Alexis Tzipras, the Greek prime minister, has until midnight tomorrow to keep his country in the euro zone. A deal, wrangled after a Greek referendum and intense talks, will force Greece to adopt austerity measures in line with the eurozone, in return for around €86 billion ($95 billion) across three years, which will help the nation climb out from beneath an estimated debt of $360 billion.
Tzipras must now convince his own coalition politicians to accept the deal. Short-term financing is a must, with banks struggling to provide cash and a government with just $1 billion in its current account. Even if he does, a Grexit may still be on the cards. Citigroup analysts wrote that “the likelihood of short-term Grexit remains significant given the strong conditionality contained in this proposal.”
The protagonists of a nascent Greek startup scene have been watching avidly. In January, with Tzipras’ hard-left Syriza party sweeping to power Red Herring reported on the rise of tech in the country, from promising firms like Workable to a core of funds such as Openfund, Odyssey, First Athens and PJ Tech Catalyst. In 2013 there were 144 startups in Greece. In 2010 there were just 16.
Then, entrepreneurs were quick to play down the financial crisis. Today, with banks shuttered and a withdrawal limit of €60 ($66) per day imposed since June 29, the mood has darkened. Every contact who spoke to Red Herring bemoaned Greece’s tax regime. All freelancers must currently pay an 80% advance on their year’s taxes which will soon increase to 100%.
“You can go round saying we have to chop the pension system – but if you destroy the public sector, which has been whittled down hugely already, why tax freelancers through the teeth – are you trying to kill SME? Of course,” says tech journalist Asteris Masouras. “Everyone is talking about debt relief but no-one’s talking about stimulus. How can you have growth? I’m really worried.”
These measures were enacted under Greece’s former government. But they, like the financial crisis, have created an atmosphere of fear that, according to leading investors, is shattering a scene that has, over the past few years, gathered significant momentum.
Unemployment hovers around 25%, a figure that has remained constant since around 2012. That has encouraged a population that traditionally shunned entrepreneurialism, to begin working on their own business ideas. However uncertainty “makes entrepreneurs less willing to start up a company in Greece,” says Dimities Kalavros-Gousiou, co-founder of Athens cowering space Found.ation.
“A stable economic, tax and social environment is a good start,” he adds. “Having a flat tax rate for the first five years for example, would make a huge difference for startups and their financial planning. Create a tax free zone aiming to attract international ventures looking to open a branch in the European Union is also an interesting proposal.”
However what the country needs most, says Kalavros-Gousiou, is long-term thinking. “We should ask ourselves, where do we want to be in the next ten years and how can we achieve this goal. It is essential to know that there is a long term strategy in place, that we know where we are going.”
Companies with an international pool of customers, and which are present in multiple markets, will have the greatest chance of survival – as do enterprise firms, which will find it easier to create new revenue streams.
Even so, admits Kalavros-Gousiou, “if this situation continues, most (entrepreneurs) will seriously consider relocation.” Many already are. Alexandro Trimis, a tourism entrepreneur, admitted to TechCrunch today that “if things evolve for the worse, then we are not sure what we will do.”
There are ways for Greek companies to access capital despite the crisis. Some expats have offered triangulated payments as a way for local firms to release funds. “If any Greek startups are having a problem paying for services,” wrote BugSense founder Panos Papadopoulos, “you can rely on us; we can act as your proxies by using our credit cards in the US to cover your expenses.”
Stavros Messinis, co-founder of Athens startup cluster TheCube, refutes this. “Triangulated payments are not a long-term option,” he says. “In fact, they may be illegal under Greek law.
“But we’re entrepreneurs,” he adds. “We will find a way.”