Lisbon Unicorn Factory – The myth that became a reality

Unicorn Factory Lisboa is one of the reasons why Portugal is considered by the Financial Times as the 6th best ecosystem for startups and scaleups in Europe. Essential Business interviews CEO Gil Azevedo about the project and expansion plans for the future.

Text: Chris Graeme Photos: Lisbon Unicorn Factory

On a once abandoned site that belonged to the Portuguese armed forces where food was produced to sustain Portuguese soldiers fighting in the colonial wars in the 1960s, something fantastic has been evolving.

It is a project that many people initially scoffed at: a lofty and idealistic dream of an ambitious wannabe Portuguese politician running for mayor of Lisbon City Council who, during the elections for city hall, made a pledge to make Lisbon a hub not only for Portuguese startups but also European ones.

That man was Carlos Moedas, the centre-right Social Democratic Party (PSD) candidate for city hall who won the elections in 2021 and immediately made good his promise and created the Lisbon Unicorn Factory (Unicorn Factory Lisboa).

“No one believed in unicorns” said the new mayor one year after the site had been revamped, but by 2023 it was supporting the development and growth of more than 200 startups and scale-ups employing around 500 professionals.

Carlos Moedas’ plan was simple: to expand the entrepreneurial technology ecosystem by financially supporting emerging innovative and disruptive companies.

From the start, the mayor said that his idea was to create a factory not just for unicorns (companies valued over US$1Bn), but also to help startups grow and scale. “What we have here is nothing less than companies that have come to Lisbon and invested in our future,” he said, adding that, so far, an estimated 10,000 jobs had been created on the back of this initiative.

“We live in a world that at times is dangerous, marked by wars. We needed people to come to Lisbon who were open to a world where we are all different, have different ideas and different dreams, because it’s this that fosters innovation,” he said.

Now, in 2024, that gamble appears to have paid off. In March, Portugal was the 6th best environment in Europe to set up and grow a startup, according to the Financial Times’ ranking ‘Europe’s Leading Start-Up Hubs 2024’, with nearly 2,800 startups and scaleups nationwide.

The ranking, compiled in partnership with Statista, a German company that specialises in market data and statistics, and Sifted, a leading media brand for European startups, pinpointed Startup Lisboa and Lisbon Unicorn Factory as among several Portuguese innovation hubs, including Startup Braga, Casa da Misericórdia’s Casa do Impacto, and the platforms Building Global Innovators, Coimbra’s Instituto Pedro Nunes, and innovation consultancy Beta-i, as shining justifications for Portugal’s position in the ranking.

This success is partly down to the Portuguese market being relatively small, so Portuguese startups aim to go international from the get-go. This international focus is further supported by a handful of prominent seed stage local venture capital firms like Antler, Armilar Venture Partners, Faber and Indico Capital Partners that collaborate with significant international co-investment partners. All of this has meant that the startup scene in Lisbon has been experiencing significant growth, with an annual increase of 30% since 2016. In 2022, Lisbon’s startups worth €2.1Bn raised an impressive amount of over €309 million — a three-fold increase on a decade ago.

A MAJOR REFURBISHMENT PROJECT

Lisbon Unicorn Factory is located in Lisbon’s Beato district, on a busy stretch of dual carriageway that runs along the city’s River Tagus estuary from East Lisbon’s modern new neighbourhood Parque das Nações to Cais do Sodré off the city’s main Terreiro do Paço square; in an area once occupied by docks and industrial sites, but now rapidly being transformed into the city’s latest upmarket residential area.

While a site with its own startups and scale-ups, it is also an umbrella brand that aggregates and expands its operations across an entire value chain to have a strong economic impact through its Scaling Up Programme, Soft Landing Programme, and through innovation-focused hubs in other parts of the city.

The main reception and offices are housed in one of the original armed forces buildings, in which much of the plain concrete industrial infrastructure has been retained in a nod to its past as a former bread and pasta manufacturing and warehousing site, while giving it a modern twist with coloured neon strip lights, comfy sofas and a coffee bar.

The Unicorn Factory developed from the Beato Creative Hub, which was refurbished in 2017, with an initial investment of €8 million, born as an idea to boost the entrepreneurship ecosystem in Lisbon providing space for 20 startups per year to establish themselves in the capital, and was renamed Lisbon Unicorn Factory in 2019.

Now, after extensive refurbishment works, it is one of the largest spaces for entrepreneurship and innovation in Europe and hosts over 3,000 people from all over the world who want to innovate. It has a wide range of catering, leisure and cultural services and facilities open to the entire city, being a place for entrepreneurs, startups, scaleups, investors, incubators, and talented professionals dedicated to the future of technological and digital innovation.

SCALING UP PROGRAMME

Lisbon Unicorn Factory has a Scaling Up Programme, the first-ever programme in the city specialised in providing scaleups with the necessary support to help unlock their growth potential.

Based on the most successful international programmes, it not only develops the critical skills of leadership teams, but also addresses growth challenges, accelerating growth in Portugal and expanding to international markets.

Besides connecting scale-ups with experts, mentors and the scaleup community, it also provides continuous exposure to potential corporate partners and clients.

The programme presents a learning journey, divided into 5 pillars, providing a practical, immersive and customised experience of growth acceleration: immersive up-skilling, mentorship board, corporate matching, international growth and community.

It allows startup entrepreneurs and their teams to acquire critical skills and tools for successful leadership, promoting key partnerships, networking and execution through structured guidance and support from experts, mentors and the most relevant companies in Portugal.

At the end of the programme, participants are equipped to deal with the various challenges and difficulties they will face during their journey, and capture opportunities to achieve sustained accelerated growth.

Now in its fourth edition, this year, eight new technology companies have been integrated into the programme and already have around €49 million of investment.

These are Aptiv.io, Dig-In, Get More Brain, Lovys, MeetGeek, Musiversal, MyCareforce and Paynest, and of these, half are international scale-ups.  The 2023 edition successfully integrated these companies:  Bhout, Enline, iLoF, KIT-AR, Maven, Nutrium, Oscar and ValuesCo.

In four editions of the programme, which aims to support companies in their growth process from Lisbon, all the scaleups have been supported with around €245 million of investment.

The start of the fourth programme coincides with the end of the second programme that supported Automaise, Didimo, Mediaprobe, MicroHarvest, Progrow, Rauva, sheerMe and Splink.

Over the eight months on the programme, these startups raised their investment by 80% and created around 135 jobs. Many have signed partnerships, an example of which was the agreement signed by Automaise with Sonae and Brisa. Others took the step to internationalise, such as sheeMe and Splink, both of which expanded to Brazil.

“The Scaling Up programme has been a success in supporting companies with a high potential for internationalisation in their growth phase. We are now beginning the fourth edition; at the same time, we’re closing the second edition with a very positive result, meaning that the teams are very happy with the programme and specialists involved, the employment created and the greater amount of financing for projects participating in the programme,” says Gil Azevedo, CEO of Lisbon Unicorn Factory, who shows me around the site that is rapidly becoming a self-contained and self-sustaining tech village for entrepreneurs.

AMENITIES AND SERVICES

On site, a building is being refurbished to become a craft beer factory and a hall for events. We enter a large renovated building that has already been covered into an upmarket delicatessen-cum-gourmet store selling quality local products such as fine wines, teas, coffees and luxury foodstuffs, and which has a distinct craft feel about it.

The space also features an auditorium for corporate events and even has a restaurant serving both lunches and dinners, which is open not only for the technology professionals working in the different scaleups, but also to the general public.

“We already have a regular programme of events running throughout the year. We have hosted beer and African festivals; during Web Summit we had a networking evening here, and every month, particularly in the spring, summer and autumn, we have at least two events and open-air cinema.

“Companies love this space for corporate events and we’re getting a lot of requests to host such events,” says Gil Azevedo as we pass by the Mexican vegetarian ‘taco’ restaurant Douro de Matar. Gil tells me that in the evenings it gets quite busy and has live music, lending an atmosphere somewhere between garage dive bar chic and trashy cool. The best thing about it is that the food is not only tasty but reasonably priced, ranging between €5.50 and €12.50 per person for a range of appetisers and tortillas.

A little further on, we stumble across The Royal Rawness, a speciality café offering various types of coffee, both roasted and ground, imported from various parts of the world, including Honduras, Brazil, Mexico, Kenya, Costa Rica and Myanmar, and offering a gourmet coffee experience. There is also the Lully 1661 patisserie, an artisanal affair selling bread and pastries, and plans are afoot for a juice bar to open on site soon.

ATTRACTING INTERNATIONAL COMPANIES

Gil Azevedo points to the building occupied by Claranet, one of the most successful flagship companies operating out of the Lisbon Unicorn Factory. A Portuguese IT supplier of British origin, by the end of 2022 it had grown by more than 77% with a turnover of over €200 million.

Claranet helps companies to modernise in terms of technology and transformation while protecting them from security threats. Its services include cybersecurity, networks, and communications and cloud services.

Run by managing director António Miguel Ferreira, the company had a good year in 2023 – it has a 7% market share — and has taken on over 100 engineering technicians at the company’s offices in Lisbon, Porto and Viseu to meet a growing number of IT services contracts.

Claranet currently has the largest business turnover in its segment in Portugal and is preparing a round of possible acquisitions for 2024, which may include an IPO in Brazil.

AFFORDABLE TALENT

After the site tour, we return to the main building housing the reception and offices managed by Berlin startup campus management company Factory. “We invited them to come to Lisbon and replicate the model in Lisbon,” Gil remarks.

“We wanted to create a link between the legacy of the past and the modern, innovative dynamic of the present, which is why the original industrial buildings were preserved,” says Gil, adding that inspiration was taken from several other similar projects in Europe, including London and Berlin.

“Six years ago we were not very well known as a city in terms of tech hubs. With the Web Summit moving to Portugal from 2016, that opened the eyes of the tech community abroad and they could see what Portugal had to offer,” Gil explains.

“Portugal offered very talented technology engineers at a lower cost compared to other European cities, a great lifestyle, a lower cost of living and a more relaxed pace of life,” adds the Lisbon Unicorn Factory CEO.

We proceed to the top of the building that has the most amazing roof garden with an allotment growing vegetables and herbs, not to mention a superb uninterrupted view over the river estuary. Gil informs that the rooftop is also in great demand during the summer months when it is hired out for events.

Access to the Unicorn Factory has been a problem for those without cars, but Gil explains that there are plans to build a light railway along this stretch of the river from the city centre to Parque das Nações, including a stop serving the site.

ATTRACTING AND RETAINING COMPANIES

The big question, of course, is how to persuade startups, which need capital to scale and grow, to remain based in Lisbon rather than up sticks and relocate to the United States or other European countries.

Gil Azevedo says that it is a challenge that needs a long-term approach, and necessarily involves bringing international funds and venture capital into the city to invest in these companies.

In one sense, this process has already begun this year with the government’s reformulation of Portugal’s highly successful Golden Visa programme that, since 2012, has brought in some €7Bn to the State’s coffers mostly through property investment, but has now been re-engineered to invest in funds to support startups and scaleups.

Stephan Morais, whose venture capital company Indico Capital Partners has been taking Golden Visa investments for five years, says: “The type of investors we’ve had over that time have tended to be sophisticated investors who understand private equity and venture capital, which is what we do; we invest in tech startups that go global from Portugal to the world, normally becoming American, including some that went on to become unicorns.”

The Indico Capital Partners founder says that venture capital is an investment class that tends to concentrate returns in the top funds. “I always say it is better to invest in the top Portuguese funds than in a top 10 London fund, because with the latter, there will be another nine funds on top of it that get to cherry pick all the deals,” he explains.

Morais says funds are a very concentrated assets class in the sense that, typically, the best performing funds tend to continue to be so and attract the best entrepreneurs, and so get the best returns and raise more money and have successful exits, meaning startup and scaleup companies that grow and go on to do well.

Gil Azevedo admits that many Portuguese scaleups go on to open offices in the US or other parts of the world, but stresses that they do keep a very significant part of their operations in Portugal.

“In terms of attracting foreign investments, creating jobs and helping the economy, the Portuguese technology ecosystem is very significant,” he says, giving the example of Portuguese unicorn Feedzai, a financial fraud detection software company that has offices in Lisbon, Porto and Coimbra, but also in San Mateo (California), New York, London, Hong Kong and Atlanta (Georgia).

However, others like Sword Health and cloud-based contact centre Talkdesk have based their main operations in the US but have retained offices in Portugal, with the founders living in this country much of the time with a lot of the investment made overseas reinvested in Portugal.

“It is through companies like this that we are creating a stronger ecosystem. This in turn attracts larger funds, and this positive cycle will not only attract more companies, but encourage them to stay,” says Gil Azevedo, emphasising that the more significant number of companies that scale up and do well and choose the path of Initial Public Offerings (IPO) (floating on the stock market) makes money for the founders, their employees and the Portuguese, and other investors that will invest again in Lisbon.

ATTRACTING UNICORNS

However, although Portugal is already a very significant ecosystem for startups and scaleups, the phenomena is still relatively recent, beginning from 2016, and Gil Azevedo admits that it will take time to attract more and larger companies to Lisbon.

At the time of the interview, Portugal had seven unicorns (now six since the collapse and buyout of online luxury goods platform Farfetch in November last year): OutSystems, Talkdesk, Feedzai, Remote, Sword Health and Anchorage Digital. However, there are 12 overseas unicorns that set up operations in Portugal, bringing the tally to 19.

The latest unicorn to set up in Lisbon Unicorn Factory is the Danish company Plio, a company comprising a core of professionals in areas such as technology, design, training, and urban and territorial planning, offering a wide array of consultancy services to companies and local authorities.

Lisbon has also incubated and grown some exciting mini-unicorns such as Barkyn, a subscription service for pet owners that combines food with tele-vet support; Unbabel; an AI-powered language operations platform that used machine learning and crowdsourcing to improve translations in customer service; Zaask, an online marketplace for hiring local professionals, freelancers and micro-companies across a range of services; Sensei, a computer vision and AI company leading the way in autonomous retail, by enabling stores of all sizes to be checkout free; Defined.ai offering AI companies a range of data solutions to improve machine learning and make AI smarter; and Uniplaces, an online platform for booking student accommodation across Europe.

Both Defined.ai and Unbabel are well on course to becoming the next two unicorns with Portuguese DNA, although Defined.ai founder and CEO Daniela Braga has played down the importance of having unicorn status.

“This unicorn status is not that important; none of the unicorns of Portuguese origin are actually even based in Portugal. Our goal is to break even, and we’re now at the stage where we don’t need further rounds of finance,” she told the business daily Negócios in an interview last year.

INNOVATION HUBS

Although Lisbon Unicorn Factory was set up in 2022, it was effectively created as an umbrella brand for several planned hubs around the city focusing on specific segments.The first, the Beato Creative Hub, actually predates Lisbon Unicorn Factory by just over three years.

It is located within the same 50,000m2 space occupied by the factory in the heart of the Beato neighbourhood, where work, leisure, and cultural areas intertwine.

Spread out over 18 buildings, it has received around €55 million in government and municipal council investment, and will continue to receive investment until next year. In September 2023, it also became the new home of Web Summit employing over 100 staff.

At the end of last year, Lisbon Unicorn Factory inaugurated its second hub, the Gaming Hub, launching the latest phase of its growth strategy. The hub on Lisbon’s Avenida da República is a space dedicated to the production of video games by creating synergies between startups, investors and multinational companies, hosting new scaleup programmes and an incubator for companies, and operating as a meeting point for the gaming community.