How startups are surviving the pain in Athens

It may sound innocuous and mundane: capital controls. Yet these two words have had a profound impact on Greece’s small businesses. The measures imposed by the country’s government this summer stop Greeks transferring money overseas and limit the amount of cash they can withdraw.

The small businesses in Romantso say the capital controls have hobbled their ability to trade effectively, and with the addition of new punitive taxes, many feel it could signal the death knell for their future.

Collective pain

Since the capital controls hit, talk in the Romantso cafe has been around little else. There is solidarity amid the collectively shared pain, and anxiety is palpable among the various business owners.

Mornings are spent sharing ideas of how to bypass problems. ‘It’s like home, with many brothers and sisters,’ says Danai Gavrili, co-founder of Lommer Bags. They’ve been swapping ideas and tricks on how best to keep going over the past months.

All have persevered through the trying times, convinced that if they keep working things will get better, and they will find a way to emerge out of the crisis.

Tax and corruption

Taxes on the small businesses gathered in Romantso is another sensitive issue. They describe
‘an attitude of contempt’ towards them from the government. They are taxed on every euro earned, from the first euro. Tax for the entire year has to be paid in advance, before a cent is made, based on earning predictions. It’s been a crippling policy.

It’s been particularly hard to stomach for these small businesses given the widespread reports
of wholesale tax evasion by the country’s rich. Every small business Courier spoke to was quick to raise black money and government corruption in any conversation.

An investigation by Germany’s Die Welt appeared to support their concerns. The report claimed rich Greeks have €800bn of untaxed money hidden in Swiss bank accounts that the government has not gone after. According to Transparency International meanwhile, Greece is the most corrupt country in the EU.

The fashion designer: Euangelia, ‘I’m making cheaper, more affordable clothes’

Two strategic shifts have been forced upon Euangelia Boubouli. The first is that as a result of capital controls, she can no longer import foreign fabrics, and instead has to rely on more expensive Greek suppliers.

She has also decided to shift away from the intricate Victorian inspired geometric high fashion dresses that she’s been creating for a decade, to create cheaper high street designs instead.
Before the crisis her clothes were sold in a large number of stores across Greece, but sales have dived in recent years. She eventually pulled all her dresses out of stores and now sells directly from her studio space.

She hopes that by tweaking her business model, sales to Greeks will return and will also help her strike a deal with international distributors.

The graphic designer: Pika Tablet, ’I don’t want to lose this battle.’

Making digital magazines was proving to be a solid business for Yannis Spanoudis. He had been the art director of the Greek edition of Maxim magazine until it, like many of Greece’s magazines, shut down in 2009 following the global recession.

Setting up on his own seemed an obvious move as magazines everywhere (not just in Greece) were either shutting or cutting staff. He quickly snapped clients such as the Greek tourist board, an Athens city guide and a Greek technology website, as well as an American events publication.

But all his clients have since left, bar the US magazine. ‘The market in Greece is now non-existent,’ he says. ‘We’re B2B but no businesses are buying services.’

Trying to build new international clients from an office in Athens in the current climate is a tough undertaking. To make matters worse, he’s unable to pay the fees for an Apple Developers License from Greece because of capital controls, meaning going after new digital business is a futile exercise.

At 39, Spanoudis is older than many of the startup residents, and is visibly more emotional and angry than many when speaking about the state of the country. ‘I’ve had a good life until now, but for the next generation things are going nowhere.’

He is nevertheless reluctant to leave his homeland, despite the prospect of finding work elsewhere in Europe. ‘If everyone leaves it’s like accepting this country is a failure. I don’t want to do that. But then if things do get worse I may have to for my children.’

One solution he’s suggested to some of the other design studio residents of Romantso is that they bunch together in order to lessen the burden of paying tax up front. ‘The attack is big right now, we have to build weapons to defend ourselves,’ he says. ‘I don’t think I want to lose this battle.’

The students: Frapress, ‘We’re all going to look for work abroad’

A recent university hosted talk by a government initiative aimed at promoting startups, was met with the reasonable questions of what exactly the government is doing to support new businesses. With nothing of substance forthcoming, the students left more despondent than when the talk started.

It was hardly an inspiring outcome for one student, Antonis Mantzavinos, who is a co-founder of Frapress, an online magazine aimed at students with topics stretching from education to current affairs. The team is currently sharing an office in Romantso with fellow student led start up Media Neoperativa, after winning a Vodafone backed competition.

Despite a growing following for Frapress, and a 60 strong contributing team meaning the site can continue to grow, Mantzavinos and his fellow student founders appear uncertain whether the project can evolve into a career after graduation given the current climate in Greece.

Like many Greek students, the dominant subject of conversation is where they can find work outside the country. ‘There’s not enough opportunities here,’ says Mantzavinos.

The architect: Despoina Sotiriou, ’I’ve started a second business’

Despoina Sotiriou’s business has two bizarrely unrelated arms: architecture and teaching hoop dance. The crisis has meant that architecture projects have become increasingly scarce in Greece. The government has but a stop to any infrastructure projects, while few are building commercial or residential property in the country. It’s left Sotiriou with a bleak outlook for potential work coming in and plenty of time on her hands.

It prompted her to turn a hobby into a second source of income: dancing with hola hoops. She teaches dance classes in the gallery area at Romantso, with many of the residents taking part, and has also started selling hoops she makes herself from piping.

To make sure she can continue to afford her office — and maintain access to the space to teach — she’s bunked up with another resident architect who was close to leaving due to a lack of work.

The agency: Foolish design, ’We pretend we’re not in Athens’

When the controls hit there was a threat that every one of Foolish’s clients, that pay for their email and hosting through the agency, would have their websites taken down and their email services terminated; with no money permitted to leave the country, direct debit payments out of Foolish’s account to companies like Google and GoDaddy were blocked.

It meant co-founder Jim Zarkadas spent hours on the phone to Google, speaking to a succession of call centre staff in a bid to stop the services from being cancelled. Eventually, he was able to secure an extension on the payments.

The experience convinced him that in order to secure his business, it should be registered abroad rather than in Greece. He’s now in the process of opening a UK company, while staying based in Athens as a satellite.

‘You can’t build a business plan and make projections; it’s so unstable. You just don’t know what’s coming next,’ he says. The plan is to make the move to London once it have a big enough war chest and client base. Eventually he’d like to follow the example of one of Foolish’s biggest clients, a software company called Hellic, which started in Athens but is now headquartered in San Jose, California.

‘For now we just shut our office door and pretend we aren’t in Greece, you have to build your own reality,’ concludes Zarkadas.

The bag makers: Lommer, ’We’re running out of materials’

A bag-maker reliant on materials imported from China was always going to be in trouble after capital controls. Danai Gavrili & Alkioni Matsourdeli have passed the three month anniversary of the last time their bag company, Lommer, was able to make orders from overseas suppliers for their bags.

The two women first tried to get around the problem by setting up a US bank account to enable them to pay for stuff through Paypal. It works in theory, but the problem is they’ve got to wait until the profits from enough new sales have been paid into the account. There’s also now a government board appointed to asses whether a business should be able to pay for an international order, which the two are planning to lobby.

But they have another problem: raising extra cash. A recent meeting with a bank in Greece to get a loan, seemed to be going well, up until they mentioned the money would be used to pay for materials in China.

It means they may have to start looking for an alternative material that can be purchased in Greece to make their bags out of. The crisis couldn’t have come at a worse time: Lommer had recently started negotiations with distributors in the UK and Japan.

Both the two founders are sanguine. ‘Well find a way of solving the problem I’m sure,’ says Matsourdeli. ‘That’s always the way it is in Greece.’