IT IS often said that the best business ideas emerge during times of financial stress. When an economy is struggling and its people are cash-strapped, we’re pushed to think outside the box. A prime example is what happened in the US during the financial crisis. A 2013 study in the Journal of Economics and Management Strategy by professor Robert W Fairlie found that “the Great Recession caused many businesses to close their doors or file for bankruptcy protection, but the rapid rise in unemployment also drove an increase in entrepreneurship.”
And experts say the same could happen in Greece.
“In general the feeling across the startup ecosystem in Greece is that, if you can succeed and make it through this challenging time… then the sky is the limit,” said George Tziralis, partner of Open Fund, a venture capital fund based in Greece, in a phone interview with CNBC over the weekend.
Rising debt, weakening business sentiment and slowing growth are putting Greek citizens in an unimaginable situation. Reports indicate that businesses have had to remain shut due to limited financing and capital controls. Owners of shops and travel agencies who rely heavily on tourists are struggling to make ends meet. And with the way ahead still rocky in spite of an agreement on a bailout deal between Greece and its international creditors, the situation will not improve anytime soon.
With this challenging backdrop in mind, some have had to think creatively. One business owner told CNBC that he is using online banking and sites like TransferWise to pay international vendors.
More Greeks are using credit cards as opposed to cash because of the restrictions at the banks. This is an example of the changing user behaviors that entrepreneurs are trying to capitalise on.
“Initiatives such as those started by Zerofund and LoveGreece.com are great examples of how local leaders are trying to tackle the immediate issues, which include taking payments and hosting challenges,” said Carlos Espinal, a partner at SeedCamp, an acceleration fund based in London.
But Greece doesn’t just need innovative ideas. The troubled economy needs ideas that can lead to job growth. And action must be taken now: the impact of long-term unemployment can be detrimental to its economy.
The government, while focused on striking a deal with creditors, should also be using accelerators as a way to foster and promote entrepreneurship. But the onus is also on leaders from the startup world to rise to the occasion and provide mentorship. While the startup ecosystem is in its infancy, some entrepreneurs have achieved great success in Greece.
Alexis Pantazis co-founded Hellas Direct, a direct-to-consumer motor insurance company, with Emilios Markou in 2010. Pantazis and Markou, both former bankers, saw the crisis as an opportunity. “We were quite lucky on the funding side – we appealed to contrarian investors, who were willing to back us, and our timing was important,” Pantazis told CNBC on Sunday.
Hellas Direct now has well-known hedge fund investor Dan Loeb of Third Point and Jim O’Neill, former Goldman Sachs economist, as backers. And as for dealing with the restrictions on banks, Hellas Direct made a clever move in keeping its money outside of Greece.
“Our capital sits in London – this means that we are protected from any deposits haircut, we can continue operating as normal and pay our clients as and when needed,” said Pantazis.
Investors are keeping a watchful eye on opportunities that may arise in Greece. OpenFund has invested in 20 Greek tech companies over the last 24 months. “We never had a hard time finding investment opportunities in Greece… the ecosystem is improving. But in the last couple of weeks we have not been focused on investing in new companies. We are waiting for leaders to reach a deal,” said Tziralis.
Several entrepreneurs told CNBC they are unable to raise funds during this time, however, given the uncertainty around Greece’s financial future.
This is the time when we must see solidarity among entrepreneurs in Greece. You may be disappointed if you fail, but you are doomed if you don’t try.
Seema Mody is co-anchor of Worldwide Exchange on CNBC.
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