Amid Covid-19 gloom, some bright spots in Portugal's tech startup scene

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Despite a recession and doubling of the unemployment rate forecast this year, it’s not all bad news for the Portuguese tech ecosystem


With Portugal under lockdown and shoppers seeking to avoid cash payments, fintech is a sector that has reported some good news. A survey of its members conducted April 14–16 by the local fintech association, Portugal Fintech, found that almost a quarter of the undisclosed number of respondents said the Covid-19 pandemic had had a positive impact on revenues. While 14% said the effect had been positive, a further 10% had seen their revenue increase by 30% or more. 

Only 3% of fintechs surveyed had had to resort to laying off staff. In the area of funding too, of the 29% in the fintech segment that were raising funds at the onset of the Covid-19 pandemic, 83% said that their fundraising had not stopped completely and 40% said they hadn't been affected at all. On a less positive note, 29% of those surveyed had experienced a 50% or more drop in revenue.

The IMF forecast last week that the country's GDP would shrink 8% this year compared with a 2.2% growth in 2019 and the unemployment rate would reach 13.9% compared with 6.5% last year. Portugal has been under lockdown since March 18. Prime Minister António Costa said over the weekend that the government would start to reopen the country end of the month.

(See also: In a united move, Portuguese startups fight to mitigate Covid-19 impact in unprecedented crisis)

Elsewhere in the ecosystem, Pedro Rocha Vieira, founder and head of startup pioneer Beta-i, the largest accelerator in Lisbon, sees growth in gaming, telecoms and food marketplaces. He also anticipates profound changes in the local work culture, with more remote working, internal innovation and collaboration both within and between companies, and consolidation within sectors. Portugal, he said, should look to boost value in sectors where it traditionally excels, including energy, healthcare, retail and agritech, so its companies can compete internationally. 

Quick reinvention

Indeed, Braga-based esports cybersecurity platform Anybrain has been the only bright spot amid the current dearth in new funding, raising €1m from French esports VC, Trust Esports, end of last month. The following week, the Portuguese Space Agency announced plans to expand its incubation program for startups across the nation. For local startups working in sectors favored by the European Space Agency – energy, critical infrastructure and agriculture – the program will offer significant advantages in infrastructure and collaboration opportunities.

Just before the onset of Covid-19 in Portugal, local VC Indico Capital Partners, on 10 March secured €54m for its new and largest fund. The fund comes one year after the announcement of its last €41m round that saw the VC invest in European scooter company TIER Mobility's €30m Series A and in circular economy food delivery startup EatTasty's €1.1m seed round. 

Many Portuguese startups have also quickly adapted by making short-term changes to their products or business models. Online marketplace Dott has seen more than 300 companies become partners since the pandemic, in a bid to sell their products via the Internet. The startup has offered new signups free partnership until the end of April, and for customers, free delivery of basic commodities like food and toiletries.

Another online marketplace, Mercachef, usually a restaurant and hotel trade supplies site, with restaurants and hotels across Portugal closed, has temporarily converted itself into a marketplace for Portugal's hard-pressed food markets. Other Portuguese startups are directing their efforts to the national fight against Covid-19, even if their business activity has not been entirely halted during the confinement, with many participating in the tech4COVID initiative.

The country's biggest STEM toymaker Science4You, is repurposing one of its existing designs, a protective mask, for medical staff and is helping to meet Portugal's requirements with 15,000 units currently being produced daily and is now exporting units to assist the US.  

Accelerator BGI is promoting five of its alumni in the healthcare and medtech deep tech field. Ihcare that produces an effective hygienic but time-saving bedbath solution for hospital patients, and HealthTextiles, with its textiles to protect healthcare workers, are just two of the solutions.

E-commerce disappoints

With virtually the entire population homebound, one might expect Portuguese e-commerce sites to be doing brisk business but initial results show quite the opposite. According to ACEPI, the Portuguese Association for Digital Economy, the last week of March 2020 saw a 30% drop in sales compared with the average before Covid-19, though the average value per transaction increased by 6% to €39.70. Sales in physical stores saw a 56% slump. ACEPI said that, in 2018, only around 3% of the country's GDP was generated by e-commerce sales, worth €5.5bn

In 2018, only four out of 10 citizens shopped online, one of Europe's lowest rates, though use was predicted to grow by 12% in 2019. The average Portuguese e-shopper made 15.2 purchases per year in 2018. The most popular market segments were clothes and sports goods, with 60% of online shoppers active in apparel and sports retail, 54% in travel and holiday accommodation, and event ticketing was third, with 32%.

The association pointed out that Portuguese online shoppers tend to buy from overseas, with 82% buying from other European countries and 70% from China. It expected food and health products would enjoy greater demand, whilst clothing and travel would be very hard hit. 

One of Portugal's three unicorns, London-based Farfetch, luxury marketplace and home to 700 boutique stores, is working hard to assist its hard-hit partners. Farfetch, which had revenue of $1bn in 2019 and 2m users, holds no inventory itself and so its survival is entwined with its suppliers. It has now taken over the product fulfilment from its boutique partners and waived its fee, as well as allowing boutiques to store inventory in its hundreds of micro-warehouses for free and helping them with online marketing drives. 

“We launched just as the financial crisis was happening [in 2007] — two weeks after we launched, Lehman Brothers collapsed — so we know what it’s like,” the company told media. “Right now, what our partners need most is a platform to sell their stock, and that’s what we’re trying to provide. 

"With a total shutdown of stores, our focus is on logistics and fulfilment. Hopefully, when those restrictions are loosened, we will focus on driving attention and getting more people to shop those boutiques. We’re trying to be nimble.” 

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Edited by Bernice Tang

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