Lisbon isn’t the first European city that springs to most people’s minds when they’re asked to name where the continent’s most promising technology hubs are. London, yes. Berlin, yes. Paris, Stockholm and Estonia, maybe. But Lisbon? Really?
However, according to Portugal Ventures, a state-backed venture capital fund with €450 million under management, Lisbon is starting to gain momentum.
“We know fully well that Portugal still has a long way to go to become a hub for international venture capital and recognised as a leading startup nation but we are on the road to make it happen,” said Portugal Ventures CEO José Franca at the firm's investor summit last month.
Alan Barrell, an investor that attended the summit and the entrepreneur in residence at the University of Cambridge's Centre for Entrepreneurship, described the Lisbon startup scene as well organised and "fired with inspiration".
There are a number of factors that have contibuted to Lisbon's emerging tech scene.
What's driving it?
Following the global recession, which hit Portugal particularly hard, a lack of jobs forced Lisbon’s relatively young population to start creating opportunities for themselves. Combine that with the fact there are several high quality universities in Portugal that excel in areas like computer science and engineering, such as the Instituto Superior Technico, Universidade de Aveiro and Faculdade de Engenharia da Universidade do Porto, and it’s easy to see why so many tech startups are spawning in the city.
Diogo Teles, product lead at venture capital firm Faber Ventures, told Techworld that access to talent and low burn rates are the two key benefits to launching a startup in Lisbon.
“Lisbon has the ability of generating talent internally and capturing talent from abroad,” said the engineer who is tasked with helping companies in the Faber portfolio on technical matters, while also building new companies at the same time. "The weather, cost of living and quality of life tend to be the biggest factors for foreigners when they decide to move here," he said. “Having affordable access to talent allows startups to be able to fail, iterate and improve without killing them on the first try,” added Teles. “Business models, companies and teams take time to setup and Lisbon increases that available period.”
Paul Boyce, an entrepreneur from Northern Ireland that has relocated to Lisbon, told Techworld that he moved his marketing analytics business, called Popcorn Metrics, to the Portuguese capital for the exact reasons highlighted by Teles. “Since we joined [business accelerator] Seedcamp last year, we've divided our time between London and in Lisbon, and our software is built in Lisbon,” he said. “With an internet connection we can reach a global market, and already, over 60 percent of our clients are in the USA, with other clients in UK, Europe, and Australia.
“When I arrived in 2012 the Lisbon tech scene was starting to take off,” said Boyce. “Since then it has really accelerated, with things like Lean Startup Machine, Startup Weekend, Startup Lisboa, Lisbon Startup Coffee, Entrepreneurs Break, Beta-i, investors like Faber Ventures and Portugal Ventures, Seedcamp and the Lisbon Challenge international accelerator programme, from which three startups have already gone on to Y-Combinator and nine, including us, have gone to Seedcamp.”
And startups aren't the only ones cashing in on Lisbon's talented developers. Online gambling giant Betfair recently opened a software development house just north of the city which employs roughly 200 developers.
With lower living costs in Lisbon, a tech firm gets "more bang for their salary euro" than they would per pound in London or per dollar in the USA, according to Boyce.
Indeed, it's not uncommon for the best software engineers in Silicon Valley to earn over $100,000 per year. "In Lisbon its more like €20,000 to €30,000," said Boyce.
He added: “This actually gives startups a distinct competitive advantage with respect to peers in California, as the amount of funds they need to raise is lower to hire a team of talented engineers.”
It appears that the Portuguese government has realised that technology companies could be the country's saving grace.
In addition to setting up its own venture capital unit, the current politicians agreed to waive corporation-tax during the first three years of a startup's life. In addition, an "entrepreneur passport" provides a monthly wage to people that start their own company.
But in order for the city's tech scene to get anywhere near the same level of recognition as its sardines, Barrell believes that Lisbon needs more connections with more international tech centres of excellence (like Cambridge and Silicon Valley), in addition to access to more international markets and pools of finance.
“It will take determination, perseverance, and above all, the courage to do things that will take time to mature to generate results and success," said Franca. "Portugal Ventures has a mission to make this vision a reality.”