Stephan Morais is co-founder of Indico Capital Partners, a company founded in 2017, a leader in venture capital based in Portugal. Indico focuses on companies with software services, artificial intelligence, fintech, cybersecurity, blockchain and blue economy.
Stephan Morais was a member of the Executive Board of Caixa Capital, a Private Equity and Venture Capital fund manager, where he led the most relevant international investment rounds for Portuguese technology companies. He was Non-Executive Director and Independent Member of the Board in several companies. With a diverse experience as an investment banker, consultant, entrepreneur and CEO, he has lived in 8 countries and 4 continents over the past 24 years. He is also a former advisor to the European Commissioner for Science and Innovation, former President of the European Venture Finance Network and former board member of the European Venture Capital and Private Equity Association and board member of the International Venture Club. He is an Entrepreneurship Specialist at the Center for Entrepreneurship at Saïd Business School, University of Oxford and a member of the Advisory Board of AMROP, Executive Search.
How did your career as an investor begin?
I started by discovering this function and industry, in fact, in London. In 2000, when I was working in a consultancy, I created a startup with my colleagues, with the financing of that consultancy itself. In 1999/2000, it was the first contact I had with the world of startups and investment. Later, when I went to Harvard to do my MBA, I realized the depth of the investor profession, in the sense of an investor in Private Equity and Venture Capital. I thought it was the profession I would like to have one day, this at 26/27 years old.
I then performed various functions as an investment banker, consultant and CEO, until the opportunity arose to join Caixa Capital, leading this part of Venture Capital. As I had the background of having already been in several positions “around the table”, as founder, consultant, banker, CEO, due to the theoretical and practical knowledge of an investor, and to the years of experience in many areas, I was left to lead the Venture area at Caixa Capital, between 2013 and 2017. Later, I founded my own fund, starting in 2017 and we started at the end of 2018.
How and when did you found Indico Capital Partners?
Ricardo Torgal and I (Stephan Morais) worked at Caixa and left in 2017 to found Indico Capital Partners. We were joined by Cristina Fonseca, the founder of talkdesk and we started between 2017 and 2018, raising the international capital needed to start the fund. In 2019, we made the first investments.
How would you describe Indico Capital Partners' investment strategy?
Indico has two fundamental areas. The first area of investment is in technological startups, in which we invest from 100,000 to 10 million euros per company, over its lifetime. The second area is investment in the oceans area, where we invest between €100,000 and €5 million in startups linked to the oceans that have a positive and disruptive impact.
In geographic terms, we focus on investing in companies that are based in Portugal and Spain or that have significant operations in these territories. In the last decade, we have already invested in several unicorns, being Cristina Fonseca, founder of one of them, talkdesk. At the moment we have three unicorns in the portfolio and in the past. We were involved in three more. Most are Portuguese/American or Portuguese/English, because companies are necessarily international, from day number one.
What are the sectors or types of companies that usually invest?
In the technological area, almost all companies are related to software, some in the area of artificial intelligence and marketplaces that bring together buyers and sellers.
The area of the oceans is broader, as it ranges from software to biotechnology, through renewable energy and other sectors related to innovative materials, related to the oceans and algae.
How does Indico Capital Partners differ from other investment firms?
One of the big differences is that normally in the Indico Capital Partners we lead operations and are very close to the teams we invest in. Therefore, we help teams raise more capital, hire talent, acquire clients, think about strategy from marketing to sales and product development. The other big differentiator is the track record. Indico Capital Partners, over the last four years, has already invested in 34 companies, around 40 million euros, and these companies have already raised 1.7 billion euros from other international investors. Therefore, we have a track record of finding promising companies and subsequently giving them the necessary tools to become international giants. Startups particularly in Portugal know that the way to become the next unicorn passes through Indico.
How is Indico Capital Partners dealing with the environmental crisis situation?
Since day one, we have been signatories to the Principles for Responsible Investment (PRI), which is an initiative of the United Nations. We incorporate the principles inherent in responsible and sustainable investment in all of our investments. In the case of the bottom of the oceans, in addition to looking for financial profitability, we also look for impact and sustainability. Therefore, we take this into account in the company selection process, but we also measure, over the life of the investment, what is the impact of each company, namely, with regard to the sustainable development objectives and, specifically, objective number 14, related to with underwater life. This is our way of contributing, investing in technologies and companies that may solve the climate emergency or contribute to that resolution.
What were some of the biggest successes and challenges you've faced during your career at Indico Capital Partners?
The biggest challenge for a Venture Capital fund is raising capital. People think it's hard to raise capital for a startup, but it's much harder to raise money for a fund. There are not many institutional investors in Europe or Portugal compared to the United States. Companies also do not invest in funds in Europe, much less in Portugal. Therefore, most of our investors are Americans and foreigners. We have some Portuguese people, but most of them live outside Portugal and Europe. This is the biggest challenge!
The greatest successes have to do with Portuguese companies that managed to become world leaders in their category. We currently have three unicorns, two of which are based in or have a strong connection to Portugal. Anchorage is a digital asset bank, which has been valued at over $3 billion. A remote, a company based in Portugal, which emerged before the pandemic and provides remote contracting to its customers. Therefore, it was a driving force behind remote work. We have many other cases where we invest in companies, 200 or 500 thousand euros, from the beginning and that today are worth several tens or hundreds of millions like unbabel, Infraspeak, Barkyn and many others.
How do you see the investment scenario in the future?
When there are quality companies there is always capital, so nowadays there is no lack of capital for good companies and good ideas. However, investors are more discerning than they were two or three years ago.
In the last four years, we've seen almost 3,000 investment opportunities, and we've only invested in 34, which is just investments in 1% of the companies we see. Very few of these become unicorns.
But for exceptional companies, there is always capital, both in Portugal and abroad. Therefore, there is no lack of capital, there is a lack of projects that solve a problem in a different way and with the right people behind it.
What advice would you give someone who is interested in being an investor?
There are several possible paths, but it is very important for a person to have a background in at least one of these areas: having been a very specialized entrepreneur with enough success to be able to advise other people on their growth path; have a very strong financial valuation and investment background. This is very important to make good investments, as it is necessary to know how to structure the operations, calculate the valuations and be able to legally carry out the operations. This whole process is a profession in itself.
The third path is in strategic consultancy, because basically when you are managing a company you have to know how to define the strategy, allocate the resources, implement those means. A background in consulting, investment banking and tech entrepreneurship are the main keys to later becoming a good VC. It doesn't mean that the person can't start in VC right away, but if you have such a background, you have a great advantage.
How do you decide which startup to invest in? Does Indico Capital Partners only invest in Startups?
In tech funds we only invest in startups. The blue fund we can invest in SMEs already in another phase, but the truth is that the vast majority of our investments are in technology and in technological and disruptive companies for the market.
The questions we ask are: does this company solve a problem in an innovative way? Is this a big problem and are there many companies that are going to pay or are they paying to fix this problem? Do these people have the right background, will, ambition and humility to work as a team with us? The last question being the most difficult to assess at the beginning.
Do you have a project or investment that you would like to share with us?
I will give the example of three very different companies that are innovating to different degrees and in different markets. A Barkyn is a company that sells food and food supplements for dogs, through an online subscription, that is, the person subscribes to the service and receives giant packages of food at home, without having to carry them. Nowadays, it has other assets such as a veterinarian, always available, various supplements and toys for the animals. Despite not being a company with an ultra-innovative technological depth, it is a company that solves a problem in a large market, as it presents a solution and more products that are not found in physical stores. This company has grown immensely, having a strong presence in Portugal and Spain.
A unbabel is a world leader in using artificial intelligence to translate. Using a mixture of artificial intelligence and human capacity to translate almost in real time, particularly in all aspects of customer service. It is a company that has large customers all over the world.
In the blue background, for example, we have the company Biomimetx, who invented a natural biocide, which lessens the impact of sticking algae or other types of biomass to the hulls of boats, aquaculture nets and other metallic structures under water. This increases the efficiency of the structures, as the boats use less fuel and at the same time replace a metallic component of the paint that is highly harmful to the environment.
These companies are not yet unicorns, they are not even at that stage, but they are on a very positive path.
What is your opinion on investing in art? Do you think it's a good investment?
Investment in art is a good investment like any other, if you choose well. It is a lasting investment, with some liquidity, however it is not liquid like other market investments, but it tends to appreciate over time. Obviously it depends on which art you are choosing and how you preserve that asset. A physical asset has to be preserved in good condition and in a safe way.
What are the risks and rewards associated with investing in art?
The biggest risk is the person buying pieces that will not have great appreciation or that will not last in time. Another big risk is physical degradation. The reward is if the person chooses well and therefore starts to have an asset that appreciates in a perennial and constant way. The other added value is for people to buy works of art that they like to see and have on display.
Have you invested in art? Can you give us some examples of investments in art you've made in the past? What are your favorite artists?
Of course. I try to buy pieces that I like and that have some reputation. I have works from my friend Vhils that I admire a lot, from the Spanish painter also a friend, now unfortunately deceased, Luis Badosa and others.
