Portuguese Startup Scene Report 2023

Data on the Portuguese venture investment ecosystem

Armilar Blog


Credits: DreamStudio
Credits: DreamStudio

We are excited to share the 2023 edition of our Portuguese Startup Scene Report!

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2023: the Reset

Having been immersed in the VC/tech industry since the turn of the millennium, at Armilar, we understand firsthand the cyclical nature of markets: as outlined in the introduction to last year’s report, we began investing right in the midst of the “dotcom” bubble, weathered the 2008 crash, and experienced the subsequent “tech boom.” These experiences underscored the importance of resilience and the necessity to avoid succumbing to herd behaviour.

That being said, we find ourselves still amidst an important (global) correction following an unprecedented peak. Despite concerns about inflation and the spectre of a recession looming over 2023, the economy remained resilient and inflation cooled. As a result, the Federal Reserve halted its interest rate hikes in December, driven by a more stable outlook on inflation. While the tech industry got a big boost from the macro environment and the prospect of lower borrowing costs, the emergence of generative artificial intelligence drove excitement in the sector and pushed companies to invest in what’s viewed as a transformative breakthrough for productivity and innovation across various industries. Companies also benefited from the cost-cutting measures they put in place starting late last year to focus on efficiency and bolstering profit margins. As a result, tech stocks rebounded from a disastrous 2022 and lifted the Nasdaq to one of its strongest years in the past two decades.

Despite the tech rally in 2023, there was a dearth of new opportunities for public investors during the year. In fact, for most late-stage companies in the IPO pipeline, more work needs to be done. The public market remains unwelcoming for cash-burning companies that have yet to show they can be sustainably profitable, which is a problem for the many startups that raised mountains of cash during the zero-interest days of 2020 and 2021.

Portugal: a similar case?

Of course, the market reset is a worldwide phenomenon with Portugal facing the same downward trend in investment as every other region globally. In 2023, the Portuguese startup scene continued its contraction path, with a decrease in overall investment activity, translating into a 24% overall drop in the number of announced deals and a 76% decrease in invested amounts:

  • We saw a lower activity in Seed and Series A stages as both international and local VCs (the main investors in these stages in 2022) significantly reduced their investment activity in 2023.
  • Looking into later-stage rounds, there were no publicly announced rounds above €100M in 2023 (while we had observed 2 in 2022 and 6 in 2021).

The decrease in investment activity was primarily influenced by reduced capital demand, with numerous companies successfully implementing cost-cutting measures, and postponing their next fundraising towards a more favorable environment. In parallel, investors adopted a more cautious approach, prioritizing follow-on investments in portfolio companies. These follow-on investments, typically unrecorded in publicly available data, underscored a tactical shift towards protecting existing investments rather than pursuing new opportunities.

Despite this market contraction, there was a notable increase in both the number of Pre-Seed rounds and the total investment amount. This uptick was propelled by two key factors: firstly, Portugal Ventures, the main Public Entity investor, shifted its focus from Seed to Pre-Seed investments in 2023; secondly, there was a significant surge in participation from non-traditional investors in Portugal, drawn by the appealing tax incentive scheme for R&D expenses (“SIFIDE”).

In conclusion, our optimism regarding the future of the Portuguese ecosystem remains unshakeable. Portugal continues to generate a multitude of startups and scale-ups that not only compete globally but also attract top-tier international talent and secure substantial venture capital investments. With this outlook in mind, we remain committed to identifying promising opportunities and visionary founders within the ecosystem. Together, we will transform their brilliant ideas into game-changing businesses.

Armilar Portuguese Startup Scene Report 2023

A reminder of why we decided to build this report

For a series of reasons, it is not uncommon that many startups decide to establish their headquarters in other countries, which can obscure the accurate metrics of VC investment in Portugal. As a result, Portugal is often underrepresented in widely-used VC data sources that many of us in the industry use.

To address this issue, we have developed our own dataset of the Portuguese startup scene by gathering information from public sources on all deals involving startups “with a Portuguese origin”. Although this is primarily an internal tool, it may prove useful to the ecosystem as a whole. It is important to note that the dataset is not exhaustive and may contain occasional inaccuracies. Nevertheless, we have decided to share some of the data we have collected in the hopes that it will be beneficial to others.

It’s worth noting that this report is not intended to compete with or replicate other reports published about the Portuguese ecosystem. Instead, we see it as a complementary tool to those reports. It is important to keep in mind that we are not a data insights platform, so the information presented here should not be taken as absolute truth. We encourage you to review the note about the methodology for further information. The data in this report is simply what we have gathered and estimated as part of our role as a Portugal-based international VC.

Queries, constructive criticism and suggestions are very welcome. Please direct them to info@armilar.com

Report authored by Pedro Almeida, with contributions from Pedro Ribeiro Santos, Pedro Castel-Branco and Inês de Macedo Santos



Armilar Blog

Armilar is Portugal’s leading venture capital funds manager, an independent VC with a 20-year-old high-performance track record and an international footprint.