom in Portugal?

It was on 28 January 2019, at the 18th Investment Committee of REDangels in Porto, that I realized in small details of my direct work, how much the Portuguese ecosystem was vibrant and international. We were listening to the pitch of two Italian startups, one German, one French, one Spanish, one Brazilian, and two Portuguese. And looking around me, I could see as REDangel shareholders, angel investors from Portugal, Brazil, France, Italy and participating remotely business angels from Brazil, Kenya, Netherlands, and the United States.

I realized for a moment, that entrepreneurship in Portugal is not a product of chance or lucky circumstances, nor was born recently.

Of course, now we have the WebSummit as a strong aggregator and mobilization factor for the Portuguese ecosystem.

As Paddy Cosgrave said in 2016 to the Irish Times, “We chose Lisbon because of the strong infrastructure in the city, the world-class venue and the thriving startup community.” We can be proud of the conquest of WebSummit for ten years more, against strong competitors such as London, Paris, Dubai, Madrid, Valencia, or Berlin.

And how we get to this point? What is happening that leads to the born in 2018 of three Portuguese unicorns: Farfetch, OutSystems, and Talkdesk and a more substantial number of startups created by Portuguese entrepreneurs that are growing to become international icons such as Seedrs, Unbabel, Uniplaces, Aptoide, Feedzai and many more. I was asking myself.

What's the secret sauce, anyway? What are we, the Portuguese, doing well in entrepreneurship? What are the roots of the Portuguese “miracle” that inspires this type of phenomenon, attracts a considerable number of investors and startups from all over the world, growing at twice the European average, considered in the specialized press, the new land of opportunity for tech startups? How was it possible to get here?

The facts and events that I’ll describe in this text were lived by me in the first person as an active actor, first as an entrepreneur in my thirties, later as an angel investor on my forties, and more recently as a researcher doing his PhD, so they represent my perspective (just that) on the way how I perceived the Portuguese entrepreneurial journey in the last 20 years. I want to recognize and thank people and institutions that touched me and made a difference in my life and influenced entrepreneurship and the Portuguese society positively in an unavoidable way.

1. The changemakers of the ecosystem

In the late ’90s and early 2000s, a leading young generation in Portugal, begun a cultural change. The change-maker spirit was born in Aveiro-Porto region under the influence of young entrepreneurs that created the National Association of Young Entrepreneurs (ANJE). We left the traditionalist conservative paradigm of finding a stable job in the public sector or a big corporation for a much more attractive proposition: become an entrepreneur and change the world. I want to recognize and thank the role of ANJE leaders and in particular, Diogo Vasconcelos, unfortunately prematurely deceased (I could not delete his number from my cell phone) for his blessed irreverence, his courage, and activism to propose a cultural paradigm shift in the Portuguese society. The Entrepreneurship Magazine "Despeça-se Já" (Quit your job now) from Grupo Forum, proposed by Diogo and brilliant led by Daniel Deusdado, had a tremendous impact in high schools and universities all over the country for almost a decade. In parallel, Diogo Vasconcelos, as Director of ANJE, launched the Entrepreneurs Academy shared the vision of entrepreneurship as a collective mission.

Diogo life’s dream "Portugal must be a start-up nation" is also my dream and my fight is the fight of many entrepreneurs and angels; it is the fight of our actual Prime-minister Antonio Costa that said at WIRED magazine: Portugal today is a start-up nation.

Diogo’s dream was a collective purpose, impacting generations of people, creating a new perspective of an entrepreneurial Portugal as the most attractive option that is achievable if we (i) think big and (ii) “roll up the sleeves” and (iii) “work together”. My late youth and early adulthood were impacted profoundly by this new value proposition, irreverent and audacious, made from young to young people, provoking a disruptive leap for the way how Portuguese look into Portugal, themselves, and their future. The Portuguese are in line with Brad Feld that argues in his book Startup Communities (the leaders and the feeders): entrepreneurs must lead ecosystems intended to be truly dynamic.

Another changemaker of the entrepreneurial culture in Portugal is Antonio Camara. With Antonio, the Portuguese learned that the impossible is possible. We can change the world. In 2000, Antonio was a professor at FCT-Universidade Nova in Lisbon, coming from MIT. He created Ydreams with the inspiration of the MIT-Media Lab. He is a visionary and a digital opinion maker.

He made us believe in the power of technology to create a better world, spreading all over the country new ideas about creativity, science, and new ways of computer interaction. Some of the projects were too advanced for the time (as he recognizes in this interview), and we have also learned that in the economic world, the timing is critical. But the impact on the Portuguese culture is there. Antonio asserted himself as a professor and entrepreneur at the same time in a period when being both were negatively perceived in the academic community in Portugal. The University and the country are better because of Antonio Camara. We’ve learned how to inspire and think big.

In June 2010, Beta-i was born, an entrepreneurial movement in Lisbon, led by Pedro Rocha Vieira and Ricardo Marvão.

Beta-i was born as a non-profit association to promote and support entrepreneurship in Portugal, particularly in Lisbon. Like the majority of the startups, they went live in bootstrapping mood, with a similar approach to the garage way, in old industrial premises borrowed under the aim of social responsibility of a corporation. Everything was precarious – the premises, the handmade furniture and the budget – but there was a lot of energy and goodwill. After a ten years operation, the Lisbon Challenge organized by Beta-i was considered one of the best acceleration programs in Europe, attracting to Portugal startups and entrepreneurs from all over the world. Along the same accelerator line, contributing to an ecosystem led by entrepreneurs, Gonçalo Amorim, in 2010, lead an initiative of ISCTE in partnership with FCT and MIT, resulting in the BGI acceleration program (Building Global Innovators). The aim is to support and reward technology-based entrepreneurs in Medical Tech, Smart Cities, Enterprise IT & Smart Data and Ocean Economy. This program had the special merit of bringing the innovation of laboratories and universities to the startups, allowing researchers to enter a business path.

In 2012 Antonio Lucena de Faria created Fabrica de Startups, helping people to become successful entrepreneurs. Coming from Harvard and Babson College, maybe he was the first person to introduce structured entrepreneurial methodologies of Lean Startup and Customer Development for seed and pre-seed in Portugal.

2. The importance of the first Portuguese success cases

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Like in other countries, Portugal of the late ’90s and the beginning of the 2000s was dominated by the business internet euphoria. The interest by the students for the technological university courses such as software engineer made the entrance marks in Technological Universities rise to the level of Medicine. The fight for the telecommunications leadership and the convergence between telecommunications and media markets created opportunities for emerging startups. Several entrepreneurs (including myself), have been requested for M&A with the incumbent operators Portugal Telecom (MEO-Altice), Optimus (NOS) and Telecel (Vodaphone), fighting for talent and technology with the newcomer ONI. The phenomena also occurred in the Media industry with the new private television channels (SIC, TVI) disputing the leadership to the public television (RTP). Dozens of exit operations that occurred in the early 2000s in the internal market contributed to the solidification of the entrepreneurial cultural change in the country. But the real proof of the potential of Portuguese technology and the great impulse for the entrepreneurial aura come from outside.

In August 2007, occurs the EXIT of Chipidea founded by the entrepreneur Professor Epifaneo da Franca, acquired by the American company MIPS for € 147 M.

This episode considered the first substantial startup EXIT had a strong positive impact in the entrepreneurial mindset of the Portuguese. Some years later, Epifanio was fortunately for Portugal, Chairman & CEO of the public VC Portugal Ventures (2012-2015).

A second impacting EXIT occurred in 2008. It was the acquisition of Mobicomp, founded by Carlos Oliveira (31 years old), by Microsoft.

This event had a great impact in Portugal with a large cover by the national and international press. The financial terms of this operation were not disclosed. This case was particularly interesting because Mobicomp founded in Braga, a medium city of North of Portugal, out of the expected places to born visible technological players. Microsoft has selected Mobicomp, pioneer, and leader in mobile software technology from a shortlist of international players from the UK, France, and Israel. Because of this type of case, Portuguese entrepreneurs begin to believe they could create great startups everywhere.

More recently, we could realize other good lateral effects of some of the public efforts on technologies. The Veniam Networks, founded in 2012 by Joao Barros and Susana Sargento resulting from Ph.D. research from Universities of Oporto and Aveiro, is considered the best case of BGI-MIT acceleration program since it raised $26.9M of top international VC’s such as Cisco, Libert Global, Yamaha Motors and Orange. From the hardware side, because of Magalhaes Project, JP Sa Couto had more than 300M€ turnover, sold 7 Million computers across 70 countries. On the firmware and software side, we can refer Caixa Magica (the open-source Linux system used in Magalhaes project) founded by Paulo Trezentos is now a global player, that lead to Aptoide (the alternative to Google Play) with over 200M users worldwide, that in Dec 2017 become known as the first Portuguese successful ICO of $ 18 million.

But in the entrepreneurial world, the real stars are the unicorn entrepreneurs. Just like Cristiano Ronaldo, Luis Figo, Paulo Sousa and are for the football world, the global Portuguese entrepreneurial talents generated in our small local ecosystem, are between the leaders of the rising unicorns: José Neves (Farfetch), Paulo Rosado (OutSystems) and Tiago Paiva (Talkdesk).

The impact in the entrepreneurial culture, the number of startups created in the local ecosystem, the jobs created, the technology push, the inspiring leadership, the attraction and fixation of talent, and the contribution to the positive national self-esteem are very positive outcomes that come out the entrepreneurial leaders.

The good news is that new emerging players are coming. Among them, we highlight two lists of hottest Portuguese startups for 2018-2019 suggested by top international entrepreneurship magazines. See the best startups in Lisbon proposed by WIRED here and the five hottest startups proposed by thenextweb here. You can see the Scale-Up Portugal 2019 report here.

3. The Portuguese Government role

In the last two decades, the Portuguese Government (supported alternatively by the left and right parties) also gave fundamental contributes to the cultural change in the country, promoting several initiatives to implement a technological revolution and develop the Information Society in Portugal. In 1998, by the initiative of the Minister of Science and Technology, Mariano Gago, it was implemented a project called Digital Cities, promoting innovative digital initiatives led directly by cities and regions, involving local ecosystem actors from schools, local authorities, industries, and technological startups. It was a great project to dynamize local actors and foster digitalization at the local level — the project created twenty-eight digital cities throughout the country, including less developed peripheries and rural areas. The total investment amount Portugal that made with the support of the European Union, in the Information Society Operational Programme (POSC) in the period 2000-2006, was 877 M€. Just as an example of one of the 28 digital cities and regions – the program “Aveiro Digital” in 2003-2006 had an investment of 23M€ involving 326 local beneficiary entities.

Going out from the entrepreneur career and associative leader into politics, Diogo Vasconcelos continued the relevant role as an influencer for innovation and entrepreneurship, leading the Knowledge Society UNIT (2003-2005) on the Portuguese government. Diogo made significant contributions to Innovation Policies in Portugal and Europe, until his premature death in 2011 at the age of 43. Diogo was Senior Director and Distinguished Fellow at Cisco, collaborating with several international institutions, including the European Commission at that time.

In 2005, the National Technological Plan was a clear priority of the Portuguese government, with several initiatives to promote the digital qualification, interconnect academic research with industry, and to give a new impetus to innovation.

In October 2006, was launched MIT-Portugal. This initiative aimed to develop cooperation and innovation in Portugal through a strategic partnership between the MIT (Massachusetts Institute of Technology), Portuguese Universities, the Portuguese State and national industries.

The program was renewed in 2013 and continues today. Portugal has developed several long-term partnerships with Top Level Research Institutes, including Carnegie Mellon-Portugal, UT-Austin Portugal, The Lisbon MBA (in collaboration with MIT Management Sloan School) and Fraunhofer-Portugal. This type of strategic partnership represents an annual investment of 20M€ per partner. The Portuguese also guaranteed the installation of research centers of excellence such as the International Iberian Nanotechnology Laboratory in Braga, the Champalimaud Foundation in neuroscience and cancer research coming from private philanthropy, the Gulbenkian Foundation in arts education and science and several other centres spread in the country connecting Universities and industries, such as CITEVE in textile innovation, CTCP on shoe industry, INESC and IT in technologies and communication. Finally, after several decades of talent emigration, Portugal has the capacity not only to fix the local talent but to attract international talent that produces top-level research in the country.

In 2007 the Administrative Modernization Agency, brilliantly led by Maria Manuel Leitão Marques and Graça Fonseca, begun to establish the vision that the state, itself, should lead and set the example of modernization and de-bureaucratization. Several popular initiatives involving technological and legislative projects have been created to simplify the interaction between the state and the citizens — the program called SIMPLEX, proportionate initiatives that transformed Portugal into a modern country. To give two examples: (i) on 1999 Loja do Cidadao (one-stop-shop for all public services) and (ii) the Citizen Card (joining into one digital card, five distinct cards). The continuity of regular government modernization initiatives led Portugal to be invited in 2018 to join The Digital 9, a network of the world’s most advanced digital nations.

In July 2008, Portugal launched the Magalhães laptop computer, inspired by the name of the Portuguese navigator Fernão de Magalhães. The project aimed to provide a laptop per child to every student of the elementary school (6-10 years old). A consortium with JP Sa Couto, Prologica, and Intel was created to produce the computer in Portugal. This controversial project that costed €273M to the Portuguese government received some international critics and endorsements but helped to create a debate regarding the role of the technologies in the schools and also a sense of opportunity to bring Portugal to the front line of digital education. Because of this project, children bringing the computer home were active players by introducing, for the first time, a computer with Internet connection in many Portuguese homes.

At 2009 FNABA, led by Francisco Banha and Paulo Andrez who became EBAN president (2012-2014) and now president emeritus, gave a special contribution to the Portuguese Government by helping to design the first Business Angels public co-investment line of 40M€, that was considered one of the best public co-investment schemes in Europe. The scheme was operationalized competently by PME Investimentos, a financial society belonging to the business sector of the Portuguese State that was led at the time by Carlos de Castro.

From the financial sector of the state, we must also highlight the role of Portugal Ventures – a Venture Capital company led by Rita Marques, Rui Ferreira, and Pedro de Mello Bryner, now committed to solving the gaps of the Portuguese venture market. PV has invested over time, € 120 Million in 98 Portuguese startups.

Rita Marques has recently challenged to be State Secretary for Tourism at the Ministry of Economy and Digital Transition. Once again, a good example of a person with technical know-how and entrepreneurial spirit invited to assume governmental positions.

Carlos Oliveira was another great entrepreneur that made an extraordinary Exit to Microsoft. After his EXIT, Carlos was invited to assume political responsibilities as Secretary of State for Entrepreneurship, Competitiveness, and Innovation (2011-2013). After the creation of the Strategical Plan for Entrepreneurship and Innovation, Carlos led Startup Braga, maintaining the activity of angel\VC investor, and being one of the 15 members of the High-Level Group of Innovators designing the European Innovation Council at the European Commission.

In 2012 the Municipality of Lisbon created STARTUP LISBOA with the idea of rehabilitation of city spaces to promote the vitality of the historic centre and other peripheral zones, generating creative dynamics to attract and facilitate the establishment of a new startup business in Lisbon.

Joao Vasconcelos that lead Startup Lisboa, was another entrepreneur that comes into politics, becoming Secretary of State of Industry (2015-2017). Joao, considered by Paddy Cosgrave in the 2016 WebSummit overture “the minister for the startups,” was relevant to implement the Startup Portugal strategy, aggregating measures such as Startup Voucher, Startup Visa, 200M€ Co-investment FUND, the National Network of Incubators and Accelerators.

Programa Semente was the first tax reform for startup investment. It creates a special tax regime and needs further development. Joao Vasconcelos deserve it, the angel and the entrepreneurial community deserve it, Portugal needs it. Unfortunately, our “minister of startups,” Joao Vasconcelos, had a heart attack and died on 25-03-2019 with just 42 years. Joao Vasconcelos, like Diogo Vasconcelos, was another great entrepreneurial talent, that died too soon. Portugal must thank both for giving the country so many relevant pillars of the Portuguese ecosystem, such as a cultural challenge, the dream of the startup nation, the Web Summit, the Startup Portugal, Hub Creativo do Beato, and the beginning of the entrepreneurial tax reform.

3. The Business Angel awake in Portugal

In parallel with the young entrepreneur's proposal of the early 2000s, the Business Angel movement began to take its first steps with Francisco Banha, through the creation in 1999 of the first Business Angels Club in Portugal associated to EBAN (European Business Angels Association). For some years, Francisco and his team were solitary evangelists, trying to challenge and attract the traditional Portuguese financial players to startup investment. He won the sympathy of several actors by organizing the first regular set of congresses for investors and promoting the business angels' cause. In the year 2006, emerged FNABA – the Portuguese Federation of Business Angels, which inspires the creation of associations and angel clubs spread throughout the country, and APBA - Portuguese Association of Business Angels promoted by João Trigo da Roza more focused in the Lisbon area.

We can call the period of 2009-2010 the ANGEL AWAKE The angel groups flourished by the country stimulated by the co-investment scheme that reserved for the members of the Angels CLUBS the possibility to benefit from the governmental co-investment schemes.

Angels should be members of any local angel club and needed to constitute an angel vehicle with a minimum of three angels to benefit from the public co-investment scheme. The first results of this initiative were awesome for angel awake in the country, providing the creation of new 48 angel vehicles dynamizing 600 new business angels creating an investment dynamic in startups as never existed in Portugal. After the initial excitement period, the execution begins at a good level.

Angels have invested in the first startups, made the first mistakes, some lack of due diligence, the first fails, the first disappointments, and the reality check. We can call the period from 2011-2014 the ANGEL LEARNING phase.

Unfortunately, this period was in parallel with the Portuguese financial crises of 2010-2016; the business angels stopped or got disappointed with startup investment. The economic environment in the country was pessimistic; some banks collapse, the International Monetary Fund comes into the country, companies and many startups closed by lack of financial support, most of the angel vehicles paused or closed too.

The opportunistic investor perspective of easy money and get quick EXITS lost its glamour. The Portuguese angels understood that the support of the public co-funding initiatives is important, but not enough to succeed.

In 2014-2015 there was the ANGEL DEPRESSION phase. No new public co-investment schemes, no new angels, no pre-seed, and seed money to startups. Some of the venture Funds also collapsed or paused with the banks too. Those were difficult times.

But crisis to entrepreneurs always means opportunities. In Aveiro in October 2014, Pedro Bandeira (an entrepreneur, currently President of FNABA) and Rui Falcao (me) (a business angel) create REDangels as a professional angel investment company with a new type of angel investment model with a mix of group decision and portfolio investment.

During 2015-2016, without public co-investment support, REDangels has grown substantially, demonstrating independence of the public funds. Today REDangels has 68 angels from 11 countries.

In late 2016, IFD a new State-owned financial company, gets the responsibility to launch new public co-investment schemes for the business angels and venture capital. With the new governmental push, new players enter the angel market. There are incentives on the public tender to create more professionalized structures, to integrate national with foreign business angels and to establish international partnerships.

The new angel vehicles in Portugal are now more structured, and the angels are better prepared. We have learned with the previous experiences, and we created professional structures. We can call this last period of the national angel history as the ANGEL PROFESSIONALIZATION phase.

In the world of business angels and after the period of dazzling and learning, Portuguese business angels began to organize themselves around more professional structures that are beginning to collaborate and partner, such as REDangels, Bynd Ventures, Shilling Capital Partners, Invicta Angels, Vega Ventures, COREangels, the Business Angels Club of Lisbon, Faber Ventures and some more.

4. Other relevant players

Besides the angels, and collaborating with them, we must highlight some other players that were game-changers in the entrepreneurship culture in Portugal. Caixa BI led by Stephan Morais (2013-2017) the irreverent manager of red shorts who dared to challenge the status quo of the Public Bank, contributing to a more informal entrepreneurial culture and making the bank closer to the entrepreneurs. Caixa has supported diverse prizes of entrepreneurship and acceleration programs.

Concerning the new VC’s structures in Portugal, we recognize the relevance of EDP Ventures focused on the energy sector, Pathena on Information technology and Digital health, Indico Capital on high tech companies Armilar Ventures on deep-tech.

Supporting entrepreneurship, we must highlight the National Incubator Network (RNI) composed by 132 incubators extend throughout the country, organized under a common umbrella, has a strong impact on spreading the entrepreneurship culture in the local communities. It is possible to highlight the exceptional work of creation, fixation, and attraction of national and international startups developed by UPTEC of the University of Porto, by the Instituto Pedro Nunes of the University of Coimbra, by Startup Braga, and by the IEUA of Universidade de Aveiro, to name a few good examples.

5. The Extra Mile factors favouring Portuguese Entrepreneurship

Maybe, the Portuguese Financial crises of 2010 -2014 has strengthened and awakened the entrepreneurial spirit even more, and the Portuguese discovered that entrepreneurship should be the best antidote to overcome our economic problems and negativism. Meanwhile, Lisbon and Portugal won successively prizes for the best travel destinations given by world travel awards.

There is a shared opinion today, from foreign people, and particularly in the Portuguese that goes to live outside, that Portugal is a great place to live for a whole series of reasons beginning in the peace and security, the hospitality, the climate, the gastronomy, a reasonable cost of real estate and labor, and the fantastic beaches. With the globalization of startup investment, and after the evidence that also unicorns can be born in Portugal, it’s not hard to understand why Portugal now is one of the best places in the world to develop a startup.

But the most striking thing about Portuguese is the capacity to integrate people and cultural diversity. Maybe this is a special talent or a gift coming from our ancients, a multi-pot mix of Iberians, Romans, Vikings, and Arabian, that were used to look into the sea and dream with discoveries and entrepreneurial adventures.

Paddy Cosgrave praises Portugal as the “California of Europe”. Lisbon has a vibrant ecosystem, a great quality of life, and is attracting a substantial mass of startups and quality entrepreneurs from Brazil, India, Africa, and other European countries.

If entrepreneurs consider to set up a startup in Europe, Portugal now is a natural spot. That’s why Mercedes opens the Digital Deliver HUB in Lisbon, and BMW has made a new joint venture in Portugal with the Portuguese company Critical Software for the development of cutting edge applications around the car, and Google hiring 800 employees for the new Google Innovation Center in Portugal and Nokia decided to open a new IT Center of Excellence in 2020 to accelerate the evolution and adoption of digital technology across Nokia. FORBES explains here why is Portugal a Top Choice for Foreign Investors.

A special word for the role of Europe and European funds concerning all the support to create an entrepreneurial culture. At Brexit time, Portugal is a good example of taking advantage of being part of the European Union. Without European funds, Portugal would be like a startup without investors, with less fuel, energy, and courage to look into the future. It's more than a money relation, its a two-way road. There are best practices sharing, learning, guidance, and tutoring, there are values, trust, and long-term commitment. Of course, the Portuguese ecosystem has big challenges to look, such as tax reform more favorably to early-stage investors, but I want to conclude this reflection as I started. The good momentum of the entrepreneurship in Portugal have not been the result of chance, but it is the product of arduous and good work, of an ecosystem that is being led by entrepreneurs for more than 20 years. Always the same. Some concrete people in the right place at the right moment, make all the difference. I want to strengthen the good practice of letting entrepreneurs led and influence entrepreneurial policies above elections and political parties, above left or right.

Above the ideologies remains the entrepreneurship spirit. I can tell you that I'm proud of being an entrepreneur. Portugal is very different today, because the entrepreneurs that believe in something bigger than themselves, create the opportunity and make it happen.