The Greek government’s recent focus on startup companies won’t be enough to turn the tide on a job market in which more than one in four Greeks are without work, startup leaders in the country say.
Greece needs small companies specializing in the “new economy” to help spark growth, Prime Minister Antonis Samaras said last week at a startup industry event in Athens he attended with German Chancellor Angela Merkel.
“Startups do create jobs and revenue for the country, and act as a positive role model, especially for the young,” Haris Makryniotis, managing director of Endeavor Greece, said in an interview in Athens. While the focus on startups is good news, “we can’t expect these companies to be enough alone to generate the number of jobs needed in Greece,” he said. New York-based Endeavor Global Inc. is a non-profit organization that backs “high-potential” entrepreneurs.
Greece has lost a quarter of its economic output during a six-year recession, under the weight of austerity measures that have led to an unemployment rate of over 26 percent. That figure rises to more than 56 percent for Greeks age 15 to 24. The value of Greece’s economic output fell 40 billion euros ($55 billion) from 2010 to 2013, according to the country’s statistical authority.
Greek startups employ about 1,500 people in a range of businesses from taxi-finder applications to social networking to souvlaki takeout operations and city-center cupcake shops. The number of new startups reached 144 in 2013, compared with 65 in 2012 and 16 in 2010. Thirty of the new companies attracted 42 million euros of investment in 2013 compared with a total of 500,000 euros in 2010, according to Endeavor.
Chance to grow
Around 15 percent of these companies have a good chance of growing into bigger firms, Makryniotis said, calling that a good performance “but not enough, and we shouldn’t put the burden on them to solve the problem.”
While increased focus on the industry is a good sign, “the negative side is this sort of obsession we have with startups,” said Emilios Markou, co-founder and executive director of Hellas Direct, an online car insurer. “Even if we had a Silicon Valley, which we don’t, we wouldn’t suddenly see 200 million euros-worth of GDP from a bunch of guys.”
Hellas Direct, which began operations in 2012, has raised 12 million euros from investors in the US and the UK, as well as from so-called angel investors. Hellas Direct employs 35 people in Athens, Cyprus and London and has a strategic partnership with Germany’s Munich Re.
“It’s premature and over-hyped to say startups are the future of Greece and will turn the economy around,” said Nikos Moraitakis, chief executive officer of Workable, a startup that makes recruitment software solutions for small and medium-sized companies. “There’s an eagerness to overplay positive stories about Greece after a period of such tough times.”
Workable, which has 18 employees in Athens and two in London, raised $950,000 last year from the Jeremie Openfund II and private investors and a further $1.5 million in March from Greylock IL, an affiliate fund of Greylock Partners. “The challenge in Greece over the next few years is for startups that have already proven themselves to get bigger amounts of funding, say around 5 million euros,” Moraitakis said.
The startup industry, while still small, is capable of creating benefits for Greece’s economy, said entrepreneur Alexis Christodoulou. “The startup ecosystem is like a pyramid, the higher the top, the bigger the base,” said Christodoulou, who together with Grigoris Zontanos founded Locish, which is registered in San Francisco. Startups “have the capacity to take the Greek economy a little higher,” Christodoulou said.
Locish in March got 820,000 euros in funding from a US venture led by Odyssey Jeremy Partners to develop a mobile application that uses social networking to offer real-time recommendations and directions.
Antonios Fiorakis, co-founder and chief executive officer of Incrediblue, a community marketplace for boat rentals, said that while the number of startup jobs in Greece is not significant, the industry’s impact shouldn’t be underestimated. “In a country with 1.3 million unemployed, the few hundred employees that startups hired last year might seem like a drop in the ocean,” Fiorakis said. “In reality though, these people are highly skilled and motivated and can make a big impact on every company’s growth, and that will result in more jobs.”
Incrediblue, founded in 2012, raised 600,000 euros last year and has grown from three co-founders to a team of 14. If the government backs its rhetoric with moves like lower social security costs, firms like Incrediblue could hire more workers, Fiorakis said. “Entrepreneurship is the solution to unemployment.” [Bloomberg]