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City startups generate more than 126 million per year

City startups generate more than 126 million per year
05 Jun 2020

A study launched by ScaleUp Porto, which depicts the entrepreneurial ecosystem of Porto and its Region, concluded that the city's startups represent an annual turnover of more than 126 million euros. This strong economic impact may, however, be at risk, as by a COVID-19 impact preliminary assessment on these young companies, it was found that 3 out of 10 are at risk of closing doors in the next three months if the context does not change. 

"Re: think | Re: build | Re: load: Characterization of the Entrepreneurial Ecosystem in the region of Porto" was a study produced by Associação Porto Digital, in collaboration with EY.

He analyzed a region that represents one of the fastest-growing tech hubs in Europe, comprising more than 350 startups and scaleups, more than 50 incubators and workspaces, and aggregating more than 30 technological communities. 

Among the main conclusions of the investigation in the field of sales and internationalization, it should be noted that, between 2015 and 2018, the total turnover of startups in Porto and the North Region reached an annual growth rate close to 28%. In this increase, the contribution of the Information and Communication Technologies cluster stands out, with 62% of the total value of the business volume.

On the other hand, in relation to the total value of EBITDA (profits), in the same period, it practically doubled, and exports registered an annual growth of 26.6%.


Employment and wages

With regard to the rate of job creation, the study concludes that, between 2015 and 2018, startups contributed to increasing the number of employees by 35%. This means that 7,018 net jobs were created in the North, in this segment alone.

In addition, there was an increase in the number of companies with higher average earnings, especially in the intervals between 20 and 30 thousand euros per year. In this context, employees in the Medical Devices & Information Technology applied to Health areas earn higher salaries than other clusters, the document states.


Public investment

For startups, the early stage is the time when they are able to attract a greater volume of investment from the public sector. In addition, the weight of domestic investment has increased; in 2019, it represented 24% of the total turnover. 

Between 2015 and 2019, public investment corresponded to around 5.6 million euros and an average of 27% of the total value achieved by companies in the Greater Porto region.


Impact of the pandemic on the Porto ecosystem

In the current context, ScaleUp Porto has proceeded with a complementary study in order to assess the impact of the sudden changes caused by the pandemic on startups. 

41 CEOs, founders, and managers of startups in the city participated in the study, conducted by Porto Digital, with the FES Agency and Aliados Consulting, in the period between April 27th and May 6th.

Among the main conclusions of the questionnaire, it was found that 31.7% of startups have up to three months of available capital. In other words, 3 out of 10 are at risk of closing after this period.

More than 60% suffered from a negative impact on sales, although 14.6%, instead, had a positive impact in this field. In general, 1 in 4 saw a reduction of up to 20% in sales; one-third of startups suffered losses of more than 50%, and 16.7% even suffered a decrease of more than 80%.

At the moment, 63% of startups are not raising venture capital and 68.3% have resorted or are looking for alternative sources of financing. Approximately 70% reduced costs, especially when contracting external services, and 39% showed concern about its potential closure. 

This more unfavorable scenario contrasts, nevertheless, with positive data that should be noted. In the turmoil of the crisis, the overwhelming majority of companies in the Porto entrepreneurship ecosystem (95%) did not make redundancies and 97.6% do not intend to make them in the next three months, with more than a third admitting until they intend to hire. 

For now, 44% of startups resorted to exceptional and temporary measures to support SMEs and micro-enterprises, and almost half (49%) intend to take advantage of specific measures to support startups, especially the measure "StartupRH Covid19".