If you are looking at the title of this post with incredulity, I totally understand it.
It’s still true though ― and after I’ve made my case, I think you’ll agree too.
See, assessing opportunities and taking calculated risks is part of the job description for a VC (the keyword here being “calculated” ― merely plunging headlong into risk is a fool’s errand).
My calculations for Greece, as an investor myself, all come up positive. And it’s not mere speculation either: there are real world results backing this up.
But let me explain myself, starting with a few definitions:
A private early stage – high risk investor is a person who invests in a company getting a number of shares in return (proportional to the money invested and an agreed upon valuation of the company’s worth), and hopes that in the mid-term future there will be buyers willing to purchase those shares at a (much) higher price.
Investing at an early stage means you get a larger share of a company, for a relatively smaller amount of money compared to later investors (or buyers). It also means that there’s an increased risk, as the company hasn’t had the time to fully realize its product or fully prove itself in the market yet. Of course the higher the risk, the higher the potential payout.
What’s special about Greece is that Greek startups are way undervalued compared to American and European ones. In other words, an early stage investor investing in a Greek startup will get a much larger stake in the company for the same money they would pay for a tiny percentage of a US-based startup.
That wouldn’t be significant in itself, if it wasn’t the case that the final buyers of succesful Greek startups are (more often than not) companies from outside of Greece, willing to pay “international” prices.
This allows early stage investors to buy stocks in Greek prices and then sell it at (much higher) Western European or American valuations. It doesn’t get any better than this.
And, again, this is not theoretical: it’s totally achievable. We (Startech Ventures) have done it repeatedly. And we’re not alone.
While the “greek startup ecosystem” is still in its early development, there have already been several success stories and strong indicators that it can produce companies of considerable value. Startups like BugSense, Crypteia Networks, AbZorba Games, e–Food.gr and others were founded and developed in Greece, and then sold to foreign buyers, in the way I’ve just described above.
These past successes also have an effect that cannot be easily measured in monetary terms, but is nonetheless important: they have shown Greek startup founders now that what they are trying to achieve is not some pipe dream but a very real possibility, that comes with hard, methodical work and perseverance.
That’s not to say success is easy, but it is certainly within reach, and that makes an increased number of talented entrepreneurs have a go at it, presenting early stage – high risk investors with a formidable, and mostly untapped, selection of investment opportunities.
Another extremely important factor is that there’s now a lot of hard earned experience. The last several years a lot of investment money vanquished in a painful, but necessary, attempt to create a new investment marketplace. Entrepreneurs that failed at their first attempts, are back on the game, but this time much more experienced and with a much better sense of the business side of things.
To recap:
- Financially struggling because of the recession, new startup founders want to make a difference
- Entrepreneurs are willing to accept relatively low valuations
- Hard-gained experience from previous efforts translates into better business models and improved focus
- Greek startups are increasingly targeting the global market
- There’s proven foreign buyer interest in Greek startups
- Foreign buyers buy at American/Western European-level valuations
In short, the current conditions are especially welcoming to early stage – high risk investments.
It is now up to the Greek investors to take advantage of this opportunity, and, though their succesful investment activity, help boost the Greek economy (and their bottom line).
Note that we are not the only ones to recognize this. The European Investment Fund, just before last year’s end, announced its plan to make available 260 million euros for the creation of investment funds for Greek startups.
This is definitely an acknowledgment that an organization such as the EIF recognizes the great investment opportunities that Greece presents — though it is still upon the Greek private investors that are called to participate in these funds whether the program will be a success or not.
For what is worth, the author of this article is extremely optimistic that Greek investors, but also international investors that appreciate our region’s potential, will recognize the great opportunity that presents itself, and will take action as angel investors and as limited partners in those new funds that are soon to be developed.
Starttech Ventures is already preparing its own early stage investment fund, to the tune of $30 million, which we will start investing by the end of Q3/2017 (this of course, is on top of our current portfolio companies and other investments in Greece and abroad).
Through our side-car angel investors group, we are welcoming prospective early stage investors interested in the Greek tech scene, to join us in investing on a number of carefully selected startups.
Our fund offers investors access to a curated high-quality deal-flow ― one that has already been assessed, evaluated and found to meet our stringent investment criteria, and that has already received a hard investment commitment from us.
Investors will have the opportunity to join in at exactly the same terms as StartTech Ventures, minimizing their risk, and allowing us to better support our investees, in terms of both cash and human capital.
But first, let’s agree on some general principles that one should keep in mind as an early stage investor:
- In such investments we never invest more than 5% (or slightly more, if we are OK with an increased risk) of our liquid assets, or of our easily realizable assets.
- It’s a big mistake to invest alone. Instead of investing €60.000 on a single company, for example, it is much better to join 4 other investors and invest €15.000 to 4 different startups (this way their bets are hedged, so to speak, and the funding needs of each startup are still covered).
- Such an investment should not just be seen as a passive monetary investment. The investor should also offer their time, mentorship, experience and contact network.
- For the investor to make money, the startup founder must, first of all, make money.
- Such investments have a longer term character. The money that are invested should be able to be left untouched for up to ten years, that is, until those companies develop into buyout targets. That doesn’t mean that an exit can’t happen much sooner, just that it is quite rare.
Let’s make a difference!
Dimitris Tsingos,
CEO and Founder, Starttech Ventures
