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Building a startup culture in a broken-down economy

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ATHENS, Greece » In a leafy back alley, two lifelong friends tap away at their keyboards, perfecting their eighth Internet startup company, a hotel recommendation service called, which began in November and is already turning a profit.

It would be just another success story of the digital age, if it were not for the company’s location: Greece, a country that almost defines economic mismanagement, a place long resistant to the demands of global competition and a sinkhole for the aspirations of young people.

Defying the problems their country’s recent history has bequeathed them, a few Greek entrepreneurs are managing to thrive here, providing a glimmer of hope for the economy and their generation even as Greece girds for more budget austerity and wrenching regulatory changes.

While members of parliament, labor unions and the syndicates that control entry to professions complain that the Greek bailout deal is a humiliating surrender of national sovereignty, a young entrepreneurial class is leapfrogging over what it perceives to be a sclerotic, protected and backward-looking business culture.

Young entrepreneurs here say they have little stake in the political and ideological debate, but are willing to embrace the realities that come with the policies being imposed by Greece’s creditors, including an end to a hodgepodge of regulations, protectionism, tax breaks and special-interest provisions that have long impeded the country’s competitiveness.

"Our customers are not Greek companies, so the success of our project does not depend on Greece at all," said Stefanos Vasdekis, 35, one of the two founding partners of Travelmyth. "It’s how competitive we will be in a worldwide environment."

With a youth unemployment rate around 50 percent, Greece presents its young people with a stark choice: emigrate and join a brain drain to Western Europe and beyond, or stay in their homeland and struggle against long odds to find a livelihood. The country’s recession-battered traditional industries have little to offer, so for many young people, the coveted prize has become a government job, obtained through the sponsorship of a political party.

But some are trying to draw instead on the country’s mercantile roots to build businesses of their own, despite all the impediments.

At least a half-dozen small-business incubators and co-working spaces – buildings where entrepreneurs can rent space cheaply and benefit from proximity to one another – have sprung up in Athens, nurturing new companies with up to about 20 employees.

A number of philanthropic organizations have sponsored contests and awarded seed money to young Greek entrepreneurs. Among them is the Hellenic Initiative, a nonprofit that receives support from Greeks abroad.

The Hellenic Initiative held a venture fair in June at which 19 startup and established Greek companies made presentations to international investors, seeking capital and connections. The hopefuls included a cosmetics safety lab, a maker of custom folding bicycles and an eBay-like website auctioning fuel oil for ships. Investors came to the fair from across Europe, the United States and Australia.

Realistically, Greece’s problems are too big for one still relatively small sector to solve on its own. But, some experts say, it can lead the way.

"There’s a divide between the old school and the new," said Jeremy Downward, the chief investment officer for Alpheus Advisors, an investment firm. He was also a founding partner in Greece’s first investment bank, Alpha Finance, from 1989 to 2001.

"Of course a lot of these ideas will fall by the wayside," Downward said. "But I really believe that there will be a handful of innovative ones that do well. There is no shortage of really smart kids, driven kids, with a lot of zeal, a lot of drive, a lot of hunger and a pretty good business plan."

Young businesses have been moving lately into old industrial buildings in the Gazi neighborhood. In a co-working space there called Found.ation, five entrepreneurs in their 20s (not including one partner now doing mandatory army service) operate a youth-oriented marketing network called Hangover Media.

One of their more successful ventures so far is, a website featuring entertainment and job listings, and even an anger test. The site is supported by "native advertising" – sponsored articles and features that the Hangover team write for companies trying to reach a youth market.

Once they get started, the young entrepreneurs face the challenge of scaling their businesses up to a meaningful size that might start employing more than a tiny handful of people.

"Talking about the crisis, and talking about all the negative aspects of this huge economic depression in this country, doesn’t help that much," said Dimitris G. Kalavros-Gousiou, a co-founder of Found.ation. "It helps if you can start building something that makes sense, and makes sense both for business and for society."

Though they would welcome a financial helping hand from the government, young entrepreneurs say that they have learned not to expect one. But seed money has started to flow from private sources, and in some cases from European Union programs.

George Tziralis, 33, an engineer, got into the seed-capital business five years ago when he and a partner founded Openfund, which invests in high-tech companies that originate in Greece but are aimed at international markets. The fund has since grown to five partners managing 15 million euros ($16 million).

Among its recent investments are Taxibeat, an Uber-like ride-hailing application that has become popular in Greece, and Workable, an employee recruitment tool now used by more than 2,000 small and medium-sized companies in 39 countries.

"We’ve demonstrated that some pretty good and interesting companies can come out of, let’s say, an exotic startup location like Greece," Tziralis said. "We get the best part of what exists here, without worrying about the worst part."

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