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Venture capital in Greece relies on certainty

11 December 2012 / 22:12:38  GRReporter
3170 reads

Victoria Mindova
 
Venture capital in Greece chooses the easy way, a young entrepreneur in the field of high technology told GRReporter. "Investment funds in the country prefer to invest their funds in established companies, which are medium-sized and want to become huge. This can ensure profits for them but it is not really helping the new start-ups, which are based on the development of new technologies," said the young man, who wished to remain anonymous. He believes that Greece has no chance of obtaining a new economy unless investors understand the nature of the projects offered to them.

Investment and growth opportunities were the main topic of the "International venture capital and private equity forum", which took place in Athens. It gathered representatives of private investment funds, banks and entrepreneurs who discussed the opportunities for new investments in Greece, but also the problems encountered by the business in the implementation of new projects.

Nikos Koulis, who is Senior Director, Head of Equity Investments at Eurobank Equities, is clear that even after three or four years, Greek banks will not be able to provide the real business in the country with significant funding. This will create major barriers not only to new companies that will be willing to operate, but also to already established companies, which will want to secure the capital necessary for their expansion.

The maintenance of a socialist-type economy has been one of the major problems of the country for many decades, says George Kourtis, who is a partner in Global Finance. State-regulated enterprises with secure financial flows regardless of the level of performance and success have characterized the economy of the country to date.

The reform, which is currently underway, will take time during which the investors will consider the country unstable. "We need to seek smart solutions for the future," states Kourits and proposes that Greece should follow the model of Israel. When the country has decided to change the economic model and turn from primary agricultural production to the development of high technology, a special secretary of research has been appointed. His function was to identify the innovative projects that could be developed into real business opportunities. Thus, the private business and the public sector have laid the basis for establishing a new economic model.

Managers of investment funds themselves have acknowledged that they cannot rely on business projects the nature of which they do not understand. This is a major obstacle to the differentiation of investment opportunities and the creation of a more competitive and progressive environment. The high technology in the field of IT, energy and other specialized sectors seek associates and specialists, who are hard to find in Greece, it became clear at the forum.

Yiannis Tsakiris, Head of Region, European Investment Fund, is clear that the investments to be made in the coming years will be focused on the most productive and promising sectors of the Greek economy. "I think that venture capital will play in the coming years a very important role in the financing of small and medium-sized enterprises that have proven their ability to develop into international players." Tsakiris stresses that this type of financing as opposed to bank loans requires higher productivity growth and expansion to ensure a good return on investment. The capital will not focus on the establishment of an ordinary production unit, which will serve only the domestic market. It is looking for stable companies that are keen on expanding outside the country.

The lack of access to funding by the business and the stagnation in the banking sector make the scarce sources of funding extremely valuable to the local economy. The money from various European funds do not reach the market and due to macroeconomic instability, there is still no private initiative to support the Greek investment projects, representatives of the local business community have told GRReporter. The companies that are successful despite the crisis remain the producers exporting abroad.

The forum presented the new "Innovation Fund." It will finance sustainable companies that need funding for researches related to improving the quality of the technology and the products offered. The Fund operates with resources under the national strategic framework for development and with private investment in a three-to-one ratio. The funds it will grant will not be free nor will they be in the form of a loan. They will have to return to the Fund in order to be invested in new ventures at a primary stage, states the head of the fund, Vassilis Poutoukis.

The businessmen who attended the presentation of the new "Innovation Fund" expressed to us their doubts as to whether it will be useful to start-ups. Previous experience shows that venture capital in Greece is still in its early stages and although investors have raised the bar high in order to create the next "Silicon Valley", little is being done to develop it into practice.

Tags: EconomyMarketsVenture capitalGreeceCrisisReformsFunding
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