Portugal is currently blazing a trail as home to one of Europe’s leading startup ecosystems – a position that is nothing short of remarkable, considering how badly affected the country was by the global financial crisis of 2008.

Over the last decade, Lisbon has worked hard to rebuild its economy by creating an infrastructure fine-tuned to the needs of new businesses, especially in the fast-moving tech sector. It’s a mark of Lisbon’s success that the city was chosen – for the second consecutive year – to host the world’s de facto annual tech conference, Web Summit in November.

Reinventing Lisbon as a startup capital

Lisbon’s renaissance is due, in large part to the commitment of Portugal’s young graduates, many of whom have returned from working abroad during the lean years to launch their own companies, at the same time generating fresh creative energy in one of the coolest capitals in Europe.

This groundswell of grass-roots activity has been matched by the support of the Portuguese government which has acted decisively to inject investment into schemes designed to repurpose derelict buildings as tech hubs and business centres. The programme of urban regeneration has already served to stimulate business growth and create more jobs – it’s a simple, yet successful, strategy that’s giving Lisbon a leg-up on the world stage.

Supporting new business through a dedicated network

Helped by a programme of accelerator funding, tech incubators and flexible coworking spaces are emerging across Lisbon. Two years ago, the government created a national network of tech hubs and startups via a bold initiative that offered hundreds of entrepreneurs the opportunity to pursue their projects via a twelve-month fellowship.

The network is supported by incubators including Startup Lisboa and Labs Lisboa, as well as accelerators such as EIT InnoEnergy – this on top of a €200m venture capital fund set up by the government to tempt overseas start-ups to the capital. As a result, Lisbon feels newly energized. A system of grants is also sympathetically transforming the historic heart of the city, with plans to turn a former army food factory into a vast startup campus – Hub Criativo Beato – now well advanced.

The benefits for investors add up

Portugal’s residency programme is key to inward investment, as it not only offers entrepreneurs the freedom to live and work in Portugal – and to travel between EU states – but also opens up a deeper talent pool for employers.

The country has a highly educated indigenous workforce and English is widely spoken – plus, around half of graduates have a degree in an engineering or maths-related discipline. Nevertheless, development costs remain competitive: a junior developer in Lisbon might cost a half or a third of a comparative resource in Germany or the UK, for instance.

As real estate is also relatively inexpensive when compared to hotspots like Berlin or London, startups have more money available to spend on talent, while professionals can afford to live well. Put simply, Lisbon offers residents that most elusive of equations: a low cost of living with a high quality of life – which speaks to entrepreneurs and their employees in equal measure.

A growing trend

Although Portugal’s tech scene is small when compared to other European countries, it’s definitely on an upward trajectory. According to Tech Crunch, venture capital investment in 2016 totalled €18.5 million – small potatoes for some, but a figure that represented a six-fold increase on the previous year. A report last year from Startup Europe Partnership shows that Portugal's startup ecosystem is now growing twice as fast as the European average.

While other Portuguese cities like Porto have seen their share of startups, such as Veniam, Hype Labs and Knok, it’s Lisbon that’s got the momentum. Ecommerce platform Farfetch is Portugal’s biggest startup success so far, having raised more than $300m in VC from 15 investors, although other names to watch are Uniplaces student rentals, SaaS contact centre provider Talkdesk and independent app store Aptoide.

Visitors enjoying a ride on the vintage wooden Tram 28 that meanders through Lisbon’s most characterful streets from Bairro Alto, via the shopping districts of Baixa and Chiado and past the exquisite churches and castles of Alfama and Graça, could be forgiven for thinking this was a city stuck in the past. But, in Lisbon, old and new exist in harmonious juxtaposition, celebrating the cultural history of the city, while championing the spirit of innovation that has made this westernmost capital such a fertile environment for business.

It’s a trend that’s set to continue as Lisbon continues to hold its own on an international stage.