Tech startups look to Lisbon as Brexit rattles London’s scene
BACK in 2012, Jaime Jorge did something few of his Portuguese compatriots ever did: He turned down a job at Google in London. Jorge, then a 24-year-old software developer, chose to start his own enterprise instead. Five years later, Codacy, the company he co-founded with Joao Caxaria, uses algorithms to automatically correct mistakes in software code for scores of businesses world-wide, including PayPal and Adobe.
They’ve never looked back. “Instead of working 18 hours a day for someone else, we did this cool project for ourselves,” Jorge says at a cafe in Baixa, Lisbon’s historic district. “We had an alternative.”
That’s something new in a small country long beset with a stagnant economy and a stressed banking industry. For years, Portugal’s best and brightest bolted for plum jobs at global consulting firms such as Accenture or tech giants like Google.
Those brave enough to start their own tech companies almost always decamped for London, where a mix of British creativity, government support, and venture capital had fostered a bustling startup scene. Half the investments in European fintech startups from 2011 to 2016 went to British companies, according to CB Insights, a New York research firm.
Now a confluence of forces is leading entrepreneurs to build their companies at home. Thanks to cloud computing and open source software, it’s easier and cheaper than ever to assemble digital platforms anywhere. And universities such as the Instituto Superior Tecnico in Lisbon are teaching students the art of entrepreneurship rather than just grooming them for careers in multinational corporations.
Besides, London is one of the most expensive cities in the world in which to run a business; a rank-and-file software developer there earns three times what a coder makes in Portugal, according to a report by Balderton Capital in London.
In 2012, Portuguese entrepreneur Carlos Silva and his partner, Jeff Lynn, were setting up an equity crowdfunding platform called Seedrs in the UK capital. They opted to base their software development team in Lisbon. “I knew there was untapped engineering talent here, and from a cost perspective it would be far more efficient than setting up in London,” Silva says.
As a result, tech hubs are taking root in unlikely locales across Europe-in Barcelona, Munich, Vienna, even Brno, the Czech Republic’s second-biggest city. In Lisbon, ventures have sprung up-ranging from Hole19, an international social network for golfers, to Uniplaces, which lets college students book housing across Europe.
A 2016 study backed by Allianz Kulturstiftung, the German insurance company’s foundation, ranked Lisbon as the fifth-bestperforming startup community in Europe, ahead of such stalwarts as Stockholm and Dublin.
Portugal’s tech scene is still tiny, with VCs investing US$18.5 million (RM83.3 million) in nine deals there last year, according to Preqin, a global investment research company. But that’s a sixfold jump from 2015, and Portuguese fintech firms are already making waves globally. Feedzai, backed by Citigroup’s venture arm, uses machine learning to automatically spot fraud for clients in Europe and the US Crowd Process has developed an artificial intelligence program called James that enables hedge funds and banks to predict when fixed income assets will default.
Now comes Brexit. While Britain’s decision to quit the EU probably won’t trigger a tech exodus from London, it may accelerate startup formation elsewhere.
Losing access to the European single market would cloud the strategic growth plans of founders who’d intended to use the UK as a springboard for expansion in Europe. Losing the freedom-of movement rights that enable EU citizens to settle in the UK with minimal fuss may hurt, too. More than 40 per cent of the founders of British startups earned university degrees outside the country, according to Balderton. —