A VC in Greece on operating in tumultuous times

Next Story

Apple launches CareKit to create health apps

Georgios Kasselakis has the same concerns as most VCs: How to raise money, how to grow the money investors provide him, how to identify the most promising startups.

Unlike most VCs, Kasselakis and his seed-stage firm, OpenFund, are based in Athens, Greece, a country that’s nearly bankrupt and where, even worse, more than 44,000 refugees are now trapped (a number that’s growing daily, owing to the closed-door policies of its neighbors).

We talked with Kasselakis last week via email to learn more about how seven-year-old OpenFund operates, and how it’s coping with what’s happening all around it.

TC: How much money is OpenFund managing?

GK: We sit on top of a €15 million fund, which is our second one. [It’s] a big jump from the €500,000 that we originally launched with.

TC: How many companies has your firm funded to date?

GK: We’ve made more than 20 investments in our second fund. While small by Silicon Valley standards,  you have to keep in mind the cost of labor for highly trained knowledge workers (developers, IT, network), which is roughly six to seven times less than the Valley.

TC: What size checks do you typically write?

GK: We do pre seed and seed, so 50,000 to €750,000. We provide a little money and a lot of advice and help in whatever the founders want. Or, we sit back if that’s what they want. Unfortunately most funds provide negative value aside from their money; we try to be there when they want us.

TC: What types of startups do you invest in?

GK: In a small country with limited deal flow, we can’t afford not to be a generalist tech fund. We do anything from marketplaces to wearables, SaaS , consumer web, IoT and others. We bring in people with sector specific expertise to help us monitor the companies but also [help the startups] define healthy [key performance indicators] and work toward achieving their goals.

TC: Do these startups have to be in Greece?

GK: We usually start with businesses headquartered in Greece, but if everything goes well, they [typically] raise from abroad and flip the company to European or U.S. jurisdictions and start growing there, too. If that doesn’t happen we’ve probably done something wrong.

In some cases, as with Resin.io, a coinvestment with DFJ [that aims to make it simple to deploy, update, and maintain code running on remote devices], we invested in a team with a few Greeks who were mostly operating out of London.

We invested our first fund across Europe, but it’s difficult to help startups across many different time zones. Also business development has a network effect on a physical level, so in our second fund, we decided to double down on Greece.

TC: Who are your limited partners?

GK: Our largest single investor is the European Investment Fund. Their investment is under the JEREMIE framework, which is a way for the public sector to leverage private investment while maintaining healthy motives. Put another way, they trust us as the managers to define the goals and let us do our work. They also bring a lot of due diligence on the fund itself, which is a great signal for other private investors to hop in.

TC: Have you had any exits yet?

GK: So far — and with moral support from our investors — we’ve decided to hold on to [most of] our portfolio companies as long as they keep [raising money at higher valuations]. We have had some great exits from our first fund [though], including [the social media monitoring startup] YouScan in Ukraine [acquired for an undisclosed amount by the Russian online directory company Yell.ru].

Our second fund has been operating since January 2013, so in relative terms, it’s a little soon to force exits. We’ve seen great leaps in valuation for [the taxi-hailing smartphone app] Taxibeat, which was a role model for founders here. It really helped Greeks look at startups as a viable life choice.

We’ve also had three companies fail — two of which returned a lot of capital, which made us want to invest in their next venture even more.

 TC: What’s the obvious star in your portfolio right now?

GK: Workable, a cloud-based recruitment platform for companies. But the reason we invest in any startup is because we believe it has the potential to grow as big.

TC: How many other active tech venture firms are there in Athens?

GK: There are four:  Odyssey Venture PartnersFirst AthensVentureFriends, which just launched; and PJ Tech Catalyst.

TC: Is that more or less than, say, five years ago?

GK: A lot fewer. At some point, a fund of funds firm called Taneo had helped create more than 10, which were then discontinued. Most fund managers stumbled on the crisis, panicked, and didn’t do any investments at all.

TC: How is the startup scene being impacted by all the turmoil surrounding it?

GK: We aren’t affected almost at all. We live in a bubble in tech, which is doing tremendously well. There’s an ongoing joke in Athens that startups are the most consistent rent payers and that landlords are fighting to get them as customers. At times it sounds blasphemous because it’s in stark contrast with everything else going around, but we’re doing excellent.

My only beef is that investors — LPs — don’t consider our fund even though our financial performance is well above the European average. We’re just not an eligible target for many of them. A similar attitude comes from fellow EU VCs who are very hesitant to consider deal flow coming from us.

Perseverance goes a long way toward changing that perception, but we still have ground to cover.