This text is a response to Spiro Kapetanakis urge to discuss about the Greek Startup Ecosystem...
Having heavily involved in the researching and drafting proposals about the Greek and European innovative entrepreneurship I esteem your initiative to start a discussion about how we going to go a step further.
In Greece we are heading to the wrong way. We have to understand that Startups create an Ecosystem and NOT the vice versa. A Startup is driven by selling a product or a service (I will use for both the term “Product” hereafter). Thus an ecosystem is created when lots of Startups have a Product to sell.
Alone, Services and Events, around Startups, aren't consisting a sustainable Ecosystem.
The Product of Startups sold, is what makes an Ecosystem sustainable. The Product of Startups sold, is what attracts investors in the long run. The Product of Startups sold, is what makes an Ecosystem to thrive…
In Greece we first finance (or establish) the “Ecosystem” and then we seek how to finance the Product sold from Startups. That’s WRONG.
We have to first find the means to finance Startups that will produce sellable Product and then the Ecosystem will naturally be evolved from the needs of said Startups.
The only Ecosystem that is meaningful to “fix” is the institutions that affect the natural evolution of Startups. And on that as OESYNE we have done numerous of interventions from taxation, to second chance law, to insurance problem, patent system and more… Apart from institutional fixes, all the rest is just financing of Seed and specifically, how we steer public funds to Seed investing. But allow me to be more specific with numbers.
Having assessed data the last couple of years from EBAN, EVCA, Eurostat, Finland, Estonia, Germany, Israel, UK, US and our country, I was very happy that saw Endeavor Greece to make such a study. So I called them to drill deeper in their data and see what exactly have found and how that correlates with all other data available to me.
Some definitions, for us as Young Entrepreneurs of Greece for the Greek environment, we consider a first investment in Pre Seed funding at < 20.000€ and in Seed < 300.000€. A Startup investment is a first investment of < 1.500.000€. Any second investment above Seed classification for us is a Series A investment.
Out of the 144 startups that they have found in 2013 only 16 have got funding from a third party falling in the Seed classification and 4 in the Startup class, we also had about 12 Series A class, 93,4% of the Seed investors where the Jeremy Funds and the rest Angels.
That’s the good news. And now, the bad...
In 2013 we had < 2,5mil€ in Seed investment capital disposed to Startups, out of the 70mil€ that rests' in the Jeremy Funds until mid 2015.
Our projections show that in the next 1,5 years that the Jeremy program will be in the investment phase we going to see a total of another 20-25 Seed investments. That’s a use of just 8mil€ in Seed from the ESPA money that was disposed to Jeremy funds back in 2011 and represents the 16% of the 49mil€ invested by the taxpayer.
We estimate that Jeremy Funds have received about 800 Unique Funding Applications (UFA), that’s a 2% Application Success Ratio (ASR), a typical worldwide number for VC’s.
And now the ugly…
Our projections show a vertical decline in Unique Funding Applications if the Application Success Ratio rate of Seed funding won’t move from 2% that is today, to 20%-30% …
Today and in the foreseeable future we see in Greece 1,6 Seed Investments per million capita (1,6 Seeds/milCap), whereas the average in all other countries we have study is about 20 to 40 times higher. In example, in Estonia the number is 30 Seeds/milCap while ASR is well above 30%, with half the UFA ratio than we have in Greece... that’s because of a vibrant Angels community… And a vibrant Angels community is a matter of Investment Culture, something that we lacking in Greece...
To return back to the Ecosystem, its worldwide well known that the catalyst in the creation of a Startup Ecosystem is the Initial Public Funding that sparks the evolution. It’s evident that the Jeremy Funds, which follow the Israeli Yozma successful model (losses shared with public, wins goes to the private investors) with 70% public funding, have gave a huge boost in the process of the evolution of the Greek Startup Ecosystem.
It’s also all over the world well known that the real catalyst of the process is the number of Seed investments. If we aggregate the total Public Funds directed in Seed investments and the Public Funds directed to the Supportive Ecosystem around startups we will witness a very funny picture.
As taxpayers we have invested more than 80mil€ to the Supportive Ecosystem (27mil€ Athina project, alone!) while on the same time we will invest until 2015 8mil€ in Seed for Startups that will create and sell Product. That’s a ratio 10/1…!!!
As an indication of the numbers, for the renovation of just one plaza, the Freedom Square in the Municipality of Koridalos, us, as taxpayers, we have invested 10.180.610,75€ (Diavgeia Β4ΩΦΝ-Ξ4Ο)…!!!
In conclusion we have three issues.
Having heavily involved in the researching and drafting proposals about the Greek and European innovative entrepreneurship I esteem your initiative to start a discussion about how we going to go a step further.
In Greece we are heading to the wrong way. We have to understand that Startups create an Ecosystem and NOT the vice versa. A Startup is driven by selling a product or a service (I will use for both the term “Product” hereafter). Thus an ecosystem is created when lots of Startups have a Product to sell.
Alone, Services and Events, around Startups, aren't consisting a sustainable Ecosystem.
The Product of Startups sold, is what makes an Ecosystem sustainable. The Product of Startups sold, is what attracts investors in the long run. The Product of Startups sold, is what makes an Ecosystem to thrive…
In Greece we first finance (or establish) the “Ecosystem” and then we seek how to finance the Product sold from Startups. That’s WRONG.
We have to first find the means to finance Startups that will produce sellable Product and then the Ecosystem will naturally be evolved from the needs of said Startups.
The only Ecosystem that is meaningful to “fix” is the institutions that affect the natural evolution of Startups. And on that as OESYNE we have done numerous of interventions from taxation, to second chance law, to insurance problem, patent system and more… Apart from institutional fixes, all the rest is just financing of Seed and specifically, how we steer public funds to Seed investing. But allow me to be more specific with numbers.
Having assessed data the last couple of years from EBAN, EVCA, Eurostat, Finland, Estonia, Germany, Israel, UK, US and our country, I was very happy that saw Endeavor Greece to make such a study. So I called them to drill deeper in their data and see what exactly have found and how that correlates with all other data available to me.
Some definitions, for us as Young Entrepreneurs of Greece for the Greek environment, we consider a first investment in Pre Seed funding at < 20.000€ and in Seed < 300.000€. A Startup investment is a first investment of < 1.500.000€. Any second investment above Seed classification for us is a Series A investment.
Out of the 144 startups that they have found in 2013 only 16 have got funding from a third party falling in the Seed classification and 4 in the Startup class, we also had about 12 Series A class, 93,4% of the Seed investors where the Jeremy Funds and the rest Angels.
That’s the good news. And now, the bad...
In 2013 we had < 2,5mil€ in Seed investment capital disposed to Startups, out of the 70mil€ that rests' in the Jeremy Funds until mid 2015.
Our projections show that in the next 1,5 years that the Jeremy program will be in the investment phase we going to see a total of another 20-25 Seed investments. That’s a use of just 8mil€ in Seed from the ESPA money that was disposed to Jeremy funds back in 2011 and represents the 16% of the 49mil€ invested by the taxpayer.
We estimate that Jeremy Funds have received about 800 Unique Funding Applications (UFA), that’s a 2% Application Success Ratio (ASR), a typical worldwide number for VC’s.
And now the ugly…
Our projections show a vertical decline in Unique Funding Applications if the Application Success Ratio rate of Seed funding won’t move from 2% that is today, to 20%-30% …
Today and in the foreseeable future we see in Greece 1,6 Seed Investments per million capita (1,6 Seeds/milCap), whereas the average in all other countries we have study is about 20 to 40 times higher. In example, in Estonia the number is 30 Seeds/milCap while ASR is well above 30%, with half the UFA ratio than we have in Greece... that’s because of a vibrant Angels community… And a vibrant Angels community is a matter of Investment Culture, something that we lacking in Greece...
To return back to the Ecosystem, its worldwide well known that the catalyst in the creation of a Startup Ecosystem is the Initial Public Funding that sparks the evolution. It’s evident that the Jeremy Funds, which follow the Israeli Yozma successful model (losses shared with public, wins goes to the private investors) with 70% public funding, have gave a huge boost in the process of the evolution of the Greek Startup Ecosystem.
It’s also all over the world well known that the real catalyst of the process is the number of Seed investments. If we aggregate the total Public Funds directed in Seed investments and the Public Funds directed to the Supportive Ecosystem around startups we will witness a very funny picture.
As taxpayers we have invested more than 80mil€ to the Supportive Ecosystem (27mil€ Athina project, alone!) while on the same time we will invest until 2015 8mil€ in Seed for Startups that will create and sell Product. That’s a ratio 10/1…!!!
As an indication of the numbers, for the renovation of just one plaza, the Freedom Square in the Municipality of Koridalos, us, as taxpayers, we have invested 10.180.610,75€ (Diavgeia Β4ΩΦΝ-Ξ4Ο)…!!!
In conclusion we have three issues.
- The “Ecosystem” sees Young Entrepreneurs and Startups as clients… Therefore the “Ecosystem” lobbying the government and succeeds in getting tenfold more public money than Startups themselves… Both, seeing a business opportunity in Supporting Startups and in the same time lobbying to get public funds for doing that, is a typical old school Greek business model…
- Jeremy Funds and in general VC schemes, are NOT *efficient* mechanisms to supply Seed finance, because the mechanics behind them DO NOT justify more ASR than 2%... and that’s a worldwide norm. So to get the levels needed to create a critical mass of Startups with Product and get the aim of 30 Seeds/milCap annually, given the fact of 2% ASR, we have to push 1,1 Billion € taxpayers money to Jeremy Funds and hope that we will get the target of 900 Seeds in 3 years… Ohh… and to happen that and considering the ASR of 2% that Greek Jeremy Funds show, we have to push our Young generation of Startupers to make 45.000 unique applications in three years…!!!
- With the “success” of Jeremy Funds, now we have enough evidence that Greek Angels are just the exclusion that proves the norm… There are NO sufficient numbers of Angels to assist the Ecosystem to even lift from the 1,6 Seeds/milCap that it is today with Jeremy Funds.
It’s easily understandable that if it wasn’t these limited Seed investments the last couple of years, today we wouldn’t have an article in Time Magazine talking about Greek Startups…
More over, it’s easily understandable that the numbers do not make any logic and there is no way out, unless we realize the challenges ahead of us…
So what we should do?
As Federation of Hellenic Associations of Young Entrepreneurs we have concluded that we need a new mechanism designed by Greeks for Greeks to mobilize our human capital and resources in a way that will catalyze the Greek Startup Ecosystem.
Our proposal is well known to almost everyone. It’s the iDea Framework mechanism. An iDea Fund managed by ETEAN or TANEO with 24 mil€ per year invested for 5 years (a sum of 120mil€) will return 900 Seeds in 3 years, thus we will get the target of 30 Seeds/ milCap.
What iDea does differently is that it effectively decouples the risk aversive VC’s and Angels from the startupers, thus allows’ startupers to, controllably, drive ASR ratio above 30% without Vc's and Angels… keeping in the same time the market driven character of the whole process, thus the public bureaucracy is in-existent in the model…
What iDea really does is:
Puts' Startupers in the driving seat of the Ecosystem. And that's what we need!
Moreover in 8 years, these 120mil€, will return earnings of 72mil€ so the long term public investment will not exceed the 48mil€. The funny thing is that the public investment in the current Jeremy Funds was already 49mil€…
What we say with iDea is that the Products created from Startups will attract the investors and that, will create the Ecosystem and not the vice versa…
More over, it’s easily understandable that the numbers do not make any logic and there is no way out, unless we realize the challenges ahead of us…
So what we should do?
As Federation of Hellenic Associations of Young Entrepreneurs we have concluded that we need a new mechanism designed by Greeks for Greeks to mobilize our human capital and resources in a way that will catalyze the Greek Startup Ecosystem.
Our proposal is well known to almost everyone. It’s the iDea Framework mechanism. An iDea Fund managed by ETEAN or TANEO with 24 mil€ per year invested for 5 years (a sum of 120mil€) will return 900 Seeds in 3 years, thus we will get the target of 30 Seeds/ milCap.
What iDea does differently is that it effectively decouples the risk aversive VC’s and Angels from the startupers, thus allows’ startupers to, controllably, drive ASR ratio above 30% without Vc's and Angels… keeping in the same time the market driven character of the whole process, thus the public bureaucracy is in-existent in the model…
What iDea really does is:
Puts' Startupers in the driving seat of the Ecosystem. And that's what we need!
Moreover in 8 years, these 120mil€, will return earnings of 72mil€ so the long term public investment will not exceed the 48mil€. The funny thing is that the public investment in the current Jeremy Funds was already 49mil€…
What we say with iDea is that the Products created from Startups will attract the investors and that, will create the Ecosystem and not the vice versa…
So if we don’t realize that simple thing and don’t invest like there is no tomorrow in Seeds, we will loose the momentum and we will irreversible discourage our young generations of startupers indefinitely.
We have to get our egos down and take actions. We have done what we could do, StartingUP portal will soon be online, and it’s in our hands to make it work. Me as Vangelis and us, as OESYNE, we have done our share, its time for the community to engage.
StartingUP it’s not just our vision; it’s our chance to our collective survival.
We have to get our egos down and take actions. We have done what we could do, StartingUP portal will soon be online, and it’s in our hands to make it work. Me as Vangelis and us, as OESYNE, we have done our share, its time for the community to engage.
StartingUP it’s not just our vision; it’s our chance to our collective survival.
