I've just left the Silicon Valley Comes to Lisbon (SVC2Lx) event, and unfortunately that's the only event that I was able to attend this week, but it was only one of the events that took place this week that was oriented towards promoting entrepreneurship and innovation, in the context of the Global Entrepreneurship Week. There was Seedcamp Lisbon, there was SAPO CodeBits, and there were the award ceremonies for the two main innovation competitions in Portugal - BES Inovação and EDP Inovação. For a great overview of what these events are all about, please go and read the latest blog post from my good friend Ricardo Diz.
But the key takeaway here, is something really is happening in the Lisbon startup scene! There is a buzz that didn't exist as such even a couple of years ago. There are impressive ideas coming to life, there are enthusiastic entrepreneurs putting their minds and their hearts into their new companies, there are great incubators doing an excellent job (Startup Lisboa is an excellent example) and there are international, experienced investors becoming curious about what's going on here. In fact, a recent European Commission report, the Regional Innovation Scoreboard 2012, shows the Lisbon region rising to be an "Innovation Leader", the highest performance group of the report which includes regions such as Paris, London, Copenhagen, Stockholm, Finland and most of Germany (see map below).
This study (full report can be found here) classifies European regions according to their ability to spawn quality innovation through variables such as higher education, R&D spending, innovative SMEs, collaboration between SMEs, knowledge-intensive employment and patents. While it is a subset of the variables used in the broader Innovation Union Scoreboard (which does the same classification at a country level and therefore with broader availability of data), it remains a good indicator as to the relative positions and the trends of the different regions. Each "Innovation Leader" region shows different flavours of these variables; the Portuguese Lisbon area shows a good balance of the key indicators used and shows a positive trend, having evolved from being an "Innovation Follower" in the 2009 version of this study.
|Source: European Commission - Regional Innovation Scoreboard 2012|
This is something that I've been having the privilege to witness regularly in my work: as venture capitalists, we look at literally many hundreds of young companies, yearly, in our global deal flow - which is industry jargon for the pipeline of investment opportunities. Now, there are not many Venture Capital investors active around here, and so I can confidently, and humbly, say that we look at the large majority of the young Portuguese startups that are looking for funding and support for growing their businesses. What we're seeing is a systematic growth in the number of these Portuguese companies. In fact, that number has multiplied practically seven-fold since 2008. That's something in itself, but what's even more remarkable is that the quality of the best opportunities and the preparedness of the entrepreneurs has been also increasing, and so it is not just an effect of many non-interesting companies being created at the bottom of the pile, just because it's cool now to be an entrepreneur. It's both a growth in numbers and a consistent evolution in terms of quality. And that is something!
Moreover, this transformation is happening, in my view (and some will hate me for saying that), not because of new policies that our government is implementing, but in spite of the lack thereof, at least until recently. Indeed, only very recently have there been important initiatives to make an entrepreneur's life a little easier (the very recent Passaporte para o Empreendedorismo, and the general +e+i Programa Estratégico para o Empreendedorismo e a Inovação are two examples), but they are mostly tactical to some extent. We're still lacking the more structural reforms that can transform the ecosystem, such as policies to attract and retain talent, or initiatives to create a real venture capital industry. I sincerely hope that the recent reform of the government venture capital does not miss a terrific opportunity to do the latter!
So, what's going on? Why is this happening? I don't have a categoric answer, and I think no-one really knows - it's still soon to draw conclusions and empirical evidence is still scarce - but a number of factors may be coming into play.
Portugal has not had a (recent) culture of entrepreneurship. Fear of failure has loomed for long, jobs for life and corporate careers have long been the standard. That is changing. The current economic downturn may have something to do with it, as more and more people see the need to create their own jobs. There is also some sort of a societal push: it has become clear that innovation and entrepreneurship are a critical requirement for economic development, in creating qualified jobs and exports, so both private and public entities have started promoting this type of activity, rewarding innovation, fostering a debate about the subject. And the social media had obviously picked it up - it's rare to find a business or a technical newspaper today that doesn't mention the words "entrepreneur" or "innovation". There's a whole hype around it, and being an entrepreneur has become really cool!
One thing Portugal has had also for long is a strong technical knowledge base. The country has excellent engineering and science schools, some of which are of the oldest European universities. However, the universities and their students have had their backs turned to the business world. The best would do research and stay for ever in academia, the more restless would go do R&D in large multinationals (most often located abroad), most of everyone else would look for a good stable corporate job. Now, as the mentality begins to shift, restlessness grows among the ranks of students, and that strong technical background is extremely valuable, and it's being put to good use.
Finally, we have historically lacked strong management skills. That too is beginning to shift. Many Portuguese students, from diverse backgrounds, attend some of the best international business schools every year and return to their home country. The Portuguese business schools have significantly raised in international recognition. Professionals who were on the first waves of that have now gathered a significant practical management experience working for large corporations. The great management schools that the big consulting firms are have now collected a large army of alumni. All that knowledge and experience is now starting to be put to good use at some of the best start ups.
This is just the beginning, and a lot needs to be done. Namely, the financing side of it still needs to be greatly developed. Among other things, we need a much more active and well financed VC industry to make whole the ecosystem. Hopefully, this buzz that is growing in Lisbon will be able to attract some international investors, who will like to co-invest along local partners that they trust, and events such as SVC2Lx are an excellent showcase for that.
On their part, the entrepreneurs will need to show a great level of resilience and resourcefulness to thrive in this nascent environment. This is a wave, potentially a large wave, and many of these promising young companies will fail. Since they are mostly all on the same first wave, that can be a harsh thing to witness, but that's just the nature of the business and it's no reason to give up. As more waves are created, waves will turn into a constant flow of exciting companies, of which some succeed to become large, successful global companies, and some don't - and that hopefully becomes a normal thing for everyone, failures become just as important as successes in an entrepreneur's life experience, and innovative companies become a driver for our economy. Something's happening in Lisbon... Surf's up! Let's keep paddling!
Thanks for reading.