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Lisbon tech is a “seed-stage investment”: 20/20 with Caixa Capital’s Stephan Morais

Four years’ time. What’s the world going to look like in 2020? We’re asking people in our network just that, for our new interview series 20/20. In this instalment we talk to Caixa Capital’s Executive Board Member Stephan Morais about how tech in our home, Lisbon, will grow.

The people of Portuguese capital Lisbon, haven’t had it easy. The global financial crisis that began at the tail end of the last decade and continued into the early years of the current one hit Portugal harder than most. With international markets anxious over the country’s ability to deal with the excessive levels of debt it had accumulated, government introduced a harsh austerity programme to try to balance the books.

The Portuguese saw their taxes raised and public servants had their salaries cut. In 2013 unemployment in the country hit a record high of 17.5 percent. In 2012 6,600 Portuguese companies filed for bankruptcy, a 41 percent increase on the previous year. In May 2011 the country agreed to a $78 billion financial bailout from the EU and the IMF, which would see the country’s austerity programme continue.

Now things are beginning to change. Portugal exited the bailout programme in the summer of 2014 and the country came out of recession in 2015. The recovery has been buoyed by a “startup revolution” in the country’s two major cities, Porto and Lisbon. Five years ago few in Lisbon considered becoming an entrepreneur. It didn’t seem an option.

With a paucity of jobs during the tougher times however, people found a solution. “Right now Lisbon feels like East London just before the tech cluster exploded. It’s a super-creative city,” as Second Home Co-founder and former British government advisor Rohan Silva put it.

Something important is happening in the Portuguese capital.

“This is only the beginning of the story. I think that the first real results have only started showing in the last two years. There’s a feeling of hope, which is particularly gratifying, given the hardship the country has been going through. But at the same time it is important to not feel satisfied,” says Stephan Morais.

The two things Lisbon needs

Stephan is an “uber-connected VC” who leads venture capital and private equity investments at Caixa Capital, the fund-management company of bank Caixa Geral de Depósitos, in charge of €700 million of funds. They’ve invested in some of the startups leading the charge in the Portuguese fightback such as luxury e-commerce powerhouse Farfetch, student accommodation site Uniplaces and crowdsourced translation platform Unbabel.

With a diverse 20-year career in investment banking, consultancy and entrepreneurship, Stephan knows his way around an investment. But if the Lisbon ecosystem were a startup, would he invest? How much would he bet on the recovery?

“I would invest in it, but it would be a  seed-stage investment. It’s still a young ecosystem. I would compare it to a promising technology that is about to reach product-market fit,” says Stephan.

He’s pragmatic on where Lisbon sits in the global pecking order of tech hubs. He says that once the more developed ecosystems of London, Stockholm, Berlin, Amsterdam and Paris are taken out of the equation, Lisbon competes with all other tech scenes across Europe.

Two things are needed to push Lisbon tech to the next level over the coming years, according to Stephan.

Founded in 2008 by José Neves, Farfetch has raised over $194 million in funding and is now valued at $1 billion. Stephan says that without more success stories like Farfetch and Lisbon startups hitting exits or unicorn status and becoming genuine household names, international capital won’t be as willing to put money into the city’s startups.

The second requirement is the emergence of more professional investors in the local market, both on the angel and on the VC side.

“There are too few professional investors in the market. And you cannot rely on foreign investors to come in and do seed-stage rounds or pre-seed. We need to see exits, and Lisbon entrepreneurs becoming second-time entrepreneurs,” says Stephan.


Stephan talks Lisbon’s future at the Iberian Tech Tour 2014

It will take five to ten years for Lisbon to realise its potential as a tech ecosystem to rival its more established counterparts across Europe and the US, says Stephan. He’s confident but realistic about the growth the scene can achieve. Actually, those in the city, himself included, can at times be too modest about Lisbon tech. But he doesn’t want to see the common mistake of indulging in overhype in his home.

“It needs to be recognised that not every single startup is going to be a global champion. The major thing that needs to be fine-tuned is that we have to accept that many of these companies will fail. We have a responsibility to not lead young entrepreneurs into the wrong path of making things too easy and not failing fast enough. This mistake has been repeated all over Europe,” says Stephan.

Why not me? And why not us?

Lisbon isn’t like other European cities. The pace of life in the city, sunshine and world-class surf just 15 minutes over the bridge in Ericeira mark it out. It’s also considered a relatively cheap city in which to live. These factors combine to form a real competitive advantage in attracting talent, says Stephan.

“Particularly the technical talent. As a pure management decision it is very obvious that places like Lisbon are competitive as opposed to hiring 700 engineers in London or even worse in Silicon Valley,” he says.

The city boasts an impressive software scene, and the likes of Codacy, Orankl and Feedzai have all shown real promise. While attracting top-quality engineers hasn’t proved particularly troublesome, high-level marketing and sales executives can be a different story, according to Stephan. Caixa Capital have begun, as in the cases of portfolio companies Movvo and Uniplaces, to complement founders with experienced senior executives from London and the Valley.

“Our role as VCs is also complementing the youth and the technical knowledge that we have here with senior hires from more advanced markets that can transform startups into scaleups,” says Stephan.

He says that the talented youth in Lisbon is the city’s first highly educated, globally ambitious generation. After years of relative hardship, the city is beginning to cautiously dream.

“For the first time we have a generation of people who say, ‘Why can’t we be great? Why can’t we be like Ronaldo or Mourinho? If people in people in London or the Valley can do it, why not me? And why not us?’” says Stephan.

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