A young ecosystem, a vibrant tech community, an amazing lifestyle, and a world-class talent: these are the key factors attracting foreign companies to Portugal. Many are the players promoting our country as the perfect tech destination; a major one is AICEP, an independent public entity of the Government of Portugal, with the goal of attracting foreign investment to Portugal and supporting the internationalization of Portuguese companies into the global economy.
We spoke with AICEP Director in San Francisco, Teresa Fernandes, and asked her about AICEP’s upcoming initiatives.
BRIDGE IN — According to Atomico’s 2019 and 2020 reports “State of European Tech”, Europe is closing the gap with the United States in terms of VC funding. We recently had the opportunity to speak with an investor in a pan-European VC (Yannick Oswald) who rightly emphasized that the European tech ecosystem is much younger and therefore more oriented towards disruptive solutions, able to raise interest internationally. The ecosystem in Portugal is even younger than in the rest of the continent and more and more people are talking about our country as one of the most innovative. In your experience at AICEP, which industries in Portugal have the most potential to attract foreign investment?
Teresa — Portugal is very competitive in new knowledge-based industries for several reasons:
- Great talent
- Knowledge networks with a strong connection to universities
- Supply chains with high experience and logistical infrastructures that allow it to effectively serve the closest markets such as Europe and Africa.
These attributes are particularly attractive for the automotive, aeronautics, food, information technology, and life sciences industries.
Considering the west coast of the United States and especially California, the sectors of activity that have the greatest potential to attract FDI, given the existence of a solid industrial and knowledge base in Portugal, but also because they are the most dynamic sectors in this region, are the sectors of Information Technology, Biosciences (including Pharmaceuticals and Bio-technology) and Agrifood.
The first makes more than a perfect match between California and Portugal: on the one hand, in Silicon Valley and Silicon Beach, we have some of the largest and most famous technology companies in the world, such as Google , Apple, Facebook, Netflix, Cisco, Ebay, Oracle, etc. (and Snap, Hulu and Headspace in Los Angeles). In addition, there are many hundreds of other less known technology companies (Artificial Intelligence, Fintech, e-Commerce, Marketplaces, etc.), but in an advanced “maturity” phase and with an ambition to grow quickly, called “scaleups”. All of these companies are in a position to expand to other markets, such as the European one, with the possibility of opening technological hubs here, and Portugal appears with a very attractive value proposition that can fit into their projects.
The second industry (Life Sciences) was identified by AICEP as being interesting for Portugal even before the pandemic, which led us to carry out in January 2020, in San Francisco, during the JP Morgan annual conference, a fundraising action targeted at potential investors in this area. We have registered interest from some companies in the sector, especially in the area of Bioengineering that is particularly strong in San Francisco. Portugal has already secured a very relevant investment by Amyris, a company that is developing a large research project — supported by AICEP — of about 45 million euros together with the Escola Superior de Biotecnologia, Universidade Católica do Porto. This is the kind of investment, one that creates jobs and finances innovative studies, that we want to continue to make possible.
And finally, the Agri-food industry, one of the strongest in California. The agricultural sector in California had an estimated revenue of $ 50 billion (2019), being responsible for the production of more than one-third of vegetables and two-thirds of fruits, nuts, and almonds produced in all of the United States of America, and specifically, in almonds, it represents almost 80% of the world production. We feel a lot of interest in the primary sector from North American companies, recognizing the potential of Portugal for the quality of our products and our natural resources. In particular, in the Alqueva region, recently, the SF-based fund Route One Investment Company, invested 150 million euros in 4 thousand hectares in that region, in the plantation of almonds. But it is not only in the primary sector that we are on investors’ radar. With the development of new bioengineering technologies applied to the food industry that reduce carbon emissions, such as cell culture, it is natural that industrial projects seek locations in Europe; and Portugal has all conditions to receive them.
BRIDGE IN — In recent years, and even in 2020 with the pandemic, we have seen strong growth in the creation of technological hubs by US companies in Portugal. Cases like Cloudflare, Salsify, Dashlane, Bose, and Google. Do you believe this trend will continue after we have passed this phase of uncertainty with the pandemic? What are the most important factors for a North American company when it decides to open a technological hub in Portugal?
Teresa — This trend was maintained even during the pandemic and lockdown, when projects were raised in a totally virtual way. We continued to raise investment projects in the area of Business Services for Portugal, which shows the confidence of investors in the country.
We had, for example, Anchorage’s official announcement of their growth in Portugal, by expanding their product team with 13 engineers in Porto and by opening a physical engineering hub there. It is a crypto company based in San Francisco and a founding member of the Facebook Libra Association — which makes us very optimistic about the upcoming months. We believe that we will continue to feel demand in Portugal, especially in areas where COVID had less impact or even had a positive one, such as the digitalization of processes and supply chain, in the area of security, cloud -computing, communication tools, and games.
As for what are the factors that make Portugal attractive, the first is definitely talent, namely the quality of our engineers. No tech company would have bet on Portugal if it did not trust the quality, performance and competitiveness of Portuguese talent. Then, the aforementioned dynamic and growing technological ecosystem, that gives foreign companies plenty of confidence to open offices in Portugal, whether in Lisbon, Porto, Braga or Coimbra. Additionally, we believe that tax incentives for expatriates, visas directed at technological companies, security (Portugal is the 3rd safest country in the world, according to the Global Peace Index) and the quality of life in Portugal are also relevant factors for that decision making. Lastly, since June 2019, TAP started to operate direct flights between San Francisco and Lisbon, 4 times a week, which we saw was a great asset for Californian investors to feel “closer” to Portugal. With the pandemic and the travel ban between the USA and Europe, this flight was suspended, but we hope that soon the routes will be stabilized.
BRIDGE IN — Tech talent: much is said about the cost-effectiveness of the Portuguese workforce in technological areas. But, in terms of quality of output, are we competitive with North American professionals? In other words, forgetting about lower salaries for a moment, can Portuguese programmers and engineers guarantee the same quality as their colleagues in the US? How does the quality of our teaching compare, specifically in technological areas, with universities in the USA?
Teresa — No doubt. Portugal has the 2nd highest rate of engineering graduates in Europe, whose quality is undeniable. We have the availability of skills and resources with a high level of technical qualifications, namely in the areas of Engineering, Management and Economics, with Universities appearing in the main international rankings. In addition, Portuguese young people have multilingual skills, speaking two or more foreign languages, which demonstrates their ability, but also their willingness to work in a global market. Portugal is the 7th among 100 countries in the 2020 EF’s English Proficiency ranking.
We have Portuguese people working for all the big technology companies in Silicon Valley. And there are companies based in the Bay Area, like Talkdesk and Feedzai, with several offices in Portugal where most of their engineers work. Farfetch (based in London) as well which, in addition to its headquarters, has offices in Portugal, USA, Brazil, Japan, China and Dubai, and has around 1,000 engineers working in Portugal.
But there is nothing like listening to the testimonies of those who chose Portugal because of their talent. John Graham-Cumming, CTO of Cloudflare referred to “Lisbon has the potential to be the next great European technology ecosystem”, adding that “The choice of Lisbon did not come by chance, it was the result of a careful search for a new city in continental Europe where we were able to locate our technology center. In 2014, I was invited to speak at SAPO Codebits in Lisbon and I was impressed with the size and quality of the technical talent present at the event. Subsequently, we examined 45 cities in 29 countries, reducing it to a final top 3. The combination of a large and growing technological ecosystem, an attractive immigration policy, political stability, high quality of life, as well as logistical factors such as time zones (the same as in the UK) and direct flights to San Francisco, made Lisbon the winner”.
The President of Anchorage, Diogo Mónica, in an interview with Forbes, stated that “Portuguese talent is world-class” and that “Portugal has one of the best distributed systems research groups”. Additionally, João Peixoto, who heads the newly opened office in Porto, said that “it is impressive to see the amount of talent that can be found in Portugal — not only in the world of cryptography but also in the world of digital security”.
BRIDGE IN — The pandemic has undoubtedly had a major impact worldwide, mainly affecting the possibility of displacement for many people. Was foreign capital investment in Portugal also affected? What are AICEP’s initiatives to encourage foreign companies to come to Portugal in the coming months?
Teresa — Especially in the months of March and April 2020, the pandemic created a situation of uncertainty, in which companies (and investors) from all sectors felt the need to stop, reassess the market and adapt to the new reality. At that time, we experienced some general slowdown. It was not, of course, the best time for any company to make an investment abroad. In the opposite direction, perhaps due to the fact that all people in Silicon Valley are working from home, meetings are shorter and people do not waste so much time in traffic, we also began to feel greater openness and availability by the Executives and Venture Capitalist to speak to AICEP.
But after that first phase, starting in June and mainly in this last quarter of the year, we began to feel an acceleration of investment intentions, including in the fundraising of startups in Silicon Valley. Talkdesk, for example, received an investment US $ 143 million in its Series C round in July 2020 — in the middle of a pandemic, when almost all companies had their employees working from home and no face-to-face meetings are held. And in the same month, the Portuguese biotechnology startup iLOF (which is part of the restricted group of 10 Portuguese companies selected to participate in the support program for entering the California market organized by the AICEP Delegation in San Francisco: “Portugal to Take Off”) raised a million-dollar investment, financed by Microsoft’s M12 fund and Mayfield.
On the part of AICEP, we continue our proactive work of identifying and contacting companies that we consider interesting for Portugal and that may feel that our country is also an asset. We feel that, although travel is generally difficult, there is a lot of preparatory work that can be done, from the aforementioned identification and study of companies to the first meetings where we present Portugal.
2020 was undoubtedly a challenging year, but we believe that Portugal, due to its quality and competitiveness, will be able to continue to raise the interest of large companies that want to expand to Europe, in particular companies from technological sectors, life sciences and bioengineering, agro-industries and companies with outstanding positions in responding to environmental challenges and mobility in general. Also, any enterprise with a need to shorten and/or ensure greater resilience of supply chains may also be interested.
BRIDGE IN is also on a mission to promote Portugal as a tech destination for foreign companies. If you are a tech executive looking to expand operations into Europe or to hire world-class talent in Portugal, download our ebook on how to set up a company in Portugal and get in touch: firstname.lastname@example.org