ATHENS, GREECE — Evgenia Papadopoulou runs a Pilates studio in downtown Athens, and over the past three years she has cut her staff from seven to three. Business is down 40 percent, while her studio's taxes, insurance and electricity costs have increased by as much as 12 percent. Even so, Papadopoulou feels lucky to be working — and to have started her business almost two decades ago, when bank loans were common and Athenians had steady incomes. Today's entrepreneurs face a starker climate. Greece is a country in crisis, with unemployment at 27.9 percent - a staggering 58.8 percent among the country's youth. Through June Greece's economy declined for the twentieth straight quarter, with GDP shrinking by 4.6 percent. Efforts to pay down Greece's mountain of debt — including tax hikes, and cuts to wages and pensions — have not had their desired effect, lowering household income and deepening the recession instead.
Could Greece turn its dismal economy around through entrepreneurship? Structural challenges make Greece a notoriously difficult country for entrepreneurs. It ranks 78th in the World Bank's Ease of Doing Business list, out of 185 countries. Banks don't give loans. Until recently, angel investors were nonexistent. Venture capital investment as a percent of GDP is essentially zero, compared to .17 in the United States and .04 in Britain. Taxation levels change constantly. Because Greece lacks a formal land registry, entrepreneurs who want to open a hotel or restaurant worry that others will challenge their land rights. Intellectual property law is complicated and expensive. Greece spends a lower percent of its GDP on education than any other EU country, and many graduates feel unprepared for careers in business.
In part because of these reasons — and also because of the appeal of public sector jobs, which until recently have been lucrative and stable — Greek has a limited history of entrepreneurship. Shipping magnates may have made their fortunes on the Aegean, but for most entrepreneurs in Greece, self-employment has been limited to mom and pop shops — tavernas, small retailers and other types of business that are consumption-driven, with low efficiency and low productivity. "If an 18-year-old could not get into university, his parents would open a souvlaki shop for him," says Haris Makryniotis, the managing director of Endeavor Greece, a nonprofit that supports entrepreneurs around the world. "Businesses were small-scale, unproductive and driven by owners who had no other choice. This is how we entered the crisis in 2008."
The crisis made things worse, as credit froze and many families saw their income plummet. Today Greece is slogging through its sixth straight year of recession, but is heading toward stability, according to IOBE, an Athens think tank.
More entrepreneurship would likely hasten a recovery. As Deutsche Bank's Antje Stobbe and Peter Pawlicki write, since Greece can't improve its competitiveness through external devaluation, it must focus on boosting productivity. GDP growth would help the country reduce its debt burden and return to a manageable public debt-to-GDP ratio. More entrepreneurship would create more jobs, and help diversify an economy that is still heavily reliant on traditional industries such as tourism, agriculture and shipping. The creation of tech millionaires would have a knock-on effect, as wealthy entrepreneurs look to invest in other startups.
There are reasons for optimism. Top graduates are increasingly interested in entrepreneurship, in part because of the lack of other job opportunities. Athens has a growing tech scene with promising startups like Taxibeat, an Uber-like smartphone app that has raised $2 million in venture funding. In the last year four firms - Odyssey Venture Partners, First Athens, Openfund and PJ Tech Catalyst - have used EU and Greek government capital to invest in startups, through the JEREMIE initiative (Joint European Resources for Micro to Medium Enterprises). "If you are 18 years old and you have a good idea in technology, it's easier today than it was five years ago to start it," says Endeavor's Makryniotis. "The Silicon Valley dream is powerful here."
Traditional sectors, like agriculture and tourism, are ripe for innovation. In the Peloponnesian city of Corinth, two-year-old startup Fereikos-Helix operates a network of 175 snail farmers, and sells cleaned, pre-cooked snails through the brand "Fereikos." It exports 70 percent of its snails. Boat rental marketplace Incrediblue - which launched in January with seed funding from Openfund — is like an Airbnb for yachts. It started in Greece and now facilitates boat rentals in 17 other countries. "A prerequisite for our entrepreneurs is that they create a global product," says George Tziralis, a partner at Openfund.
To be sure, Greek entrepreneurs aren't the only ones struggling. In the United States entrepreneurs face their own set of hurdles, including byzantine immigration laws and a lack of qualified employees. But startups remain a significant engine of U.S. jobs growth, with companies that are five years old or younger accounting for all of the country's net job creation, according to the Economist.
Investors in Greece compare their startup scene to Silicon Valley in the 1970s. "You might say that we are just at the beginning," says Openfund's Tziralis. "Our ecosystem is maturing by the day. It's almost common for a young person to consider entrepreneurship as a viable career. We're trying to create some Greek Zuckerbergs."