The bailout program ends in Greece today, as the country looks certain to default on the IMF loan. And as the country prepares for a referendum on its creditors’ demands, capital controls have been implemented, but what does this restriction mean for the nations startups?
Capital controls restrict the amount and the freedom of how much money you can access or move around, especially internationally, meaning that payments for services such as hosting or developer tools may not be possible for startups to make, as they are considered ‘foreign’ payments.
Yesterday we had issues paying our suppliers (AWS, Google, etc) since our corporate debit cards consider these transactions as transfers abroad. In addition to this our local customers can’t pay us either since they payment system that we use is considered a payment abroad.
Nikos Drandakis, CEO of Taxibeat told me that they have already seen the impact of local customers being unable to pay them, despite the capital controls only being enforced in the last twenty-four hours:
There’s already been a noticeable drop in revenues, people obviously are very conservative on their spending. Greece represents 40% of our business (we have business in other countries too) It’s obvious that, in the short term, the capital controls will impact this part of our business but I think for not too long”
The recent developments couldn’t have come at a worse time for Nick Papanotas , the founder of Collabemail, who was about to fundraise in advance of their imminent launch. He told me that the situation has literally changed overnight:
I was all set to go to Athens to raise money, but even though investors do have the money they are too scared to invest in this climate.
I’m now going to have to look to somewhere like the UK for raising money, however, right now I can’t even access money to buy a ticket to get there. It’s funny, one day I was all set to raise €300,000 and then the next day I’m not even able to buy a ticket in order to attempt to raise money; it’s inevitable that our launch will now be delayed because of this.
However, it’s not all doom and gloom, as Jon Vlachoyiannis and Panos Papadopoulos, the founders of the Greek startup Bugsense that was acquired by Splunk in 2013 have started a voluntary endeavour to help Greek startups affected by the current capital controls pay for their hosting, domains and other critical functions.
As Jon and Panos are based abroad, they can act as a proxy for Greek startups who are struggling to make their transactions due to the controls in order to keep their companies running while the restrictions are in place.
I think solidarity and helping Greece’s entrepreneurs weather the storm is the right thing to do at the moment, and this is a practical thing that can make a real difference.
And it’s not just Greek entrepreneurs who (can) contribute; the initiative is catching the eye of the global startup community, with renowned venture capitalist Marc Andreessen of Andreessen Horowitz sharing the campaign and stating his intent to help as well.
@PanosJee Brilliant — I’ll contribute!
— Marc Andreessen (@pmarca) June 30, 2015
This gesture from Greek startups and entrepreneurs abroad, taking care of those still based in Greece, is a great example of what the startup scene is all about and really encapsulates the pay-it-forward mantra that’s so often talked about. And while the Greek financial crisis continues to attract negative headlines, it’s nice to see positive stories like this one in the margins of it.
Update (16:30 CET):
Panos has confirmed that they have so far received 18 requests from Greek startups, of which they have currently helped 5. He told me that some are asking for funds for ads but that their focus is on helping more business critical functions such as hosting, as well as prioritising companies who possess the most employees.