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“Mapping” of the domestic startup scene by Pissarides

Professor Christoforos Pissarides, among others, focuses on Greece’s poor performance in the field of innovation, attempting to “map” the needs of the domestic startup scene in the draft for the development of the Greek economy.
According to him, the country’s poor performance in innovation indicators is mainly related to the following anchors:

– Unfavourable legal and regulatory environment (related to taxation, labour legislation, quality and stability of laws, as well as their implementation by the courts and the quality of services offered by the public administration)
– Insufficient domestic investment and FDI performance
– Insufficient access to finance
– Lack of research cooperation between universities and businesses
– Lack of certain skills in human resources [email protected]

Aspiring entrepreneurs – founders: There are several. However, those with previous experience as entrepreneurs or executives are missing, because the technology sector has little history in the country. There is, however, great potential among Greeks in the diaspora.

Executives: There are many engineers and scientists with skills and education, but without experience. There is a lack of experienced people. In some disciplines, especially software engineers, there is a shortage, even of young people, because the demand has increased a lot in the last five years. By contrast, there is a large supply of life scientists, chemical engineers and mechanical engineers. There is also interest in returning to these specialisations from Greeks from the diaspora in Europe. There is a particular shortage of executives with sales experience.

Initial customers: There are few companies and organisations that will try the innovative product of start-ups before it is established (early-adopters). This is a barrier to the development of start-ups for some types of products, not all. For digital products, which target many small users (small businesses or consumers), the distance from early adopters in other countries is not a constraint. For physical products, distance is a barrier due to transport costs, repairs, etc. For any product that is targeted at large organisations and that, in order to use it, requires testing, adaptation and collective decisions, proximity is an important advantage. Public administrations, banks and infrastructure networks are generally reluctant to adopt new solutions, even on an experimental basis.

Funding: Start-ups need equity, not borrowing. The usual sources internationally are founders’ savings, so-called “business angels” and venture capital (VC). VCs are specialised by stage of development and by type of technology or market (e.g. marketplaces, software-as-service, biotech). A complementary source is the various research and innovation grants, which, however, are not appropriate if there is not sufficient equity capital for the business to survive without them. In Greece, savings are meagre. Some families can support a young founder for a short time – but not to pay the salaries of others. Business angels are too few, although there are a number of wealthy families who have the financial means for this role. VC funds are currently sufficient, because six new funds started operating in 2018, with mixed public-private funding (Equifund). They will not be sufficient, however, from the end of 2020 if no new funds flow in. Those that do exist are only targeted at the early stages of development, but this is not a major problem, because good start-ups, once they get beyond a certain size and have a steady flow of customers, can find the next round of funding from pan-European or US funds. This, however, changes the ownership structure and may cause companies to migrate to other countries.

Intellectual property: The patents available from domestic research institutions are few and of low value. The situation is slightly better for algorithms and specific know-how (which, however, cannot be patented). For some types of start-ups this shortage is crucial – in fact for all ‘deep tech’.

What solutions are proposed

Experienced managers: The most immediate solution, according to the professor, is the repatriation of Greeks from the diaspora, as well as the relocation of foreigners. A much lower tax on skilled labour is needed (indicatively, with an annual gross income of 30,000 – 150,000 euros) and a general policy to improve the quality of life (especially for families with children).

Proof of concept trials: potential early adopters in the public sector (local authorities, ministries), banks and infrastructure networks to accept and test start-up proposals. This can be achieved through a combination of political decision making and incentives. Financing: a. Tax incentives for Business Angels (have been recently legislated), b. Public participation in Venture Capital funds (along the lines of the Equifund model), in a way that leaves no time gaps. Indicative size: €400 million every three years (matched with €100 million private), starting in 2021. After 2025, this capital will start to be partly recycled. There may then also be the possibility of pure private equity funds if the Equifund generation of funds achieves high returns.

Intellectual property and technology transfer: Centralised public funding for technology transfer offices (upgrading existing ones and setting up new ones), which would search for interesting research results, design, register and renew patents. No more than five such offices are needed throughout the country, concluding agreements with universities and research institutions.

Indicative amount of public funding (for all GMTs): €15 million per year (for salaries, offices, consultancy and patenting costs). Complementary activity (for certain sectors): validation studies, prototyping, certification. Indicative amount: EUR 5-10 million per year.

Big data: This is an important resource for innovation companies in all fields where AI is applied. In Greece, big data sets can be created in life sciences, city operations and agriculture (at least), as well as legislation facilitating and enforcing data collection and making it available to researchers and companies.


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