Is Portugal the right place for Tech Startups?
Lisbon’s hosting of the Web Summit in November last year saw tens of thousands of entrepreneurs, investors and specialists flock to the Portuguese capital, the most visible sign of the country’s buoyant technology sector.
While the food, weather, beaches and architectural splendor have seen Portugal emerge as one of Europe’s hottest tourist destinations, startups are also beating a path to Europe’s westernmost country.
Lisbon has now climbed to fourth in a global list of the best places to start a new business (according to freelance marketplace PeoplePerHour’s Startup City Index), leaving a list of rivals that includes San Francisco and London in its dust. In fact, a report from Startup Europe Partnership found Portugal’s startup ecosystem is now growing twice as fast as the European average.
A key driver is the record number of foreign companies using Portugal as a more convenient and affordable way to assemble their digital platforms. The quality and cost of our tech services continues to draw these companies for specific projects, with increasing numbers returning to establish their tech hub here.
Competitive development prices mean a junior developer (i.e. someone with three years of experience) earns an average of $22,549 in Portugal — those with seven years under their belt are likely to earn twice that amount (around $45,000). However, using a similarly skilled software developer from Germany or Sweden is two-and-a-half times more expensive, someone from the U.K. will cost three times more and a bill from a Swiss developer will be four times higher.
If you choose to use top tier agencies — those that work purely with highly skilled developers such as PhD graduates and Open Source contributors — you’ll be charged around €80 per hour in Lisbon. In Switzerland, you’ll be likely to pay around €300 per hour.
Another local advantage comes in a more traditional area — bricks and mortar. Despite recent price rises, Portugal’s property market is still highly competitive, with an office in Lisbon costing on average €222 per square meter, per year. By comparison, Berlin costs €360 per square meter, per year, it’s €669 in Stockholm, €732 in Zurich or the stratospheric €1,223 in London’s West End!
And with an annual inflation rate of just 1 percent, Lisbon is also a significantly cheaper place to live. The cost of living in Lisbon is half what it would be in London, a fifth lower than Berlin and 60 percent cheaper than New York, San Francisco and Zurich.
Is ROI everything you should look at when picking your partners to build a tech product?
Other factors need to be taken into consideration to fully understand why so many firms see Lisbon (rather than other more traditional outsourcing areas) as a solution for their technology challenges:
Education, cultural adaptation, geography and resilience are some of the qualities that historically made Portugal a global power for over four centuries. Nowadays, these traits are making the country a land of opportunity for tech outsourcing and startups.
Portugal has a proud history of investment in education — it was key for the evolution of navigation. In the School of Sagres, the most advanced techniques for navigation were taught, allowing Portuguese explorers to be the first Europeans to reach South America, Asia and Africa.
With an educated workforce — and English spoken widely throughout the country — our eight universities produce 100,000 graduates a year. Fifty-three percent of 20- to 29-year-olds are graduates in an engineering or math related discipline.
Unsurprisingly, this pool of tech talent is attracting the attention of global firms. BNP Paribas, Zalando and Mercedes Benz have all set up operations in Portugal while a range of successful startups and tech agencies are now successfully working with clients around the world.
In the wake of the global financial crisis, Portugal has strived to become Europe’s most startup-friendly country. Investments of up to €5 million enjoy tax deductions of 20 percent, meaning the tax rate for startups can be as low as 7.5 percent.
The Portuguese government has also eased residency programs for foreign startups and slashed red tape — setting up a company has been simplified to a simple online process. It has also allocated €200 million to help foreign companies invest in local companies and/or relocate to Portugal.
Compared to the rest of Europe, Portugal’s local tech scene is relatively small but it’s growing rapidly — a trend that Brexit will only help accelerate. In 2016, VC investment totalled only €18.5 million — but that was a six-fold increase from 2015.
Portugal’s geographical location is also playing a part. We are in the same time zone as London, an hour behind Central European Time — and a three-hour flight from key cities such as Zurich, London and Stockholm. Looking west across the Atlantic, our clocks are only five hours ahead of New York.
Renowned as a country that made its name for launching ships around the globe, Portugal is now playing a central role in helping startups from all over the globe navigate and conquer today’s digital world.
The advent of the lean culture has made it easier than ever before to assemble tech products from anywhere in the world — and Lisbon is rapidly positioning itself as a serious alternative to its main European rivals.
Article by: Daniel de Castro Ruivo Co-founder of Altar.io
Image and article: Entrepreneur.com
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