Rise, Celebration and Possible Fall of the Greek Startup Scene

(The following article was requested as a guest post on Berlin Valley Magazine, Berlin's biggest publication on startups, on the occasion of Startup Safary Athens 2015. It was written during August 2015 and was published on the October 2015 issue translated in German. It was published under the title "#GRstartupscene at Crossroads: Greece Has a Celebrated Startup Scene, that Might Be in Trouble". The title of this post was one of the working titles of the article)

Greece has been known for decades for many different things; its ancient past, its culture and traditions, its touristic destinations, its food and products. What Greece wasn’t really known for was its technology and its ability to build global businesses in the sector. In the past decades, Greece certainly has sprung out a dozen of multi-billionaire businessmen, mostly in shipping or construction sectors, but IT or high-tech wasn’t really our thing.

But the last years due to the economic crisis and the spotlight being turned on Greece, international media discovered and promoted the ‘scene’ of tech entrepreneurship of Greece, which is mainly hosted in Athens, the country’s capital.

Tech entrepreneurship started in Athens as early as late 1990s, along with the rest of the world. For Greece, it wasn’t really the ‘dot.com bubble’ we experienced in the US, but the first greek online news portals, e-shops, auction marketplaces etc. were kicked-off back then. Early 2000s saw the beginnings of the first batch of truly global digital companies coming from Greece. The likes of InternetQ, Upstream, Velti and GLOBO made it even to list in London or New York. Later in the decade big online travel agencies, like AirFastTickets, TravelPlanet24/Tripsta, AirTickets, PameDiakopes, carried on the torch of big online companies.

The roots of what has been formed currently as the entrepreneurship/startup ecosystem of Athens should be traced back in 2008-2009 and the community fostered by the Open Coffee meetups, which had actually started from 2006. This community broke through the mainstream in 2009-2010 when the then-newly-elected government of PASOK’s George Papandreou apart from agreeing on a painful bailout program for the greek economy, they also brought into the public discourse entrepreneurship and startups as a new production model for Greece. In 2009 already, the first typical seed venture capital/acceleration fund (Openfund I) was established through the Open Coffee community and the funds of Piraeus Bank (currently Greece’s biggest bank) and private investors.

A key moment of inspiration for the greek startup community was definitely the founding of Taxibeat, Athens’ biggest taxi-hailing mobile application, in the summer of 2011, amidst taxi drivers’ strikes and demonstrations against measures that would freed up a little their heavily-regulated and over-protected market. The success of Taxibeat in the months and years to come was referenced as an inspiration model for many other founders.

The catalyst for the current greek startup ecosystem to accelerate and get into the size it is today was the establishment of four JEREMIE funds (a scheme through which European Union contributes 70% and private investors 30% of each fund) in late 2012. For 2013 I personally recorded $55mn being poured into greek-origin startups, while latest available data for 2015 show an amount of $30,6mn and 8,15mn euros. JEREMIE funds are the main deal source for greek startups, as well as a handful of private/angel investors and a few US and UK funds investing in later rounds.

Innovative entrepreneurs in Greece face several problems from limited available VC funds or private investors to tax and red-tape environment, and limited international experience. Usually a greek-origin startup is registered and established outside of Greece (mostly in the UK and the USA) and a greek subsidy or branch is operating in Greece. The core team or the R&D department of a greek-origin startup is working from Greece, while one or two founders are doing business development or sales outside of Greece.

Lately, with the financial and banking crisis in Greece worsening once more, the greek startup ecosystem is at crossroads, even threatened by extinction. Recent capital controls made it hard for a lot of tech entrepreneurs (mostly the not VC-funded ones) to transfer money to even pay for their domains, hosting services or marketing campaigns, but the real problem will rise if Greece doesn’t establish a new JEREMIE scheme to fund its startups.

Admittedly JEREMIE funds and their network effect (success and failure examples, serial founders, experienced executives) have catapulted the formation and evolution not only of the companies themselves but the entire entrepreneurship ecosystem in Athens and rest of Greece. Their investment period end in 2015 and no official extension has been announced. On top of that no real private market for investing in innovative companies has been formed so far.

Most certainly, the best of startups and founders will find their way in funding their companies outside of Greece as it’s happening already, but without more ‘massive’ funding options, the much-celebrated #GRstartupscene could be dissolved sooner rather than later.

(If you are a German speaker, you can download Berlin Valley Magazine's October 2015 issue by subscribing here)