On the streets of Portugal you would never really know that under 10 years ago they were bailed out by the European Union during the peak of the global financial crisis. People seem happy and when you look at the numbers, it tells a compelling story of growth.
Portugal’s unemployment rate has fallen from 17.4% in Jan 2013 to 6.3% today. This has largely been led by a boom in tourism, construction, housing prices and in the tech sector. In fact, tourism currently accounts for 20% of Portugal’s GDP.
It is an exciting time for Portugal and one of the jewels in the crown of their success is the startup sector. In 2016 the National Strategy for Entrepreneurship, Startup Portugal was launched by the Government with 3 objectives:
- To create and support the national ecosystem
- To attract national and foreign investors
- To accelerate the growth of Portuguese startups in foreign markets.
Startup Portugal was formed in 2016 to accelerate the Government’s strategy. They were formed as an independent organisation to act as a conduit between Government, startups, corporates and investors.
I was fortunate enough to speak with Startup Portugal’s director, Joao Borga about the most important lessons as well as the future of Portugal’s thriving startup sector. Currently they manage over 40 initiatives, many of which Joao discussed in the interview. For a more comprehensive list, you can check out their work here. 3 years on from the Government strategy announcement, Portugal is on the map as one of the top startup hubs in the world. Here are some of the key lessons from building a dynamic startup market through a government led approach:
1. The Government listened and THEN responded with their strategy
In the beginning, Government spent time listening to the people in the industry including entrepreneurs, angel investors, incubator participants and others to learn about the big issues facing the sector. It gave them a good grasp of the current challenges and also what is required to create a long term strategy to become global startup leaders.
‘Listening to people and truly understanding problems is how all good policy should start but that is often not the reality.’ Joao remarked that the Government’s role was critical to understand the issues and then create a coordinated response that aims to solve these issues. However, the biggest challenge with the policy has been the timeframes. ‘Things take longer than expected and it would have been great to be further along. But we are doing the best we can!’
For Joao, the real validation of the strategy has been that some other countries including France, Italy and Spain have adopted some of the initiatives from the Portuguese model.
2. Build a dynamic, unique national startup brand
One of the things that surprised Joao was the recognition of the Portuguese startup brand on a global stage. Creating a strong brand was important for Startup Portugal as it attracted talented entrepreneurs as well as investors. However branding themselves as a startup hub had some unforeseen consequences.
‘One of the challenges in the was that we were often being compared to Silicon Valley. But we are not like Silicon Valley. We are Portugal with our own set of opportunities. So our first campaign was to showcase why we are unique.’ Their slogan ‘We are not the next silicon valley’ has become famous and was a feature of their office as I walked in. They had to focus on how they were unique in order to attract the right market.
3. Attract the right startup players with the right initiatives
The Government’s startup strategy had some great initiatives to attract and retain global talent. Here is a snapshot of some of the key initiatives:
- Startup Visa: Is a residence visa for non-EU-Schenghen startup founders who want to be part of one of the fastest developing startup communities in Europe. They get access to the incubator network, funding and the local community so they can find their feet. In order to receive a visa, founders must fit some criteria including the desire to create jobs and sell into the Portuguese market, have already launched the company and have sufficient funds. Last year they had 800 applicants from 83 different countries and about 100 were granted visas.
Purpose: By allowing a new type of visa, the Government was able to attract global startups who want to use Portugal as a testbed for innovation, stimulating jobs and the economy.
- National Network of Incubators (RNI): Currently, there are 150 certified incubators and accelerators across the country. These incubators are actively contributing to the development and growing maturity of the national startup ecosystem as well as the regional economy.
Purpose: To attract startups to rural communities outside the urban hubs of Lisbon and Porto to invest in local economies.
- Startup Vouchers: A pool of funds for grants, resources and mentoring for young entrepreneurs who have a business idea and need to validate them.
Purpose: To help the development of early stage ideas that creates an environment to reduce risks and have a higher chance of becoming an investable company.
- 200M co-investment fund: A public company regulated by the Bank Of Portugal is developing innovative funding models to attract investment into startups in Portugal. This includes co-funding opportunities for investors to invest with others to lower the risk of their portfolio. Purpose: To create funding instruments to continue the growth of startups in Portugal with an emphasis on foreign investment to attract ‘smart money.’
4. Develop a connected, grassroots network across the country
In Portugal today, there are approximately 150 active incubators and accelerator programs which make up the National Network of Incubators. These are spread throughout Portugal and are not concentrated in the big cities. One of the biggest challenges Portugal has (as do many other countries I have visited) is the uneven population distribution between cities and rural towns. This causes housing and infrastructure stress in large cities as well as socioeconomic challenges for people remaining in rural communities.
To address this, Startup Portugal created a network across the country with incubators in different towns with many having a specific industry focus. For example some of the rural incubators specialise in AgTech and others are in energy, tourism, health etc. Check out the list of incubators here.
An important part of obtaining the Portuguese startup visa is that applicants must be accepted into an incubator before receiving the visa. This means they must apply and be willing to locate to rural towns with startup incubators.
On top of this Joao shared that the Portuguese lifestyle resonates with many startup founders. ‘We are finding people from around the world are attracted to the laid back, community feel of regional towns. They also get access to more of the technology and resources in the smaller incubators, so we are finding that founders are starting to actively choose these incubators.’
Use data to continue the momentum
With the range of initiatives happening across the country, it is important to track and measure success.
Managing the National Network of Incubators is an important job as they need to be connected and engaged with each other to ensure that there is continued growth. A really important initiative that Joao spoke about was tracking the qualitative and quantitative data across the network. ‘By understanding how the different incubators are performing we look at indicators including the number of new startups, which sectors they are from, investment growth, employment, lifetime of the startups, location and community engagement. We then use this information to feed back to investors, startups and Government to inform future policy.
Above quantitative metrics, it is really important that the incubators capture a range of qualitative feedback from everyone in the community. This allows Startup Portugal to understand the culture, values, behaviours and perceptions so they can understand how to create more cohesion.
The future of Startup Portugal
Joao’s passion for the future of the Portuguese economy was infectious. He believes that Portugal offers the perfect combination of lifestyle, location and innovation to continue to be a global startup hub. ‘We have always been a testbed for innovation. Portugal was one of the first countries to have electric scooters tested and we are a nation who are open to technology and trying new things.’
Attracting people with the right tech skills is important for the next wave of growth. They are looking at how they can work with Portuguese universities to help attract more people into computer science and technology degrees.
Joao joked, ‘I am trying to get more nerds into the country! As many as I can!’ The more tech talent that can be grown at a local level will only help startups and the economy.
The future is bright for Portugal and there will no doubt be more great things coming from this small country with a population of 10 million!
Having a coordinated strategy from a national to local level is important to stimulate long term growth of an economy. The power of the Portuguese model is that it aligns Government policy, investment funds and incubator programs to create a dynamic environment that allows businesses to grow rapidly. In the last few years, Portugal created 3 unicorns which shows that the environment is ripe for success.
To Joao’s knowledge there have not been any Australian businesses using the startup visa. If you’re an Aussie startup thinking of expanding into Europe, consider Portugal as a launchpad into the European market. Get in touch with us, Joao Borga or through the Startup Portugal website.
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