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Thoughts on Portugal and entrepreneurship: trying to find their way out of the mess through new venture creation

Posted on October 18, 2011 at 9:00 am

Most people don’t put the words “Portugal” and “entrepreneurship” in the same sentence. And most folks from the US don’t know much about Portugal; most haven’t visited.

Quick facts about Portugal

Total area: 35,645 sq mi

Population: 10.5 million

2010 per capita GDP (PPP): $23,222

International startups/companies from Portugal:

  • Critical, a company that develops and deploys software for key operational functions. It has offices in six different countries and serves customers such as BAE Systems, EADS, NASA and Vodafone.
  • YDreams, a company that works in interactivity solutions and especially in augmented reality. With offices in Portugal, Spain and Brazil it serves customers such as Banco Santander, Nokia, Adidas and Vodafone.
  • EDP Renewables, the world’s third largest wind energy company, which operates in 11 countries. Although its majority owner is the near-monopolistic electricity company in Portugal, EDP Renewables has succeeded in innovating and promoting new forms of energy generation across the world.

But I can tell you that Portugal is lovely, almost surrounded by the sea, with a temperate climate, great food, terrific wines from local vineyards, and friendly people who speak English really well!

I have visited this balmy and beautiful country three times in the last several months as part of the Carnegie Mellon/Portugal program and our participation in the University Technology Enterprise Network (UTEN) program. The purpose of my visits has been to give a series of seminars and workshops around entrepreneurship American-style, in particular on entrepreneurship and innovation at Carnegie Mellon.

Clearly the Portuguese believe that we know how to do this in the US and that they can learn from us – the American way of entrepreneurship. And, like several European countries, perhaps all of them, they realize that entrepreneurship is a path out of their current economic mess.

The Portuguese used to rule the seas and they basically invented modern navigation. Now, they are using entrepreneurship as the latest and most profound tool to navigate their way out of the country’s recession.

We think that there are no jobs in America. But there are really no jobs here in Portugal. Unemployment is around 13%.

The economy is in the tank; the government collapsed in March, the first time that I was there. Now there is a new government in place administering a €78B bailout (around $115B, depending on the exchange rate).

The bailout imposes new austerity measures on the debt-burdened country but doesn’t seem to include cuts to the minimum wage or reductions in public-sector jobs, requirements that were unpopular in earlier deals for Ireland and Greece. It is almost impossible to fire someone from a public sector job in Portugal, regardless of performance (or lack of it).

Monument to Discoveries

Lisbon's Monument to Discoveries

Lisbon Orient Station

Lisbon Orient Station (Credit: Mário Tomé)

Some of that attitude has changed in the last few weeks, but in September, when I was last there, the Lisbon streets were full of people that didn’t seem too worried about their future.

A New York Times article puts it like this: “Portugal languished for much of the 20th century on Europe’s geographic and cultural margins. From the 1920s until the 1970s, a repressive dictatorship smothered the nation and its economy. Once the center of a global trade empire, Portugal became Western Europe’s poorest nation.”

In the 1970s Portugal became socialist and I can see that philosophy embedded in the entrepreneurial culture of the country. Or, should I say, the lack of entrepreneurial culture.

We are there (from CMU) to impart the wisdom of American entrepreneurship. That they recognize the problem (they lack an entrepreneurial culture) and that they want to fix it (hence our, and other, programs), and that they recognize that entrepreneurship is the way out – all of this is positive.

New Venturist profiles Portuguese entrepreneurs. In my visits to Portugal, I met many entrepreneurs. I can see that they are the future of Portugal. They are passionate and smart; their ideas are good.

In the next few posts, I will profile some up-and-coming Portuguese entrepreneurs and their startups that are part of the new generation of entrepreneurs who will drive Portugal’s economy forward – because they must.

The entrepreneurs include: computer science professor turned entrepreneur, Mário Zenha-Rela and his company Dognaedis, Sérgio Santos and his company, Bundlr, and Vera Moura and her life sciences therapeutic startup, TreatU.

Challenges to overcome.  Here are some of the key challenges that Portugal has to overcome to adopt an entrepreneurial mindset:

  • Lisbon, Avenida da Liberdade

    Avenida da Liberdade, Lisbon's main boulevard

    Attitude.  Many workers in Portugal get paid for 14 months’ work while only working 12 months. This attitude spills over into a “the government owes me support” attitude among young entrepreneurs. While this may work in Portugal it is not going to work in the US (or many other countries) where success is merit-based.

  • Policies.  Current tax policies don’t favor entrepreneurship. I learned that taxes are due on invoices sent, even if you haven’t received the money yet. Entrepreneurs tell me that they try hard not to make profits in Portugal because of unfavorable tax laws. This is counter-intuitive to new venture creation.
  • Reliance on the government.  Portuguese entrepreneurs rely on the government for funding and as customers. This instills in them a lack of the “live for the hunt,” and “eat what you kill” attitude that we take for granted in the US.
  • Private investment.  In Portugal, many venture capital firms and what they term “business angels” are investing money from both public and private sources. Portuguese entrepreneurs looking to expand their funding bases need to understand better the expectations of investors that have only private money.
  • Naivete about markets.  Most Portuguese early-stage entrepreneurs are in multiple markets in Portugal. They might sell their products and services to banking, telecommunications, and utilities. But marketing within the smallest European nation is not like marketing to the US or even to larger countries like the rest of Europe or Brazil. They will have to pick particular target markets for which they have strong value propositions.
  • Naivete about competition.  Portuguese entrepreneurs need to realize how competitive it is out there. They need to hone in on how they are different and how to erect sustainable barriers to competition.
  • The pitch.  I have seen about 30 Portuguese early-stage companies pitch and I have yet to see one that knows how to really pitch their opportunity. They are all about what, not about why. They need to communicate the problem they are solving and then their solution. And a 3-second elevator pitch takes 10 minutes in Portugal!
  • Mentoring.  Successful Portuguese entrepreneurs do not seem to give back. It is rare for them to teach entrepreneurship; they don’t seem to mentor other younger entrepreneurs. This is something that is so engrained in the US innovation and entrepreneurial ecosystem it never occured to me that there were places where this didn’t happen!
  • Entrepreneurial education.  I found that much of the teaching of entrepreneurship in Portuguese universities was by academics, not by entrepreneurs. While there are some exceptions, notably at Católica, the “been-there-done-that” philosophy of hearing it from the horse’s mouth is rare.
Lisbon

Lisbon view

Changing the culture.  We are bringing entrepreneurship à l’Américaine to Portugal. Our goal for this program is to impart valuation information, methodologies and our own experiences to the Portuguese attendees (entrepreneurs, university faculty, researchers and students, tech transfer professionals, government officials, business angels, and other interested parties).

In addition, we hope to leave them with recommendations of how to do this right, how to encourage entrepreneurship in this smaller European country and maybe not make some mistakes that we have made in the US.

But Portugal, which invented navigation and once ruled the seas, has put resources into education. The quality of the technologies that we see, the minds of the professors and students that we meet, the fact that they celebrate science and technology from grade school on up (we witnessed the end-of-the-academic-year celebration on a university campus of a middle and high school program that accelerates math and science education) is impressive.

Beach near Lisbon

Portugal - Europe's West Coast

If the Portuguese can continue this trend, producing novel technologies and if they can foster the entrepreneurial spirit, knowledge and experience to bring these innovations to market, I believe that we will see much influence on both sides of the Atlantic from this small nation.

A 2009 blog post calls Lisbon the Silicon Valley of Europe: “According to Paul Graham’s wisdom, Lisbon is all about style, hipness and quality of life. The message that Lisbon sends out is the same as Berkeley’s or San Francisco’s: you should live better.”

And if I stand on the coast of Portugal, I can just about see Delaware. It really is not so far away. Portugal is, after all, the West Coast of Europe. Maybe it’s about time we paid attention?

  • Jpferreira30

    Very good and objective comment. Thank you.

  • Franco

    Nice article

  • http://www.facebook.com/nelsonzagalo Nelson Zagalo

    Dear Babs i enjoyed your article, however let me just remind you about something that you get completely wrong from the Portuguese economy.

    “Many workers in Portugal get paid for 14 months’ work while only working 12 months. This attitude spills over into a “the government owes me support” attitude among young entrepreneurs. While this may work in Portugal it is not going to work in the US (or many other countries) where success is merit-based. ”

    Anyone outside the Portugal reading this will get the message as you got, that Portuguese people are lazy and demand things that should only be attributed to the ones who deserve it. Well saying this without trying to understand why this works like this in Portugal, and just comparing it with other countries, is ignoring the reality.

    The reality is that people receives 14 salaries because, the monthly payment is very low. This was nothing more than a strategy in the past, from the government to raise salaries, and to create more equality in the country between employees and employers.

    But the real question is not if people receive 14 months, 12, or even 10 or 20. You more than any person from other countries should know that salaries are measured an compared in a PER YEAR basis. In the US the relevant for any worker is how much will he receive per one year of work.

    So I close my argument just asking you, how would you feel about, if the American Congress decided now to take from your annual salary 24% to be used to pay the American debt?

    best, Nelson

    • Banana

      Actually, those 14 months are a false interpretation.

      We have paid vacations, which account for one of those months.

      The remaining month is an adjustment ,since we aren’t paid on a weekly basis, like in the UK. We get paid 48 out of 52 weeks a year (we assume 22 days or 4 weeks a month). The 13th month is just rounding up the unpaid salary (the remaining 4 weeks.)

      • Rui Costa

        Portuguese workers are hardly alone in getting paid full-salary holiday and Christmas annual allowances.
        Laziness or productivity are beside the point here.
        Yes, I am Portuguese, and yes, I think we should work harder (somewhat) and smarter (a lot).

  • Isep

    > Entrepreneurial education. I found that much of the teaching of entrepreneurship in Portuguese universities was by academics, not by entrepreneurs. While there are some exceptions, notably at Católica, the “been-there-done-that” philosophy of hearing it from the horse’s mouth is rare.

    Actually, it gets worst. Since now you need a phd to teach at any college, most teachers have no real world experience, jut purely academical. It’s sad, really…

    • Canadianexpat

      That’s why I avoided doing my Master’s in Economics/Marketing here in Lisbon.

  • Bernardo Marques

    Nelson,

    I think what Babs means is that our salary shouldn’t be based on a fixed amount, that is “ours by right”, but instead, should be an earned amount, based on the value a person brings to is employer. And I agree with her. That would bring a lot more productivity to companies.

    Furthermore, I don’t think Babs is awere of the 13th & 14th month salarys cut, on public jobs. She just says that they should be replaced by earned bonus. Of course cuting them is an extreme measure, but unfortunaly is also a needed one to get out of this mess.

    Babs,

    Great article, and great point of view about our small country’s entrepreneurship!

    Best regards,

    Bernardo Marques

    • Babs

      Thank you all for your comments! Interesting discussion. And I am happy to be proved wrong if that is the case. My point is not really about the workers or any laziness. I don’t find the entrepreneurs that I have been in contact with lazy at all (and you will see that if you read tomorrow’s post about Sergio Santos and Bundlr!).

      My point is that there is too much reliance on the government in Portugal and that creates an attitude that is in conflict with new venture creation. In the US, while it may seem like the land of opportunity, it is not easy to start anything here. You have to have a great idea that fills a market need. Raising money and getting support is hard here. However, we know we have only ourselves to rely upon; we don’t rely on the government (and I am referring to entrepreneurship not to the general economy).

      I think that attitude of being very self reliant and being really hungry makes entrepreneurs go the extra mile to get their new venture off the ground and ultimately successful.

      • http://www.facebook.com/nelsonzagalo Nelson Zagalo

        You can’t only account that on the side of people having ideas and wanting to push forward. If you don’t have Business Angels with money to invest in your ideas, forget. The difference between the US and Europe, is that people don’t rely on state to fund their ideas, they rely on people with big fortunes.
        But realying in state doesn’t mean, at all, that people will just give you money away. State money belongs to all tax payers, is not something falling from the air.
        Just think about the example of Facebook, you had someone who had to invest half a million in the beginning, without that money, we wouldn’t have Facebook. In Europe it would be very difficult to convince anyone private with money to do that.
        These are different approaches. In US you’re alone, it’s up to you to convince some guy with money. In Europe people are not alone, strategies are devised, and if your idea prove to be good, we’ll ask money from the community to produce and make real your idea (http://cordis.europa.eu/).

        Differences:

        US: you create http://www.Google.com, you’re rich, you and your investors.

        Europe: you create http://www.Europeana.eu it belongs to the entire community. No one profits from it.

        This a simplification, but at least with this approach we’ve fought to avoid to have the top 1% of our citizens to own 42% of the wealth more than the bottom 95% combined as it happens in the US. Also it helps to fight against having CEOs earning 350 times the workers pay.

        Be creative is possible in both worlds, as Europe have always demonstrated. A lot of differences we see between things created in the US and things created in Europe, is in the way you advertise and devise marketing strategies to convince the masses that your product is “the one”.

        Also putting people to starve and let them alone in the hole, saying is up to you to defend yourself or push yourself outside the box, is a path i don’t buy.

        • Babs

          You are being unfair here. You are mischaracterizing how we do entrepreneurship here in the US. First of all we spend billions of dollars from tax payers to fund research to come up with the great ideas to launch new startups. Every federal agency (DoD, NSF, NIH, etc.) has specific set asides in their budgets (mandated) that must be used to fund small businesses in areas to create technologies and solutions to help mankind.

          So we are not all about rich people funding startups. We use government monies too.

          My point is that I found that the reliance on government funding that I observed in early stage companies and up-and-coming entrepreneurs in Portugal is not producing as vibrant a culture of innovation as it could and should!

  • Buildinglifestyles dot com

    I don’t know exactly how many VC companies there are in Portugal (Mario Valente and Gesbanha come to mind) but in a small country like ours there are 5(!!!) state funded VC companies. And that is really unfair for a lot of reasons: if you’re privately backed or you don’t have funding and your competitor is backed by a state VC, in reality you’re paying to fund your competitor; there are a lot of European Union funding programs that are decided by state owned entities with very strong connections to the state owned VCs; if you are a VC, your competitor is the state; political reasons may interfere. So, there’s a lot of disproportion between private and public VC funding in Portugal and that affects the market.
    Good thing that the state secretary for innovation and entrepreneurship (the guy who sold his company to Microsoft, as is mentioned in the post linked in the end of this post by Mario Valente)

  • Buildinglifestyles dot com

    (continuation) is going to merge all into one.
    Follow me on twitter @buildinglfstyls or blog http://www.buildinglifestyles.com

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  • Ricardo Silva

    You should come to the north of Portugal. Much more entrepreneurship, less “the government owes me support” attitude, and people not trying to do “special” business with the government. And actually, the Portuguese areas with more innovativeness right now are around Aveiro and Braga.

  • Paulo Vaz

    This is a perfect picture of Lisbon economy. Not Portugal economy. The author should have visited northern Portugal were startup companies doesn’t rely on government.

    • Anonymous

      Actually, I did visit Aveiro, and Minho (Braga). I do love your country. But I visited multiple universities. I have not yet been to Porto. I find Portugal very entrepreneurial but simply missing some elements that I believe are essential to successful new venturing!

    • Anonymous

      As I mentioned in my reply to your countryman, I did visit parts of Northern Portugal and I would be happy to do so again. I probably met 20-30 companies that were not Lisbon. Thus, my thoughts were a general commentary about what I saw and what I heard from entrepreneurs and universities. My intent is not to criticize Portuguese entrepreneurs but to try point out some obvious areas where a shift in attitude and action can make much difference – entrepreneurially speaking.

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  • http://www.facebook.com/people/João-Amaral/1320773785 João Amaral

    I think that the point here is about mentality, and i’m sorry to say this as a Portuguese, but in my view there’s no entrepreneurship mentality in Portugal. To be a true entrepreneur you have to be crazy. You have to be willing to risk your quality of life to achieve something greater, and that’s something i struggle to find in Portugal. In my lifetime (i’m 31) i probably met 2 or 3 people who i think are crazy enough to to something great and jump off a cliff without looking back (that’s my definition of an entrepreneur). People are like,” THAT’S A GREAT IDEA! But pay me and i will develop it. You see, i already have a steady bank account balance and i have quality of life and i don’t want to loose it. But anyway good luck with your great idea.” – This is Portuguese mentality. And i also like when i hear people speaking of Steve Jobs, Mark Zuckerberg, Bill Gates, Jeff Bezos and others and they say how good it was if we had on of those. I mean the guy can be in front of you that you wouldn’t even know it even if the guy smashed against you!

    If D. Afonso Henriques, Infante D. Henrique, Vasco da Gama, Pedro Álvares Cabral, Fernão de Magalhães (Portugal’s greatest entrepreneurs of all times) were born today do you think that the Portuguese would take them seriously? Do you think that Portuguese Investors, VCs and BAs would invest in them? They would tell Vasco da Gama to go to Morrocco before he asked money to go to India!

    Come On! Before putting in question what others say about us or that they have this and that, what about looking at your own potential and dreams. In order to be great we have to prove ourselves great. And before everything, we The Portuguese must change the mentality of our own people, companies (even the largest companies in Portugal don’t even care about entrepreneurship – they only care about their own business) and state.

    Let’s build OUR FUTURE.

    I mean, imagine that Europe is a condo, We have the best apartment with the best view, the best creativity, the best problem solvers (desenrascanço)… now we just need to have the best mentality. If we have that i’m sure that we’ll rule the seas of tomorrow as we once ruled.

    Just my own honest opinion about what i see, feel and hear.

    • Anonymous

      I think your comments are very telling, João. But don’t think that it is that much easier elsewhere. Sure, it’s easy to say that it’s easy in the US. But many entrepreneurs have to fight their way through the negativity of culture, including in the US. People thought Bill Gates and Paul Allen were crazy! It’s partly that we have more volume of successful entrepreneurship in the last 20 years that makes us culturally more aware. Also, we have a strong give-back culture. And it is up to your generation to make sure that gets instilled in Portugal!

      • http://www.facebook.com/people/João-Amaral/1320773785 João Amaral

        Yes, but my whole point is not about comparing ourselves with the US or any other country but us Portuguese people fulfilling our potential and dreams our own way. The US probably isn’t perfect supporting entrepreneurship, but it’s definitely much open to it than us. The thing is 500 years ago Portugal was on of the leaders of the world in power and innovation (with spain mostly) and no one thought of our size as a country as a problem or others as examples. We only thought by ourselves (that’s all what entrepreneurship is about!) and we didn’t want to compare with others. We dreamt, we wanted and we went for it! Simple as that.

        And that’s what we have to do! We have it in ourselves, we just have to awake the sleeping entrepreneur in ourselves.

        Just to give you an example, how is it possible that you go to a big portuguese company (any of them) and you tell them that you have an idea that will give them millions and you just want to talk to someone there (even an intern) and no one even answers you back. That’s what i see day after day after day. The problem is not the fact that they don’t accept your idea, it’s that they don’t even want to hear what you have to say!

        For me, it’s just the problem of mentality not capabilities… only

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