Portugal Startup Scene | 2021 Forecast

2020 was a crazy year! If I would have attempted to forecast it, I would have got it wrong.

Still, forecasting enables me to organize my ideas, understand the macro drivers, etc. It is also fun. Sharing enables me to receive feedback and read different opinions. Hope it also helps entrepreneurs and other investors.

As such, I have put together my predictions for 2021 for the Portugal Startup Scene. Opinions are my own!

I would love to hear your feedback. Leave it in the comments section or drop me a line.

Intro

I believe 2021 will be an exciting year for the Portugal Startup Scene. In my opinion, until 2019/2020 we have been developing the foundations (our MVP) of an entrepreneurial ecosystem – the first wave of Private independent VCs, first LPs, first success stories, the rise of pre-seed and seed deal flow, etc.

Now, Portugal has a “solid beta” and is entering the initial phase of moderate growth and finding “product-market fit” :). As with any path for product-market fit, there is potential, but there are also several uncertainties. Without further ado…

2021 forecast

1. Capital raised by funds

I expect 2021 to be a good year for investors to raise funds (yes, investors also fundraise :). I forecast investors to raise €200M-250M in new funds. If my forecast is right, 2021 year can be the most active year until now! The drivers for me to be bullish are:

• On top of the Portugal Tech program, EIF is also partnering with IFD to launch the Portuguese Blue fund set to mobilize at least €75M
• Portugal has an increasingly adopted tax incentive mechanism (SIFIDE) for corporates to back funds that invest in R&D certified companies. With SIFIDE, corporates can reduce corporate taxes up to 82.5%. In nutshell, if the fund returns the money raised, corporates will have a 5x return – it is a massive incentive to invest in funds. Though I am not a fan of this instrument, I hope it will create a new wave of LPs that will continue to support the asset class for the years ahead
• Finally, Golden Visa, the cash-out of early employees and founders, etc. will further create a pool of individual LPs

As a consequence, I forecast funds that have recently raised funds to raise additional funds/increase fund sizes. I expect 2-3 new local investors raising fund I. I also expect Private Equities and other tourist investors will be more active in early-stage investments.

Finally, in 2021 there will be Series A companies back by only local investors.

2. International investors participation

Despite Portuguese investors having more money to deploy, I still believe that international investors will increase participation in the local ecosystem, from 27% to 30-33% participation in rounds.

Last year, I noticed a reduced appetite from international investors in Portugal. Main drivers associated with the pandemic/not being able to travel. Also, there was no LIS, Web Summit was 100% online, etc.

But due to COVID, international investors “learned” how to invest remotely. As such, I expect much more activity from international investors this year – Indico Demo Day a few days was a good barometer.

3. Investment (# and €)

There is a good momentum in Portugal. As I described above, I expect more supply of capital from both local and international investors. On the other side – demand for capital /startups looking to raise funds – I also believe that there will be more opportunities to invest in all stages.

3.A Pre-Seed to Series A

At the beginning of the funnel, I see more opportunities to invest

1. There are several opportunities and problems to solve, particularly associated/accelerated with COVID.
2. The current economic crisis is reducing the opportunity cost to launch a startup – particularly in Portugal
3. I see a growing number of international founders coming to Portugal, as WFH enables them to work from great places to leave

Furthermore, I see a growing pool of future Series A opportunities. As such, I expect around 200 rounds and at least €200M invested between Pre-Seed and Series A.

In my opinion, the supply of capital will grow faster than the demand, potentially generating an increase in rounds size/valuations.

3.B Of which Series B and beyond

On Series B and beyond, I also expect more rounds, as the market is maturing and a growing number of companies are reaching the Series B phase. I also forecast additional rounds of financing to current Portuguese most well-funded startups. Still, I believe that the market will at most match the previous year. Looking forward to be surprised!

4. +€100M exits (>+€100M)

Finally, exits make the wheel spinning. And Portugal Startup Scene lacks +€100M exits.

Portuguese Unicorns were positively affected by COVID. Markets are back to an all-time high. Interest rates continue to be close to zero. And tech companies have been driving the stock market valuation.

So unless there is a major stock market crash, I forecast a +€100M exit.

As you can read, I am optimistic about the future of the Portugal Startup Scene. I am betting my career on its development! I hope I can contribute to making this forecast real or even better 🙂