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Greek Startups Cut Off From The Cloud

Greece's emergency foreign spending restrictions have left tech companies scrambling to fund web hosting accounts and other services.

[Photo: Flickr user Gareth Rushgrove]

The ongoing financial crisis in Greece has left some tech companies struggling to pay the bills—but not because they don’t have money in the bank.

Like businesses around the world, Greek startups often rely on cloud services for everything from web hosting to email to credit card processing. But those services are generally provided in the U.S. or elsewhere outside Greece, and strict capital controls imposed this week sharply limit Greeks in spending money abroad.

Credit card payments and bank transfers outside of Greece are essentially blocked, forcing some Greek businesses to ask cloud vendors to delay charging their cards and keep their accounts active until the controls are lifted.

"If they're doing business in Greece and generate revenues only in the country, it's really tough to overcome these barriers," wrote Nick Drandakis, the CEO and founder of Taxibeat, an Athens-based cab-hailing app startup.

Drandakis says his company was able to make payments from a U.K. bank account, but that option is not available to companies without operations outside of Greece.

"Other fellow entrepreneurs in the country are facing big hurdles in paying their costs," he wrote.

Some companies are relying on help from friends and family overseas, while others are shifting gears to delay buying new digital services until the crisis is resolved.

"On July 1 we were going to launch the weather service we have been working on in stealth mode all this time, but news caught us and we canceled it," wrote Manolis Nikiforakis, the CEO and founder of weather forecast aggregator Weather ex Machina, in an email. "Capital controls would disable our ability to set up additional server nodes for our backend system and would have made our service almost unusable and our launch a failure."

The company will now wait until "things settle down" before launching the service, he says.

"Obviously this was not a major problem for us," writes Nikiforakis. "I am sure there are many startups out there in far more difficult situations."

To help fellow entrepreneurs keep their digital doors open, Bugsense cofounders John Vlachoyiannis and Panos Papadopoulos have been leading a volunteer effort to assist Greek startups with no way to pay for necessary online services.

"We could identify with them because we have been through similar situations—of course not so bad, because there were no controls back then," says Papadopoulos. He and Vlachoyiannis moved from Athens to San Francisco for the mobile device analytics company, which was acquired by Splunk in 2013.

Papadopoulos tweeted about the program on Monday, and soon received both requests for assistance and offers of help, including from Andreessen Horowitz and Netscape cofounder Marc Andreessen.

"What we do is we get all the requests by people, and we just dispatch it to different people who are helping out," says Papadopoulos.

As of Wednesday afternoon, the effort had received about 35 inquiries from companies in need of assistance and helped fund requests from about 15, according to Papadopoulos.

"Some of them dropped because they got some help from a friend or family member in the U.K. or Germany," he says.

The actual payments probably only came to about $1,000 in total, he says, mostly paying for essentials like web hosting for small-scale startups. At the moment, the ad hoc group’s structure is informal, but that may change if the capital controls last much longer.

"A lot of people, they’re having payables coming up," he says.

Some digital vendors have also offered assistance to customers affected by the Greek situation.

"We made our best effort to identify a few thousand Greek customers who might be impacted by the banking restrictions and changed our backend billing code to provide them with an exemption for at least the first seven days of July," wrote Zach Bouzan-Kaloustian, director of support at cloud computing provider DigitalOcean, in an emailed statement.

So far, the Greek government has given no clear sense of how long the capital controls, imposed Monday after the country’s leaders failed to forge an agreement with international creditors, will stay in place. The rules restrict Greek residents to cash withdrawals of €60 per day and aim to limit credit card payments to vendors within Greece.

But even some domestic credit card payments have been affected by the capital controls, says Georgios Gatos, cofounder and COO of Incrediblue, an online platform for booking sailing vacations with operations in Greece and the U.K.

In addition to asking cloud providers for delayed payment while shifting billing to U.K.-registered accounts, the company had to ask its Greek customers to make payment by domestic wire transfer. Incrediblue handles credit card purchases through Braintree, the PayPal-owned payment processor, and those transactions were blocked by the Greek banking system as overseas payments, Gatos says.

While Greece isn’t the first country to impose capital controls in times of economic crisis, its restrictions do come at a time when even essentially domestic transactions and local digital businesses still rely on international payments.

Even in 2008, when Iceland saw its own set of capital controls imposed in the wake of the , startups weren’t yet so reliant on the cloud, and Iceland had spent the pre-crisis "boom years" building up a network of data centers, says Bala Kamallakharan, the founder of the Startup Iceland initiative.

Kamallakharan says he hopes the current Greek economic situation, and the need to innovate around it, can ultimately be a boon to the Greek startup sector.

"Every crisis is a great opportunity to reinvent the local startup community," he wrote in an email. "This is what happened in Iceland, and I am pretty sure the resilient founders and entrepreneurs in Greece will see this as a unique opportunity to build valuable companies."