People seem to want to live in Portugal. In 2018, the number of foreign residents registered in the country rose by more than 93,000 to a record of almost half a million, the third consecutive year of robust growth, according to Portugal’s Foreigners and Borders Service. 

Meanwhile, foreign investment into Lisbon hit historic highs, with 24% of all projects going into software and IT, a sector in the city that has seen unswerving growth in foreign investment since 2015, according to greenfield investment monitor fDi Markets. Parallel to this are the city’s skyrocketing real estate and tourism sectors.

John Graham-Cumming, chief technology officer at cyber security group Cloudflare, which has more than 155 data centres around the world, recently moved to Lisbon to help set up the company’s third European office. Cloudflare looked at 45 different cities across Europe, but choose the Portuguese capital.

“Lisbon’s tech growth has been tremendous and [the city] is doing a great job of attracting talent. It has the potential to be the next great European technology ecosystem. We chose Lisbon because of its strong tech talent, quality of life, time zone and political stability. Portugal also offers attractive incentives for returning Portuguese expats (50% income tax discount),” says Mr Graham-Cumming.

Invested in talent

Lisbon’s educated and multilingual workforce is the primary reason foreign investors are entering the capital’s tech scene, according to fDi Markets. For example, Global Shares, an Ireland-based provider of equity compensation management solutions, opened an office in the city in April 2019, creating 30 new jobs for IT engineers and service analysts. Mark Purcell, the company’s chief operating officer, says: “Lisbon is a major hub with an extensive pool of resources in terms of language skills and access to highly talented staff.”

Much of this can be attributed to Portugal’s education system, which ranks 17th out of the world’s 63 leading economies in IMD’s World Talent Report 2018; it comes fifth for language skills, eighth for skilled labour and 14th for university education. English is widely spoken across the country – more so than in Spain or France, according to the English Proficiency Index 2018. 

The country also boasts the second highest rate of engineering graduates in Europe, according to Eurostat. The Portuguese government has long made this a priority, setting up exchange programmes with leading US engineering universities 20 years ago, among other initiatives, according to Ricardo Marvão, co-founder of Beta-i, an innovation platform that matches start-ups with corporate clients and organises events.

Many of the founders of Portugal’s leading start-ups benefited from these exchanges, or gained experience outside of Portugal during the crisis years – two reasons why Portuguese start-ups think globally from day one, says Mr Marvão. Another is the small size of the country’s market, which forces companies to look further afield.

ICT scale-ups

Lisbon’s thriving tech ecosystem and network is another key attraction for foreign investors and entrepreneurs. The city has registered a record number of tech companies and start-ups in the past few years, and boasts 32 incubators and accelerators and 41 co-working spaces, according to Invest Lisboa, the capital’s investment promotion and service agency.

Led by Lisbon, the growth of ICT scale-ups across Portugal doubled the European average in 2017, according to the Startup Europe Partnership Initiative, which defines 'scale-ups' as start-ups that have raised more than $1m. International investors have played a central role in this, accounting for 62% of capital made available to scale-ups, and 86% of later stage rounds.

“Ten years ago, Beta-i had 75 start-ups coming to us a year. Now we have 4000 a year – domestic and international – to choose from. The big explosion has come in the past three years, following the arrival of Web Summit, the end of austerity and the tourism boom,” says Mr Marvão.

Alongside Beta-i, another key incubator in Lisbon is Startup Lisboa. Since its establishment in 2012, it has supported 400 start-ups from 35 countries, creating 3500 jobs and raising €100m.

Lisbon's draw

Lisbon also benefits from a lively events scene and thriving business tourism, and is the sixth most popular city globally for international meetings, according to the International Congress & Convention Association’s ranking. The capital hosts one of the largest and most prestigious global tech conferences, Web Summit, which gathers roughly 80,000 people annually. The other main tech event is Beta-i’s Lisbon Investment Summit, a more informal, grassroots and social gathering of 4000 people. 

All of this makes Lisbon’s tech scene highly international, undoubtedly helped by Portugal’s strategic location. The top sources of foreign tech investments to the capital are the US, France, Germany, Spain, the UK, Brazil and Japan (in that order), according to fDi Markets. Most of those investment projects went into software, not hardware. However, Lisbon is also home to interesting hardtech innovation, especially within its traditional commodities such as cork production. 

What's the incentive?

Another key attraction for foreign investors in tech is Portugal’s legal and financial incentives. “Portugal is a country very open to technology companies and has a cosy environment. It has also been [friendly towards] technology workers [through the Startup Visa, which is a residence visa for non-EU start-up founders],” says Etienne Amic, chief executive of VAKT, a blockchain-powered commodity trading platform that opened a new technology development centre in Lisbon in April 2019. 

Attracting non-EU tech talent to Portugal has become simpler thanks to the Startup Visa, which is now complemented by the Tech Visa, which makes it easier for Portugal-based tech companies to hire highly qualified non-EU talent. Over the past decade initiatives such as these have propelled Portugal up the World Bank’s Ease of Doing Business index, to 34th among 190 economies in the 2019 list.

However, further reduction of bureaucratic ‘red tape’ is something many in the country claim is still needed. “As part of the EU, it’s not so tough to set up things in Portugal. You just have to be patient because some admin tasks can take time – longer than in France and Spain in some areas,” says Julie Menakovski, Portugal managing director of Viseo, a global IT consulting firm that opened an office in Lisbon in February 2019. 

On the plus side, foreign investors can benefit from Portugal’s attractive non-habitual tax resident regime, essentially a tax holiday for skilled professionals’ first 10 years of living in Portugal. Meanwhile, non-EU citizens who spend more than €500,000 on a property or create sufficient jobs can apply for a Golden Visa, which offers non-EU investors a fast-track to obtaining a residency permit. 

Moreover, foreign and local entrepreneurs can apply for funding through the 200M co-investment fund or Portugal2020. For the latter, however, grant funding for companies registered in Lisbon is capped at a lower level than outside the capital, leading some companies to register beyond the capital’s borders while maintaining operations within, according to Rui Andres, corporate director at Frontier IP Group, a specialist asset management group. This contrasts the UK’s equivalent scheme, Innovate UK, where SMEs can receive 75% funding, he adds. 

Costs rising

Moving to Lisbon may has many positives. The city’s attractive Mediterranean climate, cuisine and heritage are well documented. The city has the 37th best quality of life in the world, and also ranks very highly for safety, according to Mercer’s annual study of more than 200 cities. More broadly, Portugal is one of Europe’s most politically stable countries, while the country’s largest political parties are widely considered to be friendly towards foreign investment. 

Living costs, and labour costs within the IT and software sector, remain lower in Lisbon than other European tech hubs such as London, Berlin and Barcelona, according to location assessment tool fDi Benchmark. However, this is changing. “The way of life is very attractive in Lisbon. But in terms of salaries, it is not as cheap [as people think]. It’s increasing year after year, and the real estate is getting quite expensive for offices and homes,” says Ms Menakovski. 

The cost of rent in Lisbon has risen sharply in recent years, with prices hitting an eight-year high in 2018, according to a report from Confidencial Imobiliário. Aware of the problem, especially for locals, Lisbon City Council launched an ongoing affordable rent programme in 2018, set to create up to 7000 new low-rent homes across the capital. 

“[There’s a contest] for available offices that has [never] been witnessed before. New space that comes to the market is very often gone within a couple of days, costs by square metre are increasing constantly,” says João Delgado, head of communication and governmental affairs at Volkswagen Autoeuropa. In 2018, Volkswagen opened its first software development centre outside Germany, in Lisbon, building a 300-person team creating user-driver-centric software.

Hot property

Big names within tech real estate have arrived in Lisbon, such as co-working space Factory, created by the same group that set up Berlin’s renowned company of the same name. Hub Criativo Beato is another big development, a former army factory being transformed into  a 35,000-square-metre mega-start-up campus, thereby competing with Paris’s famous Station F incubator in terms of size.

“More than 20 buildings are being renovated to house national and international entities in the areas of technology, innovation and creative industries. We’re creating one of the biggest entrepreneur hubs in Lisbon and it will change the ecosystem and the city as we know it,” says Miguel Fontes, executive director of Startup Lisboa.

It is no surprise, therefore, that greenfield foreign investment into Lisbon’s real estate hit record highs in 2018, according to fDi Markets. In fact, by sub-sector, ‘accommodation’ saw more FDI than any other across Lisbon’s economy in 2018. 

Lisbon is in demand and has an appetite for more business. Bar a global recession or crisis, the city’s international tech sector is set to boom on and solidify its position as one of Europe’s major tech hubs. 

People seem to want to live in Portugal. In 2018, the number of foreign residents registered in the country rose by more than 93,000 to a record of almost half a million, the third consecutive year of robust growth, according to Portugal’s Foreigners and Borders Service. 

Meanwhile, foreign investment into Lisbon hit historic highs, with 24% of all projects going into software and IT, a sector in the city that has seen unswerving growth in foreign investment since 2015, according to greenfield investment monitor fDi Markets. Parallel to this are the city’s skyrocketing real estate and tourism sectors.

John Graham-Cumming, chief technology officer at cyber security group Cloudflare, which has more than 155 data centres around the world, recently moved to Lisbon to help set up the company’s third European office. Cloudflare looked at 45 different cities across Europe, but choose the Portuguese capital.

“Lisbon’s tech growth has been tremendous and [the city] is doing a great job of attracting talent. It has the potential to be the next great European technology ecosystem. We chose Lisbon because of its strong tech talent, quality of life, time zone and political stability. Portugal also offers attractive incentives for returning Portuguese expats (50% income tax discount),” says Mr Graham-Cumming.

Invested in talent

Lisbon’s educated and multilingual workforce is the primary reason foreign investors are entering the capital’s tech scene, according to fDi Markets. For example, Global Shares, an Ireland-based provider of equity compensation management solutions, opened an office in the city in April 2019, creating 30 new jobs for IT engineers and service analysts. Mark Purcell, the company’s chief operating officer, says: “Lisbon is a major hub with an extensive pool of resources in terms of language skills and access to highly talented staff.”

Much of this can be attributed to Portugal’s education system, which ranks 17th out of the world’s 63 leading economies in IMD’s World Talent Report 2018; it comes fifth for language skills, eighth for skilled labour and 14th for university education. English is widely spoken across the country – more so than in Spain or France, according to the English Proficiency Index 2018. 

The country also boasts the second highest rate of engineering graduates in Europe, according to Eurostat. The Portuguese government has long made this a priority, setting up exchange programmes with leading US engineering universities 20 years ago, among other initiatives, according to Ricardo Marvão, co-founder of Beta-i, an innovation platform that matches start-ups with corporate clients and organises events.

Many of the founders of Portugal’s leading start-ups benefited from these exchanges, or gained experience outside of Portugal during the crisis years – two reasons why Portuguese start-ups think globally from day one, says Mr Marvão. Another is the small size of the country’s market, which forces companies to look further afield.

ICT scale-ups

Lisbon’s thriving tech ecosystem and network is another key attraction for foreign investors and entrepreneurs. The city has registered a record number of tech companies and start-ups in the past few years, and boasts 32 incubators and accelerators and 41 co-working spaces, according to Invest Lisboa, the capital’s investment promotion and service agency.

Led by Lisbon, the growth of ICT scale-ups across Portugal doubled the European average in 2017, according to the Startup Europe Partnership Initiative, which defines 'scale-ups' as start-ups that have raised more than $1m. International investors have played a central role in this, accounting for 62% of capital made available to scale-ups, and 86% of later stage rounds.

“Ten years ago, Beta-i had 75 start-ups coming to us a year. Now we have 4000 a year – domestic and international – to choose from. The big explosion has come in the past three years, following the arrival of Web Summit, the end of austerity and the tourism boom,” says Mr Marvão.

Alongside Beta-i, another key incubator in Lisbon is Startup Lisboa. Since its establishment in 2012, it has supported 400 start-ups from 35 countries, creating 3500 jobs and raising €100m.

Lisbon's draw

Lisbon also benefits from a lively events scene and thriving business tourism, and is the sixth most popular city globally for international meetings, according to the International Congress & Convention Association’s ranking. The capital hosts one of the largest and most prestigious global tech conferences, Web Summit, which gathers roughly 80,000 people annually. The other main tech event is Beta-i’s Lisbon Investment Summit, a more informal, grassroots and social gathering of 4000 people. 

All of this makes Lisbon’s tech scene highly international, undoubtedly helped by Portugal’s strategic location. The top sources of foreign tech investments to the capital are the US, France, Germany, Spain, the UK, Brazil and Japan (in that order), according to fDi Markets. Most of those investment projects went into software, not hardware. However, Lisbon is also home to interesting hardtech innovation, especially within its traditional commodities such as cork production. 

What's the incentive?

Another key attraction for foreign investors in tech is Portugal’s legal and financial incentives. “Portugal is a country very open to technology companies and has a cosy environment. It has also been [friendly towards] technology workers [through the Startup Visa, which is a residence visa for non-EU start-up founders],” says Etienne Amic, chief executive of VAKT, a blockchain-powered commodity trading platform that opened a new technology development centre in Lisbon in April 2019. 

Attracting non-EU tech talent to Portugal has become simpler thanks to the Startup Visa, which is now complemented by the Tech Visa, which makes it easier for Portugal-based tech companies to hire highly qualified non-EU talent. Over the past decade initiatives such as these have propelled Portugal up the World Bank’s Ease of Doing Business index, to 34th among 190 economies in the 2019 list.

However, further reduction of bureaucratic ‘red tape’ is something many in the country claim is still needed. “As part of the EU, it’s not so tough to set up things in Portugal. You just have to be patient because some admin tasks can take time – longer than in France and Spain in some areas,” says Julie Menakovski, Portugal managing director of Viseo, a global IT consulting firm that opened an office in Lisbon in February 2019. 

On the plus side, foreign investors can benefit from Portugal’s attractive non-habitual tax resident regime, essentially a tax holiday for skilled professionals’ first 10 years of living in Portugal. Meanwhile, non-EU citizens who spend more than €500,000 on a property or create sufficient jobs can apply for a Golden Visa, which offers non-EU investors a fast-track to obtaining a residency permit. 

Moreover, foreign and local entrepreneurs can apply for funding through the 200M co-investment fund or Portugal2020. For the latter, however, grant funding for companies registered in Lisbon is capped at a lower level than outside the capital, leading some companies to register beyond the capital’s borders while maintaining operations within, according to Rui Andres, corporate director at Frontier IP Group, a specialist asset management group. This contrasts the UK’s equivalent scheme, Innovate UK, where SMEs can receive 75% funding, he adds. 

Costs rising

Moving to Lisbon may has many positives. The city’s attractive Mediterranean climate, cuisine and heritage are well documented. The city has the 37th best quality of life in the world, and also ranks very highly for safety, according to Mercer’s annual study of more than 200 cities. More broadly, Portugal is one of Europe’s most politically stable countries, while the country’s largest political parties are widely considered to be friendly towards foreign investment. 

Living costs, and labour costs within the IT and software sector, remain lower in Lisbon than other European tech hubs such as London, Berlin and Barcelona, according to location assessment tool fDi Benchmark. However, this is changing. “The way of life is very attractive in Lisbon. But in terms of salaries, it is not as cheap [as people think]. It’s increasing year after year, and the real estate is getting quite expensive for offices and homes,” says Ms Menakovski. 

The cost of rent in Lisbon has risen sharply in recent years, with prices hitting an eight-year high in 2018, according to a report from Confidencial Imobiliário. Aware of the problem, especially for locals, Lisbon City Council launched an ongoing affordable rent programme in 2018, set to create up to 7000 new low-rent homes across the capital. 

“[There’s a contest] for available offices that has [never] been witnessed before. New space that comes to the market is very often gone within a couple of days, costs by square metre are increasing constantly,” says João Delgado, head of communication and governmental affairs at Volkswagen Autoeuropa. In 2018, Volkswagen opened its first software development centre outside Germany, in Lisbon, building a 300-person team creating user-driver-centric software.

Hot property

Big names within tech real estate have arrived in Lisbon, such as co-working space Factory, created by the same group that set up Berlin’s renowned company of the same name. Hub Criativo Beato is another big development, a former army factory being transformed into  a 35,000-square-metre mega-start-up campus, thereby competing with Paris’s famous Station F incubator in terms of size.

“More than 20 buildings are being renovated to house national and international entities in the areas of technology, innovation and creative industries. We’re creating one of the biggest entrepreneur hubs in Lisbon and it will change the ecosystem and the city as we know it,” says Miguel Fontes, executive director of Startup Lisboa.

It is no surprise, therefore, that greenfield foreign investment into Lisbon’s real estate hit record highs in 2018, according to fDi Markets. In fact, by sub-sector, ‘accommodation’ saw more FDI than any other across Lisbon’s economy in 2018. 

Lisbon is in demand and has an appetite for more business. Bar a global recession or crisis, the city’s international tech sector is set to boom on and solidify its position as one of Europe’s major tech hubs.