When Portuguese companies need money to invest in new technology or overseas expansion, they often rely on bank loans or EU funds administered by the government.
Only a few big operators tap the capital markets through initial public offerings or rights issues but the use of venture capital, an important tool for company growth in many countries, is increasing.
The small Portuguese venture capital market is characterized by expansion-stage investments in manufacturing industries, primarily consumer goods. Government equity programmes, which have tended to be investment vehicles for European structural funds, have crowded out potential private investors. Initiatives such as the new venture capital law and a scheme aimed at leveraging private venture funding have stimulated venture activity. But measures are also needed to foster more entrepreneurs, create a less risk-averse investment culture, and take fuller advantage of international venture capital flows.
In Portugal, venture capital is becoming an important tool and resource for areas such as the carbon market and biotechnology, which need high investment, and new initiatives are being taken.
Portugal might create a venture capital fund for Africa. Paulo Gomes, the Portuguese executive director of The World Bank, which undertakes relations with Africa, has suggested the constitution of a venture capital fund, with €230 million, to invest in African countries, the fund being essentially created with private capitals.
The biotechnology sector has registered an increasing growth in Portugal and there are good prospects for venture capital. Some projects have been undertaken with capital in this area, but there is still a lot of scientific knowledge that can be used in conducting new business plans.