The Irish and Portuguese capitals have a new rivalry thanks to Web Summit’s move. But is Dublin’s tech prowess insurmountable for up-and-coming Lisbon?
A year ago, it was unlikely anyone would have considered these two cities rivals. But Web Summit’s rather unceremonious move from the Irish capital to the Portuguese one was one of the tech world’s major controversies for late 2015. The move stunned Irish startups and Web Summit attendees, with much hubaloo between organizers and the city permanently upsetting the event’s relationship with the country.
“That said, we are an Irish company. Our roots are Irish. Our first attendees were all Irish. It was those first attendees who became our greatest champions, spreading the word of Web Summit far and wide. We couldn’t have gotten here without them,” Web Summit Founder Paddy Cosgrave said in an editorial in the Irish Times last year when he announced the move.
But picking Lisbon as a replacement isn’t a cheap choice. The city is rising with some interesting players in key industries central to the development of new technologies.
“We chose Lisbon because of the strong infrastructure in the city, the world-class venue and the thriving startup community,” Cosgrave continued. “In 2015, Lisbon became the first city to receive the European Entrepreneurial Region award. Investors from across Europe have started looking to Lisbon to capitalize on the low rents and affordable IT talent. Dozens of Portuguese startups have exhibited at Web Summit and Codacy won Web Summit’s PITCH competition last year.”
Cosgrave’s move to Lisbon indicates the tech scene there is growing, but it has a ways to go. While Ireland’s is far more mature and sees steady news, the country’s funding rounds outside of biotechnology and health are low. Lisbon, perhaps better seen as leading a more consolidated Portuguese startup ecosystem as a whole, is a challenger to Ireland-leading Dublin. Things to watch are how investors react, or return, to Portugal following a trip to Web Summit.
|Dublin, Ireland||Lisbon, Portugal|
|Ecosystem value||$2.8 billion (Compass)|
|# of startups||1,200 (Startup Dublin); 2,000 (Startus Magazine: http://magazine.startus.cc/dublin-is-the-place-to-do-business/)|
|Accelerators||19 (http://startupireland.ie/map-irelands-startup-sector/)||4 (http://www.incubadoraslisboa.pt/?pg=map)|
|Incubators||23 (http://startupireland.ie/map-irelands-startup-sector/)||13 (http://www.incubadoraslisboa.pt/?pg=map)|
|Coworking spaces||90 (http://startupireland.ie/map-irelands-startup-sector/)||24 (http://www.incubadoraslisboa.pt/?pg=map)|
|Rounds (2015)||146 (IVCA)||24 (Tech.eu|
|VC invested||€526.5 million 2015-2016 (Tech.eu)|
€522m in 2015 (http://www.ivca.ie/wp-content/uploads/2016/08/IVCA_Economic_Impact_Final.pdf)
|€70.5 million 2015-2016 (Tech.eu)|
|% of VC from foreign investors||46% (Guardian), 53% since 2003 (IVCA)||Unknown|
|Average seed round||€543,210 (IVCA)||*€340,000 (out of 15 seed rounds noted by Tech.eu, many rounds were not disclosed, thus estimates were made based on disclosed rounds by known investors)|
|Exits||53 (since 2012, IVCA)||9 (nationally, with no IPOs between 2010 and 2015 - Startup Europe Partnership)|
|Unicorns||0||0, (Farfetch is Portuguese-found but headquartered in London)|
|Tax incentives||Portugal’s new Tax Investment Law will introduce 0% corporation tax for startups in the first 3 years of operation and a 6% bonus on technology activities (WEF 2014). Up to €3,000,000 in credits via IAPMEI (https://www.iapmei.pt/PRODUTOS-E-SERVICOS/Incentivos-Financiamento/Beneficios-fiscais.aspx)|
|Corporate tax rate||12.5% (http://magazine.startus.cc/dublin-is-the-place-to-do-business/)||21% (http://www.tradingeconomics.com/portugal/corporate-tax-rate)|
|Government investment||All of Ireland: €175m as a|
cornerstone investor to venture capital funds under the Seed
& Venture Capital Scheme 2013-2018 (http://www.ivca.ie/wp-content/uploads/2016/08/IVCA_Economic_Impact_Final.pdf)
|Portugal: New 200 million EUR matching fund announced at Web Summit 2016|
|Patent applications 2007-2014 (US + EU)||Ireland, 12,455||Portugal, 2,129|
|VCs||70 (http://startupireland.ie/map-irelands-startup-sector/)||21 (http://www.incubadoraslisboa.pt/?pg=map)|
|Average software engineer salary||€28,822 - €63,504 (Payscale)||€11,963 - €37,003 (Payscale)|
|Average senior developer salary||€42,891 - €74,759 (Payscale)||€14,237 - €50,000 (Payscale)|
|Grants, credit available||€10 million fund for non-Irish startups to relocate via Enterprise Ireland||€1,000,000 credit via IAPMEI|
Compared to Ireland, Portugal’s venture capital scene needs work
Portugal saw €29.2 million in funding in 2015 and €41.3 million so far in 2016 according to Tech.eu, an increase of 40 percent. The biggest round was student accommodation marketplace Uniplaces with its $24 million Series A funding round in November 2015 followed by in-car web startup Veniam’s $22 million Series B in February 2016. Customer behavior startup Movvo raised €5.5 million in June this year while last month AI translation startup Unbabel grabbed $5 million in Series A.
The biggest funds in the country are Portugal Ventures and Caixa Capital, the latter recently participating in Unbabel’s Series A round. Others include EDP Ventures, Ganexa Capital, and BES Ventures.
Ireland is far ahead of Portugal capital-wise. In 2015, Irish startups raked in €200.5 million, and so far in 2016, they have already garnered €326.5 million. October was major for the country with anti-cancer startup Carrick Therapeutics (€86.4 million Series A), Genomics Medicine Ireland (€36.4 million Series A), Aqua Comms ($25 million), and home monitoring company Smartfrog (€20 million Series C). A whole 46 percent of Irish venture capital is from abroad, “€241m in 2015 compared with €132m the previous year,” reports the Guardian.
According to the IVCA, 81 Irish companies raised seed rounds in 2015 with a total of €44 million invested, bringing the average to an extreme approximation of €543,210. Portuguese data is not as consolidated with several of 15 seed rounds in 2015 undisclosed. Based on publicly disclosed seed investments by the main investors in those rounds (Portugal Ventures, Caixa Capital, Keensight Capital, and Startup Lisboa Tech), we arrive at an estimated €340,000, which sounds like a high figure.
But none of this compares to Ireland’s absurd €486 million H1 2016 (compared to €309 million in the first half of 2015). It is indisputable that Ireland bests Portugal, and by extension that Dublin bests Lisbon, on venture capital.
The announcement during Web Summit last week by the prime minister of a new government matching fund worth €200 million EUR should attract at least some activity. There are a number of tax and credit incentives though. Portugal is now offering a 0% tax rate.
Some of the biggest venture capital firms on the scene in Dublin are Frontline Ventures, Delta Partners, DFJ Espirt, Polaris Partners, Kernel Capital and of course the Irish Venture Capital Association. The Halo Business Angel Network, Irish Investment Network, Business Angel Partnership and Lucey Fund are the biggest players on the angelic scene, with the AIC Seed Capital Fund also playing a role for startups in the first three years of operation, eliminating the 21% corporate tax rate that typically might fall on a company. The Irish government slashed capital gains on startups in July by 10 percent and put a cap on taxes it can take to €10 million.
Daniela Monteiro of Portugal Ventures gives some blunt talk in an FAQ section to the company’s website on whether or not you can get mid-series venture funding in Lisbon: “Some say yes and you typically do if is not such a big round. However, the ecosystem is still maturing and there’s the need to reinforce the dynamic. Most Portuguese startups get Series B outside the country as they want to speed up their global growth. Besides getting the money to grow, the support of VCs abroad helps the expansion of the network in the foreign market. Even though, there are some Portuguese VCs with a significant international outreach and very good local relationships with international investors.”
Essentially, domestic investments are slow to catch up, which Monteiro glosses over here with reference to Portuguese startups’ need to scale anyway. But it’s still a problem as follow-on investments from previous funders are critical for growth, and in small ecosystems that still means from the likely local investors who were your seed and Series A participants.
Unicorns? Depends on whom you ask
“We’re all striving to build big companies here,” says John Flynn. “But it needs an ecosystem. “What happens is that big companies like Microsoft need to acquire smaller companies. Ireland is good at growing companies to €40 million. And the biggest bell curve of returns on companies happens between the €30m to €150m mark. If the market takes a dive, and there are no IPOs, eventually it reduces the number of buyers for companies that Ireland is producing. It’s a supply chain issue.”
Since 2012, Ireland has seen 43 exits and 39 acquisitions according to a joint report by Crunchbase and Mind the Bridge. Two Irish biotech/medical companies Covidien (with 12 acquisitions according to Crunchbase before it itself was acquired by Medtronic in 2014) and Shire (13 according to Crunchbase) are ranked as two of the top 15 acquirers in Europe, a list Portugal does not make.
But while Portugal’s numbers are abysmal on the face of it, the bulk of new funding is recent. Startup Europe Partnership tracked $166 million in investments between 2010 and 2015, with 65 percent of that in the final two years of their assessment. Portuguese companies have already raised a quarter of that figure in 2016 with a couple months to go. Seventeen of the country’s 40 scaleups, companies which have raised more than $1 million, are in Lisbon. But 11 are based in Porto, something that indicates Lisbon might be better seen as one segment of a more consolidated Portuguese startup ecosystem than something isolated from the rest of the country. All nine Portuguese exits between 2010 and 2015 were acquisitions by foreign companies.
Successful Portuguese startups should not be faulted for technically re-headquartering to the US. Israeli companies do this all the time and often assign the locations of their big funding deals to cities in California rather than the founding cities in Israel where most of their R&D is still located. Unbabel (San Francisco), Feedzai, and Talkdesk are all Lisbon-originating initiatives while Veniam was founded in Porto (now in Mountain View). Musikki, founded in Aveiro, is headquartered in London with operations in Porto. With that in mind, London-based Farfetch was founded by Josè Neves, employs more than 1,000 people and has operations in Porto. Because of that, Farfetch should be considered a Portuguese unicorn.
Innovation, incubation and government support
Ireland has had the lead on Portugal on patents filed through the European Patent Office (EPO) and US Patent and Trademark Office (USPTO) for quite some time, growing from 1,597 to 1,890 patents filed between 2011 and 2014. Still, Portugal has grown since 2010. Between 2011 and 2014, Irish filings to the EPO stagnated in 2015 (from 742 to 743) and USPTO in 2014 (1,087 to 1,088). Portuguese EPO filings jumped from 192 in 2014 to 218 in 2015, and USPTO filings from 134 in 2013 to 183 in 2014
In terms of grants, Dublin and the Republic of Ireland have a few options that seem to outpace Lisbon and Portugal.
Enterprise Ireland (EI) offers an innovation grant that covers 50% of research costs as well as a €5,000 Innovation Voucher. EI also offers €50,000 for 10% equity out of its Competitive Start Fund. The Dublin Startup Community Fund, Ireland’s Vest Young Entrepreneur Competition, the OPTIMISE e-commerce fund, music-startup-specific Guinness Amplify and the New Frontiers Entrepreneur Development Program offers €15,000. The biggest boon might be the Refundable Priming Grant, which offers up to €80,000 in employment grants (€10,000 per employee) through the Enterprise Boards.
Lisbon’s central incubation and acceleration resource though is Beta-i, founded in 2010. They run the 10-week-long Lisbon Challenge, which Fundacity calls the second most dynamic accelerator in Europe. They have already invested more than 60 million EUR into 94 startups.
In terms of incubation, institute-supported incubators are aplenty in the Republic: NDRC — National Digital Research Centre (government-sponsored), the NCI Business Incubation Centre (National College of Ireland, Trinity Technology & Enterprise Campus, plus Invent and Nova UCD (University College Dublin). In the Portuguese capital, StartUp Lisbon (Startup Lisboa) runs its eponymous TECH and COMMERCE incubators, while others on the scene are Lispolis, Tec Labs, Inovisa, Labs Lisboa and Play.
What’s a clash over Web Summit without an assessment of the web? Special for this report, we have to take a glance at internet power in both cities, or nationwide.
According to Akamai, which keeps a quarterly ranking for internet speed around the world, all countries in Europe have seen average connection speeds rise through the first quarter of 2016, with Portugal reaching 31st in global rank with 13.1 Mbps. The only glaring drop in rankings is Ireland, which saw a 14% decline to drop to 14.4 Mbps. However, it is still 23rd in global rankings and ahead of an accelerating Portugal. But Portugal outscored Ireland in terms of unique IPv4 addresses, 3,623,086 to 2,139,757.
In terms of data centers, Portugal actually beats Ireland 26 to 21 with 10 in the immediate vicinity of Lisbon and in and around Dublin. But Ireland is also close to a plethora of centers in the UK, including the Isle of Man and Northern Ireland. NomadList, which tries to give travelers a sense of available resources were they to visit or have extended stays in a given city, ranks Lisbon’s web access as better than Dublin’s, even more so in terms of finding free WiFi.