Greek Startup Manifesto

The proposed actions presented hereafter, extend and complement the proposals made by the EU Startup Manifesto[2], to suit the specific needs of Greece. Indeed while the EU manifesto has a pan-European audience, the audience for the Greek startup manifesto is primarily policy makers in Greece.

1. Taxation & Social Security2. Remove the red tape3. Invest in digital infrastructures4. Access to Capital5. Actively promote entrepreneurship

We don’t mind paying taxes – as long as they are consistent, fair and simple

In Greece in the last 2 years alone, the parliament has voted for more than 6 new laws on tax. That is not sustainable. The same rules should apply from one year to the next. The rules of the game need to balance simplicity and justice. We suggest the creation of a “Blue Book” that will contain the complete tax framework relevant to Startups and SMEs.

Proposal: We need a simplified tax framework that applies to Startups and SMEs and doesn’t change from one year to the next.

Companies in Greece are taxed based on the amount of invoices to their customers. Tax owed should be based on actual profit, not invoiced values.

Proposal: Establish cash-accounting rules, i.e. tax and VAT should be paid at the exact date when an invoice is cashed in, not before.

Currently profit that is not distributed and indeed is reinvested in the business, gets taxed. This leads to smaller budgets for research, innovation and in turn to lower growth rate.

Proposal: Exclude reinvested earnings originating from export activities from tax for a 5 year period.

Establish a startup friendly tax environment

For a startup to thrive, it first needs to survive. It is critical that the tax system will not suffocate a company at its early stages. Today, however an extra percentage (as high as 80%) of the tax on the projected profits for the next fiscal year, is prepaid as advance payment.

Proposal: Lower tax rates for the first 3 years of a company’s life. The degree of decrease in tax rates could be tied with the rate of increase in employment or exports.

Today a startup with losses or even companies which have no commercial activity, are required to fill in tax documents and keep detailed accounts of even insignificant expenses. The result is that accountant costs rise to prohibitive levels (starting at €5000/year) even for startups.

Proposal: No tax filings paperwork should be required, until a company has significant financial activity, i.e. sales reach 70k or until the end of the 2^nd year of activity, as happens in the UK.

Today a company’s founders are required to pay for personal insurance. The cost is significant and deprives the founders of important capital especially at a time when they most need it.

Proposal: Remove the need for redundant personal insurance by the startup founders, where it applies. Additionally the startup founders personal-insurance cost, could be waived or rolled over to lower initial costs.

Closing a company in Greece is a very complex and long process that blocks entrepreneurs from failing fast and moving to other activities. Insolvency proceedings should be sped up and simplified inspired by best practices in Europe and according to Small business Act initiative.

Proposal: Allow the companies to close within 6 months and with no costs, in accordance to other EU member states good practices (e.g. UK insolvency act).

The state as a responsible business partner

The public sector is notorious for delays in payments to the suppliers of services and goods. Large corporates may see this as a discrepancy in their accounting books; however the SMEs and especially the startups cannot afford such delays. A law applying a respective EU directive, mandates that payments by public authorities are made within 60 days or else interest is paid, however this law is seldom applied in practice.

Proposal: Speed up payment for goods or services delivered by startups and SMEs to the public sector. The state should benchmark the payment process and correct the procedures if required, so as to ensure payment within 60 days.

Currently Greek SMEs and Startups and especially those who export their products, are deprived of the amount of VAT they are required to pay but is not refunded.

Proposal: VAT refund should be immediate. Extend the scope of existing VAT exemption to extrovert Startups without initial export revenues.

Simplify processes for incorporating a business

The process for incorporating an enterprise in Greece is too complicated and requires time and paperwork. It is of major importance to ensure that the potential founder is not deterred by the complexity of the processes required.

Proposal: We need Less Steps – Less Paperwork – Less Time required for incorporating an enterprise. Make all the information relative to establishing and operating an enterprise, fully available online, for example all the documents (certificates, permits) needed, procedures, tariffs and fees, opening hours.

The need for permits further perplexes the situation. The government should undertake a full review of permits required, with a view to removing those that are merely an obstacle to economic activity.

Proposal: Provisional permits should be issued and be considered valid until the official permit is granted. The permits regime should be radically simplified.

Bank processes need also become faster and flexible. Today a Startup can register a company in a few days, but to open a bank account and be able to start working, it may have to wait at least 10 days and even up to 20 days!

Proposal: Enforce 1 day process in opening a bank account to a new company.

Currently when foreign investors decide to invest in a Greek Startup, they are required to submit into the Company Registrar a number of statutory documents officially translated in Greek.

Proposal: The state should remove any language barrier for foreign investors. When foreign investors decide to enter in Greek Startups allow them to file documents in an official european language and allow the translation to be delivered within a three months period.

Doing business with the state, an entrepreneur is required to deliver the same document again and again to prove its validity at the date of transaction (e.g. tax certificate, social insurance certificate, proof of registration with the chamber of commerce, etc). No technology or operational barrier exists (document repositories), thus we should make sure that this requirement is removed and the applicant is only required to renew the documents that expire.

Proposal: Make sure that information already provided to the public administrations should not be asked for again (The all-data-only-once principal)

Decrease operational burdens – Establish uniform legal and regulatory provisions for SME/Startups with EU

As stated also in the EU Startup Manifesto, setting up a company in the EU presents its own set of barriers. Requirements that once made sense, from the minimum amount of money required to launch a business[3] now simply impede on our ability to build new businesses. As a result, when seeking funding from a VC in Central Europe, applicants are essentially turned down due to the uncertainties imposed by the legal (incl. tax) framework a company has to comply with locally.

Proposal: Coordinate efforts with EU authorities to establish an “E-Corp” in accordance with the EU manifesto proposals. Having a cross-European corporate entity will not only boost new domestic businesses, but also provide local companies with equal opportunities and access to international capital.

[3]In Greece there is one type of Limited company, the “IKE” (or the “one Euro company”) which however still has very high operational costs and is not equity-friendly, i.e. the shares cannot be acquired by investors.

Invest to increase WAN coverage and bandwidth

Innovation will not always occur in urban and suburban places. However in areas of lower population density, access to broadband infrastructure is minimal (no/slow ADSL, in some cases 3G is the only broadband alternative).

Proposal: Accelerate efforts to make sure that appropriate funds from EU are utilized, to ensure affordable access to broadband networks, even in the most remote locations. Achieve yearly measurable results, leading to the goal of 100% of the population having access with at least 8Mbps by 2017[4].

Facilitate Cloud Investments

Cloud computing facilities along with high throughput networks, will represent the brain and nervous system of the digital economy in the years to come. Everyone considers the value of such infrastructures as being similar to the roads and utility networks, while access to such infrastructure at the local/regional level is critical for delay-sensitive applications (gaming, real-time content broadcasting). However, currently such cloud facilities in Greece are scarce and the cost is high.

Proposal: With the help of European Funds, and building on existing strengths, Greece should set up a number of 6-8 regional “digital start-up hubs” across the country providing facilities to startups and web entrepreneurs such as access to ultra high speed Internet, data centres, high performance computing and incubation services.

Ensure high degree of sophistication of eGov (G2B and G2C) services

While most of the Greek public sector offers some information online, very few of these services (besides tax and social security) are sophisticated enough to offer their end results fully online. One reason seems to be the very slow take up of the digital signatures by public administration and similarly the lack of regulations for establishing one’s identity online. Another reason seems to be the lack of a flexible, secure and transparent payments mechanism.

Proposal: Offer a higher degree of sophistication of G2B and G2C services, thus eliminating any requirement for the physical presence of an entrepreneur in public administrations offices.

[4] in accordance to the DAE goals of 50Mbps for 100% of the population by 2020.

Allow Startups to create the Ecosystem – unleash our ideas!

Implement a funnel-shaped evolutionary model for assessing and financing innovative startups. It begins by involving young innovators in assessing their ideas in their first steps.This way we transform assessment to an open, community-led process.

Proposal: Pre-seed, Seed stage – Implement breakthrough assessment platforms based on an open, crowd-sourced model, thus minimizing the bureaucracy involved in the assessment process. Offer access to 100mi€ public funds, distributed as 12.000€ vouchers for 600 startups as a Pre-Seed and 35.000€ for 300 startups as Seed per year, for a total period of 5 years, to be spent in services and resources through an Open Electronic Marketplace.

Following the above pre-seed, seed stages, the next stage in the evolutionary model should be ab Impact Investment Fund model, which can be employed with far less risk aversion than a typical VC. Elected Mentors from Startups (40%) and Impact accredited Fund Managers (60%) can assess the candidate teams.

Proposal: Establish a Public Private Impact Fund endowed with 100mil funds, with 30% from Foundations and 70% from Public to bridge finance the aforementioned voucher mechanism with Startup capital of up to 180.000€ for more than 100 startups per year for a total period of 5 years.

A budget of 200mi€ for a 10+ year term will leverage more than 400mi€ of private capital. The establishment of the previously mentioned stages, guarantees the significant deal flow required.

Proposal: Implement a matching Fund of Funds for Series A – Growth Venture Capital funds that will invest 0,5€ public money per 1€ private money invested. Should the tax base of the funded companies remain in Greece for a minimum 10 years period, losses will be shared and profits will belong to the private side.

Incentivize Angel investments

International experience has shown that Angels don’t need tax incentives while they invest; what they do need instead is tax return in case of loss to overcome their risk aversion barrier. Experience in UK has shown that almost a 70% tax return on their losses unlocks their potential, if it is combined with no tax in dividends in wins.

Proposal: Implement a tax incentive regime for annual investment by Angels of up to 300.000€. To ensure that only the qualified investors participate, the incentives will be applied only after the 3rd year profits and offer a tax break of up to 70% in case of failure (corresponding to the highest income tax rate of 45% tax return + a 25% tax incentive), according to the UK Seed Enterprise Investment Scheme good practices.

Promote the use of EU and national innovation funds by Startups

Despite the existence of a number of programs for funding innovation available for SMEs and startups by both national (GSRT) and EU funds (the SME Instrument), it is well known, that small sized SMEs and Startups face difficulties in applying and getting granted. One major issue seems to be to navigate through the wealth of information available for funding instruments, to identify the right instrument, partner with other organizations, etc.

Proposal: Make information for funding tools easily available to SMEs and Startups. Establish a virtual helpdesk for innovation that would make the life of Startups looking for funding much easier.

Remove the need for guarantees

Currently guarantees are required in all cases that advance payments are requested by private organizations for R&D projects (e.g. projects of the General Secretariat of Research and Technology, co-funded by the EU). Guarantees are not required for advance payment by EU co-funded R&D projects (e.g. advance payments are provided to all partners in FP7/Horizon2020 projects, without any need for guarantees).

Proposal: Remove the need for collateral & a letter of credit guarantee in high risk co-funded projects. The financial viability of the applicant should be based on technical criteria.

Buy Locally from Startups and SMEs

The public administration is buying less than 25% of its ICT budget from SMEs[5]. The public should make greater use of its procurement budget to drive innovation and promote the growth of small businesses.

Proposal: No less than 40% of the public procurement budget should be devoted to procurement of innovation in accordance with the guidelines from the EC. A specific amount (no less than 5%) should be allocated to startups for promoting disruptive technologies and best practices.

[5]See article in Kathimerini newspaper http://www.kathimerini.gr/768560/article/oikonomia/epixeirhseis/prwta8lhths-stis-analhyeis-ergwn-plhroforikhs—thlepikoinwniwn-o-ote

Support Startups in accessing foreign markets

In a country that desperately needs to export to foreign markets, there is little support for extrovert companies trying to assess the opportunities to sell in a foreign country.

Proposal: Actively Support Hellenic Startups in building international awareness and effectively reaching international markets (by supporting the Commercial Attaches in Embassies)
Proposal: Establish export guarantee schemes that will improve the competitiveness of Greek companies

If we need to create a competitive environment for startups to flourish, we need to harvest the experience of other ecosystems and explore business opportunities away from home. The startup ecosystem should develop closer ties with foreign markets and investors[6].

Proposal: Consider the creation of “Soft landing” programs, in other cities in Europe, US or Asia, offering services (including spaces and mentoring), to introduce startups to business opportunities abroad. Establish Educational Trips for prospective entrepreneurs, as a way to create a shift in the entrepreneurial culture.

Establish ties between academia and startups

Universities should actively nurture the spirit of creativity thus providing students with support and funding to translate their ideas into reality. A live online registry of startups should be available and interconnected with the universities. This will be for the benefit of both the students who seek to realize their ideas and seek advice or funding from successful startup founders, as well as the startups who can more efficiently recruit young promising personnel.

Proposal: Establish live and continuous cooperation between startups and universities. Create student entrepreneurship centers that would soon transform to university incubators, taking advantage of European Social Funds.

Facilitate access to high value human capital

Frequently Greek enterprises and especially the ones involved in innovation-related activities need to attract the most talented minds, independent of their nationality. However the current situation with Visa for work is restrictive.

Proposal: Implement a Startup Visa or a Visa for work to allow higly skilled and talented engineers to work in Greece freely.

Reform Justice

A major pillar for the establishment of a business friendly environment is the juridical system. Currently for a typical financial dispute, it takes 3 to 5 years to verdict. Justice should be awarded faster than what happens today.