About Venture Capital and Portugal Ventures Activity
Venture Capital Funds are autonomous assets, without legal personality, that belong to the holders of the respective shares, run by a managing body (in this case Portugal Ventures), that invest own equity (and sometimes debt financing) instruments, for a limited time, in companies that have high growth potential, in hopes of benefiting from their respective valuation. These operations are regulated and supervised by the Portuguese Securities Market Commission (CMVM).
The main characteristics of a Venture Capital investor are:
- Entry of an investor occurs by means of equity (shares) and non-debt (liabilities), thus improving the company’s financial autonomy ratio.
- However, other forms of financing may be sought (grants, bank loans and other financing), that is, venture capital investment can be combined with other forms of financing through negotiation and under specific terms.
- Non-repayable, without personal or real collateral.
- A Venture Capital investor will have a seat on the Board, a say in the company’s strategy and play an active role in its development and growth.
- Venture Capital divestment may lead to a complete change in the shareholder structure.
Each investment project will be analysed on a case-by-case basis based on its characteristics. Any investment Portugal Ventures makes in a given project will be made through the Venture Capital Funds (VCF) it manages and should be used to finance the project until you have a product on the market and to scale the business. Investments by Portugal Ventures are made progressively, in tranches, as milestones and deliverables defined in the investment agreement are achieved. Read more about our Investment Strategy.
Project milestones are defined during the negotiation process together by the Founders and Portugal Ventures and aim at establishing the business’s goals and plans of action during the investment phase. When each milestone is achieved, the next investment tranche will be released.
Does Portugal Ventures invest by acquiring a stake in share capital, making supplementary capital contributions, shareholder loans or a combination thereof?
Portugal Ventures invests in companies by acquiring a stake in their share capital, which may be occur when the company is incorporated or at a later stage, during a capital increase. Other equity instruments may also be considered, depending on the situation.
When Portugal Ventures invests, is there an increase in or dilution of equity in the shareholder structure?
Portugal Ventures invests by means of increases in share capital, which leads to a dilution in the ownership of existing shareholders. This dilution can either be greater or smaller, depending on Portugal Ventures’ valuation of the company.
Portugal Ventures’ stake in the share capital of a company varies according to the outcome of negotiations and based on the amount invested and agreed valuation of the company.
There are no costs associated with our monitoring of the companies in which we invest. Only the inherent transaction structuring fee, at the time of investment.
Valuation is determined using international best practices, taking into account the company’s level of development.
Entrepreneurs can present their projects to Portugal Ventures through:
- Investment Calls
- Open Day initiative
- Partners Networks
- Direct contact with our investment team.
Once you have decided on the Call you want to apply to, fill in the application form such that the project can be assessed by the Portugal Ventures Team. After submitting your application, projects undergo an initial screening by Portugal Ventures, followed by an assessment carried out by panels of multidisciplinary experts from Portugal and abroad, and finally a pitch to Portugal Ventures’ Board of Directors. Each of these three stages are elimination rounds. Portugal Ventures will then take its final decision on applications that successfully pass the elimination rounds and an investment term sheet may be presented to selected projects.
How are Portugal Ventures’ Calls different from all the other initiatives and competitions for business plans and ideas held in Portugal?
Calls provide innovative science and tech-based projects access to venture capital investment. Competitions and contests aim at promoting incentives, be they qualitative or quantitative. Portugal Ventures’ Calls focus on investing in a project, with an investor holding an ownership stake in the company.
About Portugal Ventures' Investment - General conditions
What criteria should I follow to determine whether my project is eligible for Portugal Ventures’ Calls?
Portugal Ventures invests in projects that:
- are differentiating and innovative and have competitive advantages over the competition;
- have growth potential and are profitable on a global scale;
- can obtain intellectual property protection;
- have market validation and, preferably, some confirmed customers, with the exception of Life Sciences projects;
- have a team with the appropriate and complementary skills.
- already be incorporated or should be incorporated when investment is made by Portugal Ventures;
- have their registered office in Portugal, located in the eligible geographic areas of each Call (if restrictions apply);
- foreign companies should have a relevant footprint in Portugal;
- be SME certified by IAPMEI;
- have tax or social security clearance certificates.
The requirements associated with a minimum viable project may vary depending on the industry and project. However, a Minimum Viable Product entails presentation of a working product able to obtain market feedback, preferably, from early sales. Having an MVP is not an eligibility criterion for the Therapeutics & Health Tech sector.
Market feedback is needed to determine the type and level of development required for the product at the time of investment. Other types of investors, such as Business Angels, normally invest lower amounts in the in earlier stages. Portugal Ventures invests from the moment the product is on the market or ready to be introduced in the market, although the requirements for a minimum viable product may vary depending on the industry and product in question. Market feedback is not required for investments in the Therapeutics & Health Tech sector.
Portugal Ventures invests in:
- Projects in the pre-seed stage that requires the first investment to start their business and/or MVP.
- Projects in the seed stage that have a functional prototype and preliminary market feedback.
- Projects in the growth stage to projects with the goal to expand to new markets and to fundraising to new investment rounds – Series A/B
There are 5 stages in the assessment process:
- Filling in and submission of the online application form;
- Once submitted, applications are assessed with 15 days;
- If a project passes the pre-screening stage, it will be assessed by a panel of Portuguese and international business and technology experts, to whom the Founders will pitch their projects. These assessment panels aid Portugal Ventures in analysing the investment to be made, by applying the best international benchmarks and practices used in the respective industry sectors.
- Taking the recommendations made by the expert panels into account, and if the assessment panel deems an application worthy, Portugal Ventures will invite the Founders to make a second pitch to assess the business opportunity and take its investment decision. At this point, the Founders will pitch their projects to Portugal Ventures’ Board of Directors, following by a Q&A session.
- If a project is selected, it will move on to the investment proposal stage, which usually takes place up to 90 days following the initial pre-screening stage.
This assessment method allows Portugal Ventures to obtain a qualified opinion from multidisciplinary Portuguese and international experts. This process has two stages:
- The first stage is a pitch by the Founders, followed by a Q&A session. Panel members get the opportunity to interact with the founders, allowing them to form a more consolidated opinion about the team and the project.
- After that, and in the second stage of the process, the experts make a qualitative assessment of each project based on the information provided in the application, the founders’ pitch and in subsequent discussions. This qualitative assessment will take into account the rules and regulations, the identification of the main risks and possible measures to mitigate them, as well as the project’s business and investment opportunity.
Portugal Ventures seeks to have on its panels renowned technical experts from various sectors of investment that are relevant to the candidates. Under our Partners section, you will find information on some of the experts that are part of Portugal Ventures’ contact network.
The presence of all team members at the pitch session (with both the assessment panel and with Portugal Ventures’ Board of Directors) is mandatory such that the assessment panels, first, and then Portugal Ventures can assess the investment opportunity.
You should address the following issues in the pitch sessions:
- Founders/Team – Management team, advisers, awards and acknowledgements;
- Problem/Opportunity – what market opportunity has been identified?
- Solution and value proposition – product characterisation and how its added value will be demonstrated in the market;
- Competition and Differentiation – who are your competitors and how will you stand out from these players in the market? What are your comparative advantages?
- Market characterisation and size – what is the size of the market and how fast it is expected to grow in the next few years?
- Market entry strategy – what is your initial plan for approaching the market?
- Sales – Business plan, structuring of your pricing policy and expected growth compared to your current situation?
- Project milestones and financing plan – what strategic goals have been set and what funding amounts are needed to achieve them?
- Next funding rounds and exit – what are your plans for the next strategic step? When do you expect divestment to occur? What are the company’s valuation expectations?
When I submit a project, does the company already have to be incorporated or can it be incorporated when Portugal Ventures makes its investment?
The company can be incorporated when Portugal Ventures makes its investment.
Yes. However, in the event Portugal Ventures decides to invest in one of the projects, the founders must dedicate themselves to that particular project and focus all their efforts on it.
Portugal Ventures will always assess the equity situation pre-investment and, if it finds that it is held by companies, the structure of said companies will also be taken into account.
Yes, provided the founders set up a company or have a significant footprint in Portugal. Portugal Ventures will not cover any travel expenses related to the assessment process of the Calls.
Yes, provided the founders set up a company or have a significant footprint in Portugal. Each situation will be assessed taking into account the stage the project is in and its respective business and development plans.
I have already submitted an application to prior editions of one of the Calls, but I wasn’t selected. Can I submit the same project again?
Yes. However, the issues that were raised and which led to the project being rejected must be resolved.
May an investment of a higher or lower amount than the minimum and maximum amounts stipulated be requested?
Portugal Ventures is willing to co-invest with other interested parties and, as such, the maximum amount of the round can be increased.
Yes, they are compatible, although some restrictions may apply. In such cases, we advise you to disclose all information about the funding received and what it is being used for.
Is there a mandatory minimum investment the founders have to make together with Portugal Ventures’ investment?
Investment amounts will be analysed during negotiations based on several factors, such as the company’s valuation and capital subscription requirements.
The project’s founders are responsible for Intellectual Property Protection. However, Portugal Ventures ensures the confidentiality of all information shared. Our platform uses security protocols and only Portugal Ventures employees have access to it.
Portugal Ventures assesses each project very carefully. There are three critical factors which can determine the rejection of an application for investment:
- the Founders’ team and not having the skills needed for the project;
- the inability to demonstrate product/service differentiation compared to what is already available on the global market;
- the project’s immature stage of development and respective market feedback.
About submitting applications to Portugal Ventures' Calls - Technical conditions
No, Portugal Ventures have available in the application platform the form in Portuguese and English.
Must the detailed budget (P&L) requested be a five-year forecast or is a three-year projection enough?
Portugal Ventures will always require a five-year forecast.
Must the Business Plan include the investment amount requested or is this amount provided after the project has been assessed the Portugal Ventures’ team?
The Business Plan must include the investment amount requested from Portugal Ventures, as well as how it is to be used. However, the investment amount and use thereof can be revised during negotiations.
The pitch video is mandatory, when is required in the application form. It is a very important tool, especially in the pre-screening stage. It does not have to be a professional video. All you need is your computer or your phone’s camera so that you can tell us about the project (founders/team, problem/opportunity, solution and value proposition, technology, competition/differentiation, market, sales, financial situation, etc.).
If you upload the video as an unlisted video, only people who know the link can view it. An unlisted video will not appear on any of YouTube’s public spaces (channels, search results or homepage).
How to upload an unlisted video to YouTube:
- Sign in to your account or create one;
- Click the Upload Button at the top of the page;
- Select the video stored on your device;
- Change the Privacy Settings from Public to Unlisted;
- Make sure you click the Save Changes button at the bottom of the page.
Founders can submit their projects without support from an Ignition Partner. However, their support helps improve and better qualify applications. However, the submissions of some investment Calls from Portugal Ventures are made, exclusively, through the entities that are parte of this Network.