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Young Greek entrepreneurs: 'We are unfazed'

ATHENS — In a modern high-tech office, two software engineers are busy directing an army of young engineers as they work on upgrades for their three-year-old cloud-based recruiting software company, Workable.com, which already has 3,500 customers in 50 countries and has attracted more than $34 million in venture capital.

It would be just another Silicon Valley success story if it weren't for the company's home base: Greece, a country that is the basket case in the euro zone because of economic mismanagement, public sector corruption and a youth unemployment rate that's a staggering 60 percent. The situation is so dire, suicide rates are on the rise, and there is an exodus of talent looking for opportunities abroad.

Despite the bleak outlook, there is a growing cadre of Greek entrepreneurs determined to defy the odds and build high-tech businesses that can thrive, providing a glimmer of hope for the economy. These trailblazers are patriots. As the most highly educated generation in the nation's history, they are determined to grow their ideas on home soil even as Greece grapples with budget austerity, and regulatory changes that are undermining the middle class and threatening national sovereignty.

"The crisis has pushed people into survival mode, and they are looking for opportunities," according to Stavros Messinis, CEO and founder of The Cube, a start-up incubator in Athens. "At this point, there isn't much for them to lose."

Most are tired of an unstable political system unable to put the country back on its feet. Since the start of the economic crisis in 2009, Greece has lost more than 25 percent of its GDP, and thousands of enterprises have gone bust under the pressure of a deepening recession. This summer the country defaulted on more than $280 billion of debt, and capital controls were issued to prevent a run on the banks.

As Messinis explained, "Up until now, 70 percent of Greeks were employed by the public sector. But that is now crumbling. Now we need to develop a high-tech sector that can produce value-added products and services to turn the economy around."

Perhaps nowhere in the Western World are the obstacles for entrepreneurs so difficult and complex. The lack of bank liquidity makes it near impossible to raise bank loans. The antiquated legal system mires new businesses in red tape. There are 39 procedures just to register a new business entity, get electricity turned on and get construction permits. Taxes — including a 100 percent advanced corporate income rate — are also onerous, while the social benefits of costs for new hires, including pension and health care, is 39 percent annually.

Yet some Greek entrepreneurs are willing to deal with the realities of a broken bureaucratic system and a sinking public sector in order to remain in their home country. For them, the risks are worth it, since there are few avenues left that offer career opportunities.

"We are unfazed by the Greek economic crisis," said Nikos Moraitakis, co-founder and CEO of Workable.com. "We are building a global high-tech business that can take root anywhere, with a customer base that is 98 percent outside Greece in more than 50 countries. In fact, we feel we have a leg up because we can recruit excellent engineers at very competitive costs who are fiercely loyal employees."

All of Workable.com's engineers have at least a master's degree from top-flight U.S. and European universities, such as Purdue University and Imperial College in London, speak English and many other languages and are up to date on all technical advances. Their annual salary ranges from $50,000 to $80,000 vs. $100,000 to $150,000 in the U.S.

Workable’s dynamic duo: CEO Nikos Moraitakis and CTO Spyros Magiatis
Source: Workable
Workable’s dynamic duo: CEO Nikos Moraitakis and CTO Spyros Magiatis

It's not surprising that Workable.com has become the poster child of entrepreneurial success in Greece. The company — tapping into the $1.7 billion market for small- and medium-sized enterprises (SMEs) — is growing at 15 percent a month and expects to expand its workforce from 60 to 200 employees by the end of 2016. With well-heeled backers, including 83North (formerly Greylock IL), Balderton Capital and Openfund, young entrepreneurs aspire to copy the company's success formula.

The model is to develop a tech product or service with huge potential for the global market, keep R&D in Greece, and maintain financial and marketing operations in the U.S., U.K. or other European hub, said George Tziralis, managing partner of Openfund, a €15 million Athens-based venture fund that provided the seed funds for the software company and was the first venture capital fund launched in Greece in 2009. "It's a way to circumvent political uncertainty and economic instability. It is the new modus operandi," explained Tziralis, a software engineer turned entrepreneur himself.

At Endeavor Greece, a start-up accelerator in the tony Kolonaki area of Athens, managing director Haris Makryniotis sees the same trend. "Entrepreneurs of all ages are launching businesses in the midst of an economic crisis, and an entrepreneurial ecosystem is slowly developing here. ... When economies go down, risk-taking by entrepreneurs goes up."

According to Endeavor statistics, there are about 600 high-tech start-ups in Greece that have sprung up in a range of industries, from aerospace and biotech to tourism and mobile apps. Surprisingly, the rate of formation has not declined through the country's debt crisis. It has actually increased 12 times since 2010.

One of the early champions of this movement is Tziralis, who didn't only launch the country's first VC fund but also Greece's first high-tech entrepreneurial networking forum, called Open Coffee, in 2007. Today, hundreds attend Open Coffee's monthly events at the Binaki Museum in Athens and in other cities across Greece, where successful entrepreneurs give presentations about their best practices. It's become the epicenter of the Greek start-up scene, where developers, investors, geeks and marketers gather to network and share ideas.

To date, Openfund has invested in 20 companies, including Workable.com and Taxibeat — a hail-a-cab smartphone app and taxi driver marketplace that has raised $6.7 million from international investors and has been expanding its services across cities in Europe and Latin America.

"These success stories are helping to boost interest from angels and institutional investors from abroad," Tziralis said. "They are now realizing that a €1 investment in a Greek start-up is equal to a £2 investment in the U.K. and a $5 investment in Silicon Valley because of our world-class engineers."

Following his lead, there are now a handful of venture capital funds in Greece, including Attica Ventures, First Athens, PJ Tech Catalyst, Jeremie Funds and Odyssey Venture Partners, managing about €70 million in assets. While this is a paltry sum by international standards — the total European market for venture capital raised €4 billion last year — it's helping to ignite a fledgling venture capital financing market.

George Tziralis, founder and partner of Openfund, an Athens-based venture capital firm.
Marios Polyzogopoulos | CNBC
George Tziralis, founder and partner of Openfund, an Athens-based venture capital firm.
"A €1 investment in a Greek start-up is equal to a £2 investment in the U.K. and a $5 investment in Silicon Valley because of our world-class engineers." -George Tziralis, managing partner of Openfund

Multinationals like Microsoft are evangelizing the benefits of high-impact entrepreneurship in Greece. Innovation centers, business incubators and shared work spaces have sprung up across Athens and other Greek cities to help start-ups. Their goal: to help defray operating costs and mentor entrepreneurs. Their mantra: Forget about any government support, since there isn't any. Instead, rely on your own resources and strength.

At the Microsoft Innovation Center, located on Kifissias Ave. in Maroussi — a telecom alley located outside Athens — entrepreneurs with sound commercial ideas in software and mobile applications are given six months to two years to launch a start-up with Microsoft product support. "To find candidates, we visit universities and incubators," said Fotis Draganidis, the general manager of the center.

That is becoming easier as the number of incubators proliferate. One called Orange Grove is sponsored by the Dutch embassy, and Dutch companies such as Heineken, KLM and Philips. Another, called Enter Grow Go (EGG) — backed by Eurobank, the third-largest Greek lender; and Corallia, a Greek innovation cluster — is nurturing start-ups in a host of industries. The list includes TomoTECH, a company developing advanced cloud-based brain MRI software that is now raising $200,000 in a seed capital round from angel investors in the U.K. and Greece to ramp up R&D and expand its team.

Although these incubators do not offer equity capital, they sponsor competitions to help aspiring entrepreneurs garner grants to transform their ideas into commercial prototypes and fledgling businesses. At Orange Grove, a quarterly event called The Squeeze awards eight of the most promising start-ups €10,000 to €15,000 so they can work full-time on their venture.

Often the publicity that winners attract can lead to big and better things. Roxane Koutsolouka, the 29-year-old founder of JoinCargo, an online transport platform connecting small businesses with cargo carriers, was able to attract €100,000 from an angel investor in the U.K. after winning first place at The Squeeze last year. The networking event attracted more than 300 investors, entrepreneurs and international company representatives who come to offer support services for Greek start-ups.

One of the most notable competitions is the Hellenic Entrepreneurship Award, which is sponsored by the Libra Group, an international conglomerate born out of the Greek shipping empire of the Logothetis family. Each year, a panel of judges composed of VCs, CEOs, bankers and marketing experts choose up to five winners based on their disruptive innovation, job creation potential and savvy financial and management strategy. They are given interest-free loans of up to €1 million to help with business plan development and branding. They also receive a marketing mentorship from a Libra executive and free legal, accounting and IT support.

According to Jimmy Athanasopoulos, head of social responsibility for the Libra Group, submissions for the award have risen from 500 in 2012 to 900 in 2015. The quality of the business plans are also improving every year as aspiring entrepreneurs become more trained on how to structure business plans and develop business strategy. "The start-up community is evolving, and we are in the early days. It takes time, but we are getting there despite all the hurdles," said Athanasopoulos.

The Cube, a start-up incubator in Athens.
Source: The Cube
The Cube, a start-up incubator in Athens.

RTSafe, a winner of a €250,000 Hellenic Entrepreneurship Award last year, found that the coveted prize has helped them gain international recognition and the working capital to refine their breakthrough medical technology. The one-year-old company makes a 3-D-printed brain and skull avatar to improve the targeting of radiotherapy for brain cancer patients that is now being used at clinics, hospitals and research centers in the U.S. and Europe. These include The University of Texas Health Science Center, San Antonio, and Thomas Jefferson University Hospital in Philadelphia. Among its customers are Brainlab and Philips.

In June it also won the MIT Enterprise Forum Greece competition and now it is being courted by venture capitalists and angel investors who are attracted to the mulit-billion-dollar global market for the company's unique technology. "Besides the money and recognition, Libra and MIT helped us bundle a strong management team and develop a branding and marketing strategy that laid the foundation for our venture," said Evangelos Pappas, a medical physicist who is one of RTSafe's co-founders. The company has a pre-valuation of €12 million and it is being courted by angel and VC investors in Europe and Boston.

The trickle down effect

Guidance is pivotal, since most Greek entrepreneurs are scientists and technology geeks that lack strong business management experience. "It is a weakness in the market," stressed Ion Tsakonas, CEO of PJ Tech Catalyst, a €15 million seed-stage venture capital fund that invests in information and communication technology companies (ICTs) and is backed by Piraeus Bank. "Teams are not experienced enough in business building," Tsakonas said. "We are seeing an organized effort now in Greece to educate and train entrepreneurs. The question now is how quickly all of this will trickle down."

Philipp Brinkmann, the Greek founder of Travelplanet24.com, the largest e-commerce company in Greece, sees a dramatic improvement in the entrepreneurial talent base over the last three years. "When I first launched my online travel booking company in 2004, it was hard to find people with experience in online marketing and data science," he said. "Now there is quite a lot of talent in Greece. And we're seeing more start-ups take off."

"What the country needs is more access to capital, and a larger venture capital industry base," Brinkmann said, noting he had to bootstrap his company and plow profits back into the business in order to grow, since no other funding options were available. "If I had access to capital, there is no telling how much faster I could have grown my venture."

Today, Travelplanet24 employs 270 people and has annual revenues of €520 million. After acquiring its biggest competitor, Airtickets.com, earlier this year, it now serves 40 markets worldwide and garners 67 percent of its revenue from Europe.

Greece also needs to build bridges between the university research community, corporations, entrepreneurial innovators and investors, much like the collaborative infrastructure in Silicon Valley.

An early visionary who has been laying the foundation for change is Vassilios Makios, professor emeritus of engineering at the University of Patras and general director of the Corallia Clusters Initiative. In the late 1990s, he realized the need for Greece to transform its public sector economy into one focused on ICT value-added products and services, much like Israel had done in the 1970s. "I saw how a lack of private innovation was forcing brilliant young minds to leave Greece to find jobs elsewhere. "It was a brain drain threatening our country's future," he said.

So he reached out to companies like Atmel, a Silicon Valley firm that makes flash memory chips and which is run by Greek expats, to establish a product design center in the Greek city of Patras. After successfully luring a handful of other high-tech multinationals, he joined forces with two other Greeks who had worked at Bell Labs, and the team was able to get a grant from the EU to launch Corallia in 2008. It is the country's first innovation design cluster that focuses on supporting new ventures in the microelectronics, nanotechnology, gaming and aerospace industries and boosting cooperative research efforts among companies of all sizes in these fields.

Today, Corallia has 150 company members, of which 40 are start-ups. The innovation cluster idea pioneered by U.S. start-up guru Michael Porter of Harvard Business School has helped Greek companies boost exports by 108 percent and churn out 100 patents over the last five years. Corallia has been recognized by the EU for excellence and is now part of the Silicon Europe Alliance.

"For the last 30 years, entrepreneurship was an anathema in Greece, but that's slowly changing," Makios said. "We can now support multinationals that need R&D but face talent shortages in places like Israel and India."


The start-up supply chain is emerging in this economically battered country. Across Greece, universities are teaching students how to think like entrepreneurs and transform innovative ideas into breakthrough commercial products. They are also pairing engineering students with MBAs to forge teams capable of developing sound business strategies to boost the odds of start-up success.

At the University of Economics and Business in Athens, Ennovation, the country's biggest student entrepreneurial competition, is held during Global Entrepreneurship Week in November. At the event, around 300 teams from more than 40 universities in Greece and Cyprus pitch their big ideas, vying for a chance to land a spot at a local incubator like the EGG, set up residence at the Microsoft Innovation Center or get invited to meet potential investors abroad.

For a lucky few, Ennovation has been their "Golden Ticket." Just ask TomoTECH's CEO Zoi Giavri. The electrical engineer won last year and was taken to the South by Southwest Conference in Austin, Texas, this past March, where she met potential investors and gained perspective about the entrepreneurial mentality in the U.S.

"It's a dream come true and a chance for a brighter future," she said.