Ecosystem Deep Dives is a weekly series in which I analyze and compare different start-up ecosystems from around the world. If you enjoy and gain value from my work, feel free to share and subscribe!

Trying times

It’s safe to say the 2010’s wasn’t Greece’s best decade. A plethora of convoluting issues starting with the country’s overflowing sovereign debt created a domino effect triggering EU bail-outs, austerity measures, unemployment and plummeting purchasing power. The crisis also led to a massive “brain-drain”, with many talented Greeks leaving abroad in search of better opportunities. As we’ll see later, this is a trend that is slowly being reversed by the Greek start-up ecosystem.

In order to better comprehend the backstory behind the Greek crisis, I strongly recommend the book “Adults in the Room”, written by former Greek finance minister Yanis Varoufakis. The book brings the reader backstage into some of the most critical meetings held by the infamous “Troïka” ( a group made up of the European Commission, the European Central Bank and the IMF) during the crisis. The book is evidently opinionated, but it’s a great read.

Almost a decade after the crisis started, Greece is, similar to Portugal, seeing light at the end of the tunnel. Everything isn’t perfect, but the country’s buzzing start-up scene is a testament to the breath of economic fresh air Greeks are finally getting to inhale.

The role of the EU (again)

Ironically, the EU played a critical role in getting the Greek start-up ecosystem to where it is today. Indeed, in 2017, a $300 million “fund of funds” named Equi’Funds was launched, with the stated purpose of “unlocking equity financing in Greece”. To do so, money from the program was used to create six different, local VC funds, each of them carrying out a singular investment thesis. These include:

• BigPi Ventures: Focuses on technology transfer by assisting both research-based projects and companies, mostly active in the B2B segment.

• Metavallon Fund: An accelerator fund that focuses on pre-seed and seed stage companies in Greece and targets technology and intellectual property (IP)-driven start-ups primarily in information and communications technology (ICT) and engineering products.

• Unifund: Targets pre-seed and seed investments in the broad technology sector, aiming to leverage the hidden potential that exists in the Greek university, R&D and technological space.

• Velocity Partners: A pre-seed and seed acceleration fund that focuses on technology companies in verticals where the Greek economy can provide global validation and real market traction.

• Marathon VC: Brings together a team that combines investment, entrepreneurial, technical and operational skills in order to help the new generation of ambitious founders build world-class technology companies. The fund targets SMEs at the seed and Series A stages.

• Venture Friends: Brings together a strong and cohesive team able to provide substantial value to ICT SMEs in the seed and Series A stages.

An interesting comparison to the Equi’Fund initiative would be the Tunisian “Fonds des Fonds ANAVA”, which aims to deploy $200 million in order to launch 13 new Tunisia-focused VC’s. One could also name Start-Up Chile, who went a step further by incubating the start-ups its public money financed.

Equi’Fund has been fundamental for the ecosystem in a country where institutional investors are not yet accustomed to the venture capital asset class. Some of the funds’ top investments include ThinkSilicon (acquired by American multi-national Applied Materials), PushMe (acquired by German company Tier Mobility) and Instashop (acquired by DeliveryHero for $360 million). One can also cite Softmotive’s acquisition by Microsoft, VivaWallet’s and PeopleCert’s unicorn valuation, Flexcar’s $50 million and Blueground’s $180 million fundraise in order to highlight the growing performance of Greek start-ups.

Other organizations such as Endeavor Greece have been an important link between international start-up resources and the young Greek ecosystem.

In line with many other start-up ecosystems worldwide, Greek start-ups experienced an impressive funding boost in 2021. Indeed, the amount raised by Greek start-ups in 2021 was north of $500 million, triple the total start-up investments in 2020. As the ecosystem slowly exits its “nascent” phase, plans are underway to make the funding landscape stand on its own; an ambition stated by Chris Gasteratos from Marathon Partners:

“Under these auspicious conditions, venture capital funds in Greece find themselves in a post-EquiFund era, where the industry transforms from a heavily state-sponsored enterprise to adopting more market-driven characteristics.”

Greek advantages

While its “business” image has been damaged in the past decade, talent and big corporates are slowly waking up to the positive sides of doing business in Greece.

Let’s start with the low-hanging fruit. Greece’s beauty, climate and idyllic scenery is a good match to the permanent remote work setting many companies are implementing and many employees are requesting. However, this is a double-edged sword, as the advent of remote work also makes it easier for local Greek talents to work for a big multi-national without leaving home. Nevertheless, the remote work trend is leading to a tangible “brain-drain reversal”, with many Greeks in the diaspora coming home, a topic we will cover later on.

Talking about talent; Greek’s education system sure has its flaws but it does pump-out high quality STEM graduates, looking for exciting opportunities in disruptive fields. Greek tech talent is also cheaper than many other places in the EU. This supply of local talent has been key in incentivizing some big corporates to establish Greek R&D centers, such as Pfizer in Thessaloniki, Microsoft in Attica, Teamviewer in Ioannina or Tesla in Athens. As we’ve seen in the Mexico article, the establishment of big corporates in a start-up ecosystem is a two-way street: on one hand, it may deprive Greek start-ups of their brightest local minds in the short term, but on the other hand, the workforce spilling out of those companies is very well-suited to launch start-ups themselves.

The role of the diaspora

The involvement of the Greek diaspora in the rise of the Greek start-up ecosystem has been crucial. It has also proven to be a symbiotic relationship: as the diaspora helps the ecosystem grow, the growing ecosystem attracts more diasporas. Ecosystem actors are very well-aware of the value the diaspora represents; as Aristos Doxiadis, partner at Big Pi Ventures states:

“The greatest advantage of Athens and some other Greek cities is the number of highly skilled Greeks in their thirties, who are working in technology or research in the rest of Europe and are looking to return home.”

The involvement of successful founders in the Greek diaspora such as Stavros Papadopoulos of TileDB, Dimitrios Skaltsas and Vangelis Vergetis of Intelligencia, Niko Bonatsos and Andreas Masouras of Saphetor was paramount. Organizations such as the Hellenic Innovation Network have been acting as the liaison between both sides of the Atlantic.

The excitement surrounding the fast-growing Greek start-up ecosystem has provided an impetus for many skilled members of the diasporas to take an extra-step and actually move back to Greece. This has started to counter some of the “brain-drain” damage that occurred during the darkest times of the Greek financial crisis. As Myrto Papathanou, founding partner at Metavallon says:

“The pandemic has in fact created a mini-brain gain in Greece, with technology professionals coming back here and getting involved in startups as founders, executives and investors”

While the term “start-up nation” and the start-up world in general are sometimes mocked as being over-hyped, the fact of the matter is that start-ups are “cool” for lack of a better word. It might sound barbaric, but cities with active start-up ecosystems are “cool” and thus attract young, fresh talent. Just think of the transformation Portugal went through, from an economically stagnant country losing its talent in droves at the beginning of the 2010’s to being one of the most en vogue destination for tech nomads today. In other words: having an active start-up ecosystem makes a city desirable, and that is key to attract the highly-skilled, young and cosmopolitan Greek diaspora back home.

Government involvement and regulatory changes

The Greek government definitely doesn’t have the reputation of being the most efficient and cost-effective one out there. The Greek business apparatus still has a long way to go before being a go-to choice for founders. Indeed, Greece ranks 79th in the 2020 World Bank of Doing Business Report, nestled between Tunisia and Kyrgyzstan. There have been recent efforts to relax some of the administrative burdens on Greek start-ups, with the change in fiscal requirements regarding stock options for example:

“With a recent tax legislative amendment by the Greek government, giving out equities to employees is not treated as employment income anymore, nor as a payment in kind. Instead, a flat 15% capital gains tax is applied on the value of the stock at the time of the ‘exercise’ of the stock option.” - Start-ups in Greece 2021 report by Found.ation

The launch of Elevate Greece, a government initiative aimed at centralizing the ecosystem’s resources and streamline administrative procedures will likely turn out to be the backbone on which the Greek start-up legislative environment is improved. The public-funded Hellenic Development Bank of Investments has also been pouring money into the ecosystem.

On a macro-level, it is undeniable many bureaucratic barriers remain to enable the ecosystem to express itself fully. The launch of the so-called “Digital Transformation Bible” and the Digital Governance Ministry seems to indicate the government is on the ecosystem’s side. The recent success of Greek start-ups will hopefully give different ecosystem actors more leverage to move things faster.

Remaining challenges

Once again, there is a disturbing problem of gender parity in the Greek start-up ecosystem, as with almost every other start-up ecosystem in the world. Out of the start-ups Equi’Fund has invested in, only 1.5/10 had female founders. This is due to a variety of factors and should be addressed at the earliest stage of the ecosystem’s pipeline (start-up competitions/university hackathons).

While Greek startups are the strongest in sectors such as life sciences (healthtech, biotech, medtech), some observers say there is a lack of fintech innovations which could not only prove lucrative in Greece, but could be very scalable to other countries in southern Europe that face significant rates of financial exclusion. While funding has been growing, there is still a gap in large, scale-up tickets, as well as a lack of very early-stage $50-250K tickets.

“Although in the last 18 months we have noticed a growing number of active angel investors, who traditionally are the backbone of every healthy ecosystem, first-capital in (the sub 300k region) remains largely underserved and untapped, minimizing the inflow of new talent and ventures in the market” - Start-ups in Greece 2021 report by Found.ation

Conclusion

I think there are a lot of comparisons to be made between the Portuguese and the Greek ecosystem. Both countries had suffered damaging financial crises in the past couple years, draining their population of their best talent. However, as Portugal demonstrated, building a national start-up ecosystem is a key element to getting an economy back on its feet. Growing start-up ecosystems pressure legislators to make governmental procedures more efficient, attract foreign investment, and incentivize local talent to stay local. While it isn’t a panacea for a country’s woes, I think start-up ecosystems and subsequent local success stories can provide role models and hope to countries where the youth has all too often been disillusioned about their future.

Question of the week: Do you have other examples of public entities kickstarting local VC fundraising scenes? Tell me in the comments!

Ecosystem Deep Dives is a weekly series in which I analyze and compare different start-up ecosystems from around the world. If you enjoy and gain value from my work, feel free to share and subscribe!