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2011.12.17

Advice from Successful Greek IT Startups

Members of the Hellenic Association of Mobile Application Companies and the Hellenic Semiconductor Industry Association, assorted biotechnology companies, and representatives from Greek and US-based venture capital funds gathered on Friday December 17, 2011 in a meeting to exchange advice, tips, and war stories on venturing abroad. It was one of the most inspiring meetings I've attended for some time. These are my notes from the meeting.

First spoke Menelaos Scouloudis Velti's CCO. Velti (NASDAQ: VELT) provides mobile marketing and advertising technology to brands, advertising agencies, mobile operators, and media groups. He said that things are now more difficult than they were ten years ago, because due to the debt crisis Greece's brand name has been tarnished abroad. According to Menelaos, Velti went through three other markets before focusing on mobile: e-marketplaces, bank back office software, and content management systems. He therefore suggested to test products abroad for traction. For that there's no need for a full-fledged product: management should be ahead of sales by a year, which should be ahead of engineering by six months. He recommended to open an office abroad; it's essential to gain the customers' trust and it's cheap nowadays. One strategy to find customers is to follow your local multinational customers abroad. It's important to get a good company board, which can introduce you to new customers. Decide on the profile you need, e.g. technology and finance, and use your network to locate suitable candidates. The cost for each board member can be around $100K / year on stock or stock options. Don't get intimidated amounts like that, by the end of your company's IPO expect to be diluted to 10% of the company's capitalization. "Be prepared to fail, be agile to adapt", Menelaos stressed. It's important, he said, to target an attractive market opportunity arising from discontinuities, major trends, or latent demand. Finally he described the significance of appropriately packaging your company's offering, for instance, through appropriate product names and international offices.

Next spoke Marco Veremis, co-founder and president of Upstream, a developer of mobile marketing solutions. Marco advocated deciding to venture abroad, but also establishing targets for what your aiming for: the company size, the exit strategy, and whether you're focusing on a product or a service. He said that currently it's impossible to get long-term financing in Greece to build a platform as e.g. Palantir Technologies is doing in the US. Therefore, include in your team people with contacts and a track record to sell to customers abroad. Choosing the right partner can be a shortcut, but noted that Upstream had a distressing experience with partners that ended in expensive litigation. Thus be careful in choosing partners, and insist on being the customer-facing interface. Marco agreed with Menelaos in that you need international presence near your customers. He mentioned Zuckenberg's comment on the many difficulties in setting up a company in Silicon Valley such as large costs and employee promiscuity. In the end, to establish international presence, you need a fully committed team prepared to travel a lot.

The next presentation was from GLOBO, which delivers mobile, telecom and e-business software products and services. The main points were that funding is essential to acquire and mobilize resources and avoid missing the time to market. For many reasons obtaining the first customer is hugely important as is local presence, perhaps through local partners. For that you should cooperate with a local consultancy on legal, accounting, finance, and networking help. These are not your core business and you shouldn't waste time on them. An interesting idea that was advocated is to customize and cut-down your product or service so as to deliver a simple user experience to each customer.

In a discussion that followed, participants commented on the clustering effect being developed in Greece in the area of application development for mobile operators and platforms. In parallel a participant described how 50 microelectronic design centers now clustered around Patras were spun off from the 140 engineers who worked for Atmel's design center that was setup there. A participant from the biotechnology sector said that one shouldn't be afraid to create labels (drug repositioning in their case) and invest on them, while another commented that you may even have to hire people whose appearance will mesh with that of your target market.

The next person to address the meeting was Thanasis Kalekos, a managing partner from Odyssey Venture Partners, which invests in Greek information and communication technology start ups addressing global markets. Talking from the Silicon Valley over Skype, he commented that the discussion and problems voiced during the event were exactly the same as those he experienced by companies setting up in the US. It is therefore valuable to know the US side of things if only to be less daunted by it. Creating a sales channel is expensive, he said. Technologists setting up a company believe that research and development is the dominant cost, but in truth it's one third of marketing and sales. Therefore, he suggested, you need finance to prime the pump.

Next spoke Panos Papadopoulos from bugsense, a free, real-time bug tracking service for Android, iOS and Windows Phone 7. He described their application, which currently processes 1.4 million bug reports per day. In his talk he lamented on the insular nature of typical geeks and suggested to use meetup to find interesting Meetup Groups near you, as well as LinkedIn contacts and your Greek network abroad as a stepping stones towards clients and funding sources. Panos also stressed that if you want to target US venture capital firms you should be prepared to create a US company as no one would invest in a non US startup. On the PR front he mentioned that it's difficult to get exposure at the top technology news outlets. However, as the press loves infographics creating one can often be a good way to reach them. When flying to the US, he suggested to always get an open ticket as there will often be one more meeting a day after your scheduled departure.

Then spoke Yorgos Koutsoyannopoulos, the Chairman of the Board and CEO of Helic, an electronic design automation (EDA) specialist, developing technologies for the semiconductor market. He started by saying that their first sale to a big US semiconductor company was made when their only asset was a laptop. He agreed that problems in the US are similar to those companies face in Greece. For instance, on the bureaucracy front, the US company income tax declaration is 50 pages long versus Greece's 4 pages E3 form. Incorporating in the US (e.g. in Delaware) gives you many advantages: an easy way to grant stock options, a much friendlier accounting and tax compliance regime, and an easy way to contact a large technology customer base. This doesn't mean you have to relocate your entire company to the US. You can get away with a small management team in the Valley and have your design center in Bangalore (or Greece for that matter). There's no need to apologize for your provenance, he said, nobody cares as long as the technology and service are what your customers want.

The event finished with a presentation of a trip that representatives of more than 20 Greek IT startup companies will make to the US (San Francisco and the Consumer Electronics Show in Las Vegas) in order to network, contact clients, and explore funding opportunities. As I told one of the organizers, I left the meeting with renewed optimism for the Greek economy and its technology sector.

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