Why we believe in the Portuguese Ecosystem

David Alonso Martínez

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Mar 30, 2020 · 5 min read

“O povo português é, essencialmente, cosmopolita. Nunca um verdadeiro português foi português: foi sempre tudo.” — Fernando Pessoa

Samaipata is a pan-european VC investing in pre-seed and seed digital platforms and marketplaces. At Samaipata we aim at investing in continental category leaders and we have offices in Madrid, Paris and London.

Since last November, I have been wanting to write a post to put into words why I love the Portuguese ecosystem so much. This has come together with an unprecedented crisis and therefore uncertainty, which I believe calls all of us to action positivity, so well, time has come!

Seb and myself (the Southern Europe squad!) quarterly visit Portugal to have quality catch-ups with the most relevant players in the ecosystem. Actually, we usually do this in all leading Southern European tech hubs (e.g. Barcelona, Milan, Lisbon, etc.) since it helps us to keep our boots on the ground on one of the most interesting emerging VC ecosystems. It’s an amazing exercise, somewhat packed and stressful, but definitely it adds a lot of value to better understand the country by spending time with founders and VCs. From our latest visit and insights, we want to share our view on why Portugal is an amazing place to kick-off your business and to place a bet as a VC.

Let’s start with some relevant statistics of the ecosystem:

• Population: 10 million
• GDP per capita: $35k
• 29 VC funds headquartered in the region
• 7 new funds have been raised since 2015
• 3 CVCs in the country
• VC funding of c. $200m in 2019 (10x in 5 years)
• 116 deals where VC-backed in Portugal during 2019
• Portugal’s top 5 superstars in the ecosystem are:

1. Farfetch (IPO) — Index, Advent, FJ Labs
2. Outsystems ($442m) — Goldman Sachs, KKR
3. Talkdesk ($125m) — Salesforce Ventures, Storm, Viking
4. Unbabel ($91m) — YC, Point72
5. Feedzai ($78m) — Citi, Sapphire, Oak HC

You realize how cool this is? These figures state that a 10m people country is creating one of the most promising hubs in Europe by gathering all the right ingredients. Now, we have been looking directly into the ecosystem for the last 4 yours and it’s time now to predict the future. Here are our four key beliefs for the ecosystem:

1. Portugal is gathering the right ingredients to become a reference hub in Europe

• Founders from all around the world are kicking off their business across the different beautiful cities of Portugal.
• Number of VC-backed startups has increased at an 8% CAGR in the last 5 years and with a remarkable trend in the last 2 years.

• VC funding has increased 10x in the last 5 years, reaching an outstanding $200m in 2019.
• VC landscape is observing new fund creation and investment, and therefore higher competition. This is amazing! It’s helped to set the right atmosphere for best practices that allow the creation of world-changing businesses.
• Increase of international funds looking into the country led by recent rising interest (e.g. Point72 Ventures leading a $60m round in Unbabel. Find more here).

2. Public funding to help VC/startup ecosystem develop over the coming years

Government support is one of the most important drivers when building a new tech ecosystem. Portugal has taken two different approaches:

• Direct investment fund, Portugal Ventures, which invests tickets of €0.5m in 15–20 startups every year.
• Apart from direct investing, as many other European countries have done, Portugal has developed two different fund of funds initiatives which are behind of some of the new funds being born: i) a Matching Fund that aims to foster Co-investment in startups in Portugal, with national or international private Co-investors, and ii) a EIF-sponsored program for Portugal which has already backed tens of tech investment firms in the country.

Also, in May 2013, the Portuguese government introduced a law which allows a 20 percent tax deduction on investments of up to five million euros, following the approach of other European countries to foster BA activity.

3. Portuguese VC landscape is turning more and more professionalised Series A+ investors allowing an opportunity for pre-series A funds

We believe the startup scene in Portugal is infra-capitalised at pre-Series A stages. This is mainly due to:

• In the last few years, with the (many) new money going into the big funds, the late-stage market has boomed and round sizes (and valuations) have gone up from Series A onwards, driven by an increase pressure to deploy larger fund size.
• More and more local pre-seed funds and incubators are feeding the ecosystem with amazing quality startups but have limited fund sizes to lead pre-series A investments.

4. Besides its market size, Portugal has a very high entrepreneurial quality and will continue to be home of unicorns

Portugal has managed to become in the past years a country which, given its size, concentrates a lot of tech-related value which has led to proof high entrepreneurial quality:

• In the past decade, 3 unicorns were born in Portugal: Farfetch, Outsystems and Talkdesk. These 3 set precedent to new success stories as more entrepreneurs successfully exit their businesses and foster the ecosystem in the creation of new world-changing ventures.
• International funds leading mega-rounds over the past years (e.g. Unbable, Feedzai, etc).
• In the past two years, leading tech companies are founding digital hubs across the country, increasing the demand for highly qualified engineers and software developers (e.g. Google, Amazon, Uber, etc).
• Leading universities in engineering, mathematics and computer science are becoming incubators of gifted-minded entrepreneurs.
• Lisbon is home of one of the major events in the European tech scene: Web Summit, attracting investors and entrepreneurs from all over the world and hosting them in the same city for a whole week.

As always, we’re keen to hear contrarian thoughts so please do reach out to us if you’d like to discuss our view :)