‘We are working with the government to launch a new startup law’

Portugal may be at the top of the places where entrepreneurs say they want to be, but the country has been losing positions in rankings that measure the conditions offered by the ecosystem. Startup Portugal wants to make those numbers go up.

“We are Startup Portugal not Turismo de Portugal and we want to create conditions for entrepreneurs to feel that Portugal is a good place to develop their business, grow, have capital, talent and be a good base to internationalise from here and not to move their companies out of Portugal,” says António Dias Martins, executive director of Startup Portugal, in his first interview since taking office.

To this end, Startup Portugal is working with the Government on a new startup law. António Dias Martins did not reveal many details, but topics such as definition of startup, stock-options or financing are issues for which they are preparing measures. And later this year the ecosystem will see the birth of this law. “I have good signals from our interlocutors – Ministry of Economy and others – that a relevant part can happen already this year. It is a medium and long-term project and it is natural that in the next 3-4 years we will still have phased measures to be implemented in this framework, but a signal has to be given this year,” he says.

Signals must be given to the startup ecosystem at a time when the winds from the United States are signalling a cooling off in investment. Winter is coming and there is a need to strengthen the ecosystem. “The sooner we implement it and become attractive for these investors and for these startups to come here, the faster we turn around and fight this trend coming from there (the United States). This is really the 3rd big argument for us to act and act now.”

“New policies and effective initiatives are needed to forward the growth of our ecosystem to the next level. Otherwise, our country will never be more than a hype,” I’m quoting you. What is missing for that gazelle jump towards unicorn? What role can Startup Portugal play?

Portugal is very well positioned in several lifestyle surveys, in the desire it arouses in foreigners to come here and develop their work or get to know the country. What interests us is to add to this concrete indicators that in Portugal you can launch a business, make it grow, develop and internationalise. In this field we are not doing so well. When we look at the rankings based not on surveys or wishes, but on concrete criteria…

We are not going to force Portuguese startups to stay in the country, the founder and the person running these startups know the business strategy. If they have to go abroad, for business reasons, for talent, for critical aspects of their operations, they have to go and it’s legitimate, but what about for lack of funding? Due to administrative difficulties? Because of taxes that are not competitive with other countries? Excessive bureaucracy in Portugal? Those should not be the reasons to leave the country.

You are referring to Startup Genome…

…for example, we see that we are either stagnating or falling and we still have a long way to go. That is our role. We are Startup Portugal not Turismo de Portugal and we want to create conditions for entrepreneurs to feel that Portugal is a good place to develop their business, grow, have capital, talent and be a good base to internationalise from here and not to move their companies out of Portugal. Unfortunately, it has been happening. We proudly have seven unicorns.

Only one based in Portugal.

Only Feedzai is still based in Portugal. It has to do with two major gaps we have in our economy and entrepreneurship and startup ecosystem. We still don’t have the capacity to go through significant funding rounds with Portuguese investors and from Portugal. Remote a few months ago capitalised itself in $300 million, a giant step for a unicorn created in 2019 and it was not through Portuguese investors. If we can create conditions for big Portuguese investors – pension funds, institutional, insurance companies – to look at venture capital (VC) and startups we completely change the landscape. We will start to have funding at home directed to these growth stages, which today are done through foreign investors.

We are not going to force Portuguese startups to stay in the country, the founder and the person running these startups know the business strategy. If they have to go abroad, for business reasons, for talent, for critical aspects of their operations, they have to go and it’s legitimate, but what about for lack of funding? Due to administrative difficulties? Because of taxes that are not competitive with other countries? Excessive bureaucracy in Portugal? Those should not be the reasons to leave the country.

These are issues you mention in your strategic plan for the triennium – strengthening the ecosystem, internationalisation, new funding models, taxation for startups, approaching large corporations and investment funds, and attracting and retaining talent – but how can you convince large funds to invest in the national ecosystem?

We have to create conditions so that investors see Portugal as an attractive place to do business. That means going to those who have the governing, executive power, those who set the rules and raising their awareness, putting pressure on them and showing them how good these arguments are, because these measures have a positive valley for the country. At first they may imply an investment, in the sense of having some impact on the State Budget, but in the medium and long term they mean more return, more economic impact and more business for the country. That is our role: by A plus B characterise and identify these measures, take them to those in charge, expose them, listen to the ecosystem.

With the creation of the Startup Portugal Strategic Council, chaired by Caldeira Cabral and with representatives from various agents of the ecosystem, what we did in the early days was diagnosis. Listening to those on the ground and dealing with these difficulties and understanding where we had to go, what the problems to be solved were.

There are many things that the private sector solves well. There is already VC for rounds of relatively contained size, several incubators, a recognition and a sensitivity to entrepreneurship. Where have we identified important gaps? Essentially in funding, in two specific phases: in the very early stage and in the very later stage. In the first, we have incubators without the capacity to put capital into the projects they believe in and at this stage the VCs are very selective; of the many projects they analyse, they invest 1-2%. Another barrier is in the scale-up phase. For tickets worth €30-€100 million in investment capital, we don’t get there with Portuguese investors.

We missed the big industry train, where we can differentiate ourselves is in these easily scalable technological businesses that, from a market of our size, can cover the whole world very quickly. Probably, this area of entrepreneurship and startups is what will allow us to stand out on a European, global level.

We are not talking about a Development Bank for the entrepreneurship sector…

We do not need to create more instruments and institutions, we need to lighten the rules and make them more investor-friendly.

But what is strangling the willingness of these funds to invest?

When these funds invest in Portugal, they have to provision 100% of their investments in VCs and startups, because there are rules stating that these investments are high risk and they have to give 100% of what they invest as a loss. This can be counterbalanced with other measures, creating comfort so that they do not have to consider investments of this nature as a 100% loss. We also have gaps in terms of talent, taxation…

Stock options are a constant complaint in the ecosystem.

It is an old issue and this year I am convinced that we will finally solve it.

The issue of visas for digital nomads was also supposed to be resolved last year. The issues have a capacity to drag on….

That is what we are working for. We are working with the Government to launch a new startup law, with a set of very relevant initiatives. Now I cannot detail it, but I can say that we have had the greatest receptiveness from the decision-makers to look at this with eyes to see, to discuss the newsrooms with us, to listen to the ecosystem and take due account of the diagnosis made.

But what issues do you want to address in the new startup law?

I really can’t announce, but I give two or three topics. The legal framework for the startup. We know what an SME is, it is legislated, it is relatively simple for the Government to create support measures and there is no bureaucratic application process. It is defined and regulated. A startup is not.

It is a simple aspect but it enables a whole set of other new measures that, with this definition, become easier to implement, since they become easier to defend before the Ministry of Finance that will naturally want to quantify the impact of what we are proposing. We must be able to say ‘startups are this, they have this impact’. This is a basic, structuring measure. The second is stock-options and we have other measures linked to funding, to talent.

Are you convinced that it will happen this year? When will startups be able to count on the new law?

I believe it because I have good signals from our interlocutors – Ministry of Economy and others – that a relevant part can happen already this year. It is a medium and long term project and it is natural that in the next 3-4 years we will still have phased measures to be implemented in this framework, but this year a signal has to be given. Not only because of the issue of rankings and the fact that we are lagging behind, but because other countries are not standing still. Spain has announced very important measures, the ecosystems of Madrid or Barcelona are more dynamic than ever, with many unicorns being born and also French and German. It is a moving train and we have to keep up with this pace.

We missed the big industry train, where we can differentiate ourselves is in these easily scalable technological businesses that, from a market of our size, can cover the whole world very quickly. Probably, this area of entrepreneurship and startups is what will allow us to stand out on a European, global level. We have the base, the talent, the hype, the will of third parties to come here, we lack some component of creating conditions and facilitating the process.

A company born in Portugal must be born with international ambition. If it wants to be a unicorn, it won’t achieve this with the Portuguese market.

And is that scale up through “unicorn factories”, for example?

It is a possibility. The name is disruptive…

Is it more hype than reality?

It is a name that provokes. It has a big advantage, it puts the focus -and it’s a flag of who created it [Carlos Moedas, president of CML] – on the process of scaling a company. In fact, we need to do more of that, all over the country, grow a lot and quickly. There is no miracle, no magic wand, but it can be made easier, there is a process that helps companies to go that way. All initiatives in this direction are to be applauded, regardless, of the names more left or right, what matters is the will to make this happen from Lisbon and from Portugal. Startup Portugal has a more global and transversal scope and we really want this to happen at a national level.

A Dealroom study pointed last year to investment peaks for national startups, almost all concentrated in Lisbon. How can you attract investors to other parts of the country?

For foreign investors and entrepreneurs looking at Portugal the geographical theme is not a theme. It is much more where are the polytechnics, the universities, where do I have more possibility of making a partnership with a certain vertical business that expands in one region, than in another; where is the know-how or the technology dedicated to this very specific vertical. There is no such preconceived idea: I only go to Portugal if I go to Lisbon or Porto. We collaborate very closely with incubators to give them visibility and bring investors to meet them. We have programmes that aim to match startups and corporates, startups and investors and give stage to the valences of each one of the incubators and geographies.

And also an international stage. A company born in Portugal must be born with international ambition. If it wants to be a unicorn, it won’t achieve this with the Portuguese market. And what have we done to achieve this? This year we had the largest delegation ever of startups in international missions promoted by Startup Portugal. We took 70 startups to various international fairs to showcase their business, try to make partnerships, connect with potential clients, investors, in countries we defined as strategic: Spain, Germany, France, Canada (Toronto), a good gateway to the United States.

We are already working with the WS organisation to benefit, for the sake of our ecosystem, from these regional events that they are doing. Of course we are working on that. For me it will be an opportunity, to put Portuguese startups showcasing in the places where WS is already.

One of the stages for internationalisation is the Web Summit. Brazil hosts the summit in May next year. Won’t Portugal lose the focus of potential investors here?

There is a contractual plan agreed with the Web Summit (WS) organisation that we have to respect. We have the exclusive for Europe and they can internationalise and do regional events in other countries. There is nothing new and extraordinary here in this option of theirs. On a business level, whether or not it hurts us to have regional events around the world? I think it only helps us. It is an opportunity for us.

The WS base is still Lisbon, nobody has any doubts about that and these events in other geographies – for example, Collision in Canada (where one of Startup Portugal’s missions took place) is a WS event – will not prevent investors, local ecosystem agents from being interested in going to the WS in Lisbon to learn about the European ecosystem and the world being shown from here. On the other hand, for us it is an opportunity through this partnership with the organization to take our startups to exhibit.

Are you saying that the next Road 2 Web Summit has a pit stop in Brazil before heading to Lisbon?

I wouldn’t say so, but we are paying attention and we are already working with the WS organisation to benefit, for the sake of our ecosystem, from these regional events that they are doing. Of course we are working on that. For me it will be an opportunity, to put Portuguese startups showcasing in the places where WS is already.

After a good year in terms of investment, this year we have seen a great cooling down. If the difficulty in accessing investment was already great in a moment of great liquidity, how can Portugal prepare itself? What impact can it have on these growth wishes?

That is precisely the third argument for us to do something now. The time is now. When I was asking earlier if by the end of the year we will be able to introduce measures, the new startup law, that is the big third argument. Right now, the entrepreneurial ecosystem, with many companies even based in the United States, is already realising that the crisis is coming to the US and that investors in this market are getting more conservative, turning off the taps and, that in the US, startups are starting to restructure and introducing management measures to shrink: either not hiring anymore or doing some layoffs.

Americans when they have these crises in relatively short time they attack it and turn it around. When it comes to Europe, it typically settles down and takes much longer to fight. It’s a complex continent, it still has many different realities and the decision is spread over many.

We are already having these signals coming from the United States, in the entrepreneurial area. Very concrete signs of, or colleagues of our startups or even our startups, there being contingency to reduce and funds tightening the tap. What do we have to do? Active public policy towards turning it around. The sooner we implement it and make ourselves attractive for these investors and for these startups to come here, the faster we turn around and fight this trend coming from there. This is really the third big argument for us to act and act now.

Last year we closed the year with seven unicorns. Will the liquidity constraint hold back this growth?

We have seven unicorns, in per capita terms, we still have more than Spain, France, Germany… But times are challenging. I’m not going to promise unicorns here, or risk making big estimates about the number of unicorns this year. The times are challenging and lead us to want to act now and to want to do something different now in the field of public policies so that this dynamism continues to exist. If we don’t, we will be going backwards.