Navigating the Way for Startups in Portugal

0
Print Friendly

“Portugal has immense engineering and design talent with the same quality as Silicon Valley, but at a quarter of the price.”

In the wake of Portugal’s exit from its bailout program in May, the country remains saddled with 214 billion euros of government debt. Major rebalancing is in order, and innovation will be crucial to Portugal’s future growth. Indeed, innovation in the form of startups has developed amongst unique Portuguese characteristics; startups in the Iberian country are hampered by the lack of access to capital and a risk-averse business culture. Despite these challenges, startups in innovation centers such as Lisbon and Porto have thrived and in the future could revitalize Portugal’s haggard economy.

The difficulty of attaining capital has long hindered startups in Portugal, and according to the International Monetary Fund’s February report, private sector lending remains constrained. At the moment, Portuguese banks face reduced business and an increased number of non-performing loans, leading to a depressed credit market. Moreover, Portugal lacks significant venture capital, further limiting funding opportunities for entrepreneurs.

As a result, risk-aversion has long defined Portuguese startup culture. Owing to a lack of available credit, entrepreneurs have historically had to reverse mortgage their family houses in order to fund their endeavors.  Correspondingly, if a venture failed, its loss would fall on an entire family. Compounding on the fear of losing the family house, the Portuguese are frankly unaccustomed to the high rates of startup failure—around 75%—according to Virginia Staab, cultural attaché at the US Embassy in Lisbon.

But startups are beginning to overcome these obstacles with the creation of startup incubators across the country and the entrance of US funding.  Incubators provide real estate for startups, in addition to assistance with business strategy and access to capital. Indeed, investors have begun to recognize that Portugal offers an attractive location for startups, largely because of its highly educated workforce and lower wages compared to many other Eurozone nations. The country has developed infrastructure and due to its small population of 10 million, can serve as a test market for new products.

In Lisbon, more than seven innovation hubs have sprung up across the city, offering discounted premium office space. Initiatives like “Start-Up Lisboa” have created public-private partnerships to support startups by providing equipment, management support, and limited funding, and in its first year, “Start-Up Lisboa” helped over 100 firms. Local governments have demonstrated a commitment to cultivating startups by supporting such incubators, which have also taken off in the North of Portugal, where many of Portugal’s respected universities are located.

In terms of funding, the United States has actively pursued partnerships linking Portuguese ventures with US venture capital. The US Embassy in Lisbon has supported programs like “Lisbon Challenge,” a three-month startup acceleration program that selects the best ideas for 150,000 euros in initial funding and the opportunity to propose business ventures to international investors in New York, São Paulo, and London. Universities like MIT and Carnegie Mellon have programs dedicated to developing Portuguese startups and have so far aided consulting, information and data processing, and software ventures.

Many Portuguese startups are technologically oriented, with uses ranging from business services to personal entertainment. Hole 19, for instance, is an app developed to provide game statistics and tips for golfers using GPS, while TalkDesk specializes in call center software for small businesses. Other Portuguese startups have taken to fixing JavaScript security holes, and streamlining medical imaging data using cloud technology.

Portugal has only recently emerged from dire economic straits and in the long term, it must grow its economy to pay off large amounts of outstanding public and private debt—and startups may be able to contribute to growing Portugal’s economy. The outlook is hopeful, and entrepreneurs are optimistic about the future of Portugal’s startups. As Anthony Douglas, founder of Hole 19, told Bloomberg, “Portugal has immense engineering and design talent with the same quality as Silicon Valley but at a quarter of the price. Given the economic situation, young Portuguese are hungry and motivated to make things happen.”

Share.

About Author

Melody Wang

Melody Wang is an associate editor of Yale Economic Review. Contact her at melody.wang@yale.edu.

Leave A Reply