Portugal’s blossoming start-ups are thriving in several fields, especially fintech. As well as foreign venture capital funding, investors in financial services are moving tech functions to Portugal in their droves. Behind all of this lies Portugal’s stellar R&D and educational institutions. The country’s overall innovation output is ranked 32nd in the world by the Global Innovation Index, conducted by Cornell University, Insead and the World Intellectual Property Organization.
Portugal’s economy has witnessed a paradigm shift over the past 10 years. Rather than just exporting goods, the country has also looked to export its services. The internationalisation of Portugal’s economy was accelerated by the crisis, which undermined the domestic markets, according to Luís Pedro Duarte, managing director of financial services at Accenture in Lisbon.
“Since the crisis, our governments have been hungry and proactive for foreign business. Having foreign workers in Portugal is normal now [and tourism is booming]; this wasn’t happening 10 years ago. Portugal was hidden, now it’s being discovered.Those Portuguese who left during the crisis are coming back,” he says.
Companies’ strategies have also internationalised. Like Accenture before the crisis, Hitachi in Portugal was focused on the domestic market. However, after losing its local clients, the multinational turned to its international network, receiving added-value projects and growing exponentially since 2014, according to Margarida Marques, vice-president at Hitachi Consulting in Lisbon, who adds: “The crisis was a blessing, in this sense.”
Like many countries, however, Portugal’s increased globalisation does mean it is more vulnerable to international market volatility.
An international recipe
The flair with which Portugal's economy has recovered has boosted its reputation and investors’ business confidence, helping to position the country as a growing hub for financial services, especially in fintech. “[Accenture] believes the tech movement is generating critical mass in Portugal, [making it] one of the spots to innovate and provide services internationally,’’ says Mr Duarte. Accenture employs 3000 people in Portugal, half of which export high-value technology services. In 2017, the company launched a technology centre in Braga.
Portugal’s shift towards service exports has been driven forward, in large part, by its start-up community. The crisis led to the Portuguese creating their own jobs, solutions and markets away from an old economic system that had failed. Start-ups were the answer to providing international clients, talent and investor efficiency.
“The economic crisis rewarded efficiency and [innovation]. It benefited the Portuguese tech ecosystem that bloomed from 2012 onwards. [Moreover], for Portuguese start-ups, the domestic market is too small, so they immediately look abroad and that helps attract international investment and talent,” says Carlos Silva, co-founder of Seedrs, a leading Portuguese fintech that facilitates international crowdfunding for start-ups on a global level.
This international mindset was furthered by the fact that many of the successful Portuguese start-ups have been founded by Portuguese citizens who studied or lived abroad. As Portugal reaches out, the world has reached back. Considering the global clamour to recruit quality tech talent, especially in Europe, Portugal has become an alternative to the crowded fintech scenes in London and Berlin, according to Mr Duarte.
Moreover, since physical location matters less within the digital world – which enables remote working – the importance of 'liveability' has risen. Portugal’s tech cluster offers a happy balance between geographic proximity to Europe’s economic hubs, accompanied by a high quality of life and infrastructure.
Pack your bags
Fintech in Portugal now boasts several local companies that have a global profile, with Feedzai, James, Syndicate Room, Switch, Seedrs, UTrust, Magnifinance, MB Way and Didimo among the most prominent examples. Scenting an opportunity, foreign companies have been responsible for a significant flow of investment in fintech and financial services in the country recently.
Amsterdam’s Euronext, a European stock exchange operator, and Paris’s Natixis, a corporate and investment bank, are just two examples. In its first ever nearshore investment outside of Paris, Natixis set-up a global IT service centre in Porto in 2017. The centre’s 550 employees include business analysts, developers, data scientists and a digital transformation centre.
“We were [impressed] by the entrepreneurial ecosystem in Portugal. We find very highly qualified people here. Geographical and cultural proximity was also important since we’re working closely with Paris. Another key aspect was the international mindset, especially English language skills,” says Nathalie Risacher, senior country manager of Natixis's Porto centre. “Portugal’s bureaucracy is definitely painful but the local help we got was great thanks to Porto municipality and [Portugal’s IPA]. I’ve been impressed by the way we’ve been welcomed. It makes a big difference."
Similarly, Euronext opened a technology centre in Porto in 2017 consisting of 150 employees in IT development, engineers, cyber security and 24/7 IT operations that keep Euronext’s markets open.
“It was the huge talent pool in Porto from the universities that attracted Euronext. [Like Lisbon], international companies are in Porto. The investment support was good from the local and national government. The set-up time was quick,” says Manuel Bento, CEO of Euronext Technologies.
BNP Paribas and Crédit Agricole also opened technology centres in Portugal in 2018, and fintech company Revolut recently opened a support centre in Porto. “Accenture is working with some major international banks – I cannot disclose more – that are moving their corporation to Portugal, as it becomes a nearshore centre for their operations,’’ says Mr Duarte.
Online bookmaking giant Paddy Power Betfair recognised Portugal’s tech potential early, acquiring local start-up and software engineering company Blip in 2012. Visiting Blip’s headquarters in Porto and seeing its offices – which include perks such as games and nap rooms and a massage parlour – signals the emphasis it puts into attracting and retaining the best staff. As Portugal attracts more foreign tech companies, the demand for talent will also increase – so the country may also require foreign talent.
“One thing that might be holding back some of the very biggest tech players is the pool of available talent. At the moment, if you invest in Portugal, you'll most likely have to steal the best from other companies,” says Helder Costa, director of development at Blip.
João Barros, CEO of Veniam, one of Portugal’s most successful start-ups, believes large corporations think of Portugal as a place of untapped talent. “However, it is very important and necessary to further expand our talent base [through education], as I’ve discussed with Portugal’s president,” he says. “But the most promising avenue to increase our talent base is to attract talent from abroad, and Portugal is uniquely positioned to do that because of [benefits such as] our quality of life and infrastructure.”