Portuguese Silicon Valley?

What makes “Silicon Valley” Silicon Valley? Portugal is betting it has the formula. Three key features of Portuguese tech and the next Silicon Valley.

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Portuguese tech workers
If you search Google for the exact phrase “the new Silicon Valley” you’ll get 77,500 results for cities and countries as diverse as Miami, Austin, Cambridge, the UK, Switzerland, Poland, Berlin, Amsterdam, and Estonia.  In Portugal, Lisbon, and increasingly Porto, top the list.
It’s tough to predict whether Lisbon, or any other Portuguese city, is on track to be the next Silicon Valley, but the country as a whole definitely has many of the key elements of the Bay Area model: a high rate of science and engineering graduates, a vibrant start-up culture, and, if I dare say it, even better weather than San Francisco.  There have already been seven Portuguese “unicorns” – private companies valued at one billion dollars or more – and startups now account for 1.1% of the country’s GDP.  Portugal recently began offering a “digital nomad” visa for non-EU residents working remotely, and Madeira, Lagos, and Lisbon are currently among the top 20 destinations on Go Nomad.  
A swath of consulting firms has breathlessly set up shop to provide offshoring services to foreign tech companies looking to hire in Portugal, as well as visa assistance to individuals relocating here. All told, there are many potential upsides on the horizon for Portuguese tech in the country’s overall socio-economic development.   Yet the transformation of the San Francisco Bay Area over the years has shown that the good (a highly educated, innovative, and productive workforce), the bad (skyrocketing home prices), and the ugly (a harrowing epidemic of homelessness; check out Ezra Klein’s podcast episode on California for some backstory) hold lessons for future Silicon Valley contenders. 
As I discuss in my Portugal Real Estate Watch post, Portugal is the Eurozone country where housing prices have gone up the most in the last 12 years, and housing has become a major political issue across the country.  And while it’s true that the number of “digital nomad” visa holders is not very high right now, political discontent has emerged about the fact that these visa holders, who already must earn several times more than the average Portuguese salary just to get the visa, also pay a lower tax rate than Portuguese citizens.
I have worked remotely from Portugal for years, so I pay attention to the tech industry – its supporters and its discontents.  In this post, I talk about three key features of the Portuguese technology sector, how they are beneficial from the perspective of both would-be investors and tech workers, and where the trend line seems to be moving.

A Highly-Trained, Low-Cost Tech Labor Force

In 2021, Portugal awarded 8,056 science, math, and computer science degrees, nearly 10% of higher education diplomas across all subjects, and Portugal is the eighth highest STEM degree producer in the EU.  Considering the fact that more than a quarter of the country was illiterate coming out of decades of dictatorship in the 1970s, that is an astounding achievement.
Today, the average gross monthly salary for university graduates in Portugal across disciplines is 2,414 euros, about US $2,600, or 33,796 euros yearly, about US $37,00, and even higher for tech workers.  According to the journal Exame Informática, and using data from the recruiting firm Robert Walters, a full-stack developer in Portugal with 2 to 5 years of experience can expect a gross yearly salary in the range of 35,000 to 55,000 euros (US $39,000 to $61,000), jumping up to 60,000 to 90,000 euros (US $67,000 to $100,000) after ten years of experience. 
(Note: Portuguese usually talk about salary in terms of months.  The yearly salary is calculated as the monthly salary times 14 to include the subsídio de férias, or holiday subsidy, which is an extra month of salary paid during summer, and the subsídio de Natal, or Christmas subsidy, which is an extra month of salary paid in December.  All employees receive these by law.)
Now, these employees will cost their employers at least an additional 25% more per year when taking social security and insurance payments into account, not to mention any of the other benefits tech firms often provide, like free meals and family support.  But from the perspective of foreign employers looking to open subsidiaries in Portugal, or outsource jobs to Portuguese workers, that’s still a pretty good deal.   Compared to hiring a US full-stack developer, where entry-level workers take home an average of US $93,000 per year, moving up to $146,000 for those with more experience, Portuguese tech workers bring a lot of value at a much lower cost.  Plus, as I’ve mentioned before, English is widely spoken in Portugal, especially among younger and/or more educated Portuguese, which makes hiring Portuguese workers a breeze for international firms.
On the other hand, if you are a US tech employee working remotely, or are a freelancer with US clients, and you want to keep living it up in Lisbon, my advice is not to lose your US sources of income.  Even if you would entertain a salary cut by working at a Portugal-based company, and be willing to move out of trendy Chiado, by law Portuguese citizens take hiring precedence over any other residents, followed by nationals from other EU member states. 
Also, it’s worth mentioning here that while it is true that the cost of living in Portugal is generally below the EU average (you can get into the weeds here with some Eurostat data), whether or not you’ll be swaggering around with your tech dollars really depends upon what you are doing.  For one thing, the greenback is weak against the euro right now, currently trading at 0.91 euros to a US dollar, meaning you’re already shaving off almost 10% of your purchasing power, not counting all those exchange rate fees you’ll be paying to send money over here.  On top of that, if you’re the organic soy milk lattes and free-range chicken type, or if your idea of dinner out starts with an amuse-bouche, prices quickly begin to look similar to other more expensive locales.  And while Lisbon is not Manhattan, housing costs have risen substantially in Portugal, as I talk about in my Portugal Real Estate Watch post mentioned above, and spillover effects from foreign investors flooding downtown metropolitan areas is part of the problem. 
Still, you’ll get a way better deal in Portugal than California, which is probably why both the LA Times and the New York Times have recently covered the rise in Californian expats here.  Americans are currently the largest group of foreign buyers purchasing property in the Lisbon metropolitan area. 

A Vibrant Startup Culture

Everyone is looking for the next Portuguese unicorn to emerge, but a lot of public and private investment dollars are swirling around to try and make it happen.  To get a handle on all the programs currently underway here, a great way to start is by checking out Startup Portugal, an NGO devoted to helping the Portuguese government strategize a national plan to develop startup companies and entrepreneurship in general (and pick up EU funding to do it).  Their various programs (available in English here) include funding for startup incubators and accelerators, helping entrepreneurs from outside Portugal that want to open businesses here, visa assistance for Portuguese companies that want to bring over specialized tech workers, and funding to attend the annual  Web Summit conference held in Lisbon, one of the largest tech industry conferences in Europe.
Lest the uniformed reader think that Portuguese tech is only betting on growth via a bunch of apps with dubious social value, it’s important to point out that social investment is also big.  In fact, there are a ton of fantastic Portuguese companies offering products and services using socially and environmentally conscious methods and materials.  (I write about these companies in the Eco page of the blog.) Portugal Social Innovation is a government imitative aimed at promoting this kind of social entrepreneurship and investment, and the private impact investing company MAZE develops and funds would-be social entrepreneurs in the startup phase.
I once attended a workshop sponsored by Portuguese Women in Tech where one of the speakers was Cristina Fonseca, co-founder of the Portuguese unicorn TalkDesk, who humbly described her origins as a good but not amazing coder, which seemed impossible given her net worth.  By the end of the talk, what struck me as the single most important element of the success of TalkDesk was not just the founders’ idea or coding abilities, but rather the Silicon Valley environment in which she and her co-founder eventually found themselves – and found themselves pushed ahead.  This is at the heart of what Portugal is trying to achieve.

The Emerging Portuguese Tech Ecosytem

But can you recreate, in a short span of time, what took decades to organically develop in Silicon Valley?   That is the question looming over the tech sector in Portugal.
One of the key factors responsible for the rise of Silicon Valley is the tight relationship between research universities – principal among these, Stanford – and local businesses.  Besides churning out STEM graduates in high numbers, Portuguese universities have also gotten into the public-private partnership game.  For example, NOVA University in Lisbon, a heavy lifter in business and technology research, recently announced a new development in its ongoing partnership with Nestle to promote food sustainability.  Other Portuguese universities in Coimbra, Porto, Lisbon, and the Algarve have started academic-private sector partnerships to bridge the research and business communities.  Time will tell if the Stanford magic is portable.
At the same time, various NGOs and private investors have put boots on the ground by investing in physical space to bring innovators into closer contact.  Startup Lisbon has spent the last ten years or so as an incubator, and their Casa Startup Lisbon serves as a sort of tech hostel where aspiring entrepreneurs in the Lisbon startup scene can (pay to) breathe the same air.  There are now hundreds of coworking spaces around the country (you can search a list of them by region at Remote Portugal) and even the national government is trying to create a coworking network in underserved areas of the country’s interior.
The skeptical observe may have doubts about the future of coworking (anybody remember WeWork?) but that hasn’t stopped tech centers optimists in Portugal from stepping it up a notch.  There are now several plans underway to build mix-use “cities” within existing cities, bringing together housing, academic research, tech entrepreneurship, office space, and the modern lifestyle into one centralized location.  These projects, which generally aim to be greener, “smarter”, and more purposeful than the current design of the cities that house them, include: Innovation District in Almada, part of the greater Lisbon area; Fuse Valley in Matosinhos, next-door to Porto, and with backing from one of the original Portuguese unicorns, Farfetch; and Gaia Innovation City, across the river from Porto in Vila Nova de Gaia. 
Granted, one of the lessons of Silicon Valley is that nothing good comes without a price, and that price is not cheap.  Five years after a similar mix-use project, Living PlanIT in Paredes, was announced – the brainchild of former Microsoft executive Steve Lewis – it still just existed on paper and was eventually scrapped for lack of funding.
What does this all mean for the growth of the Portuguese technology sector more broadly? There’s a lot of momentum here right now, and momentum attracts money.  As a betting woman, I would bet on Portugal.  I already did.
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