The Cypriot startup ecosystem beyond tax benefits

Cyprus, the sun-soaked Mediterranean island, has long been known for its pristine beaches and ancient ruins.

But in recent years, a new attraction has been drawing a different kind of visitor: entrepreneurs and investors looking to tap into the country’s growing startup ecosystem.

While the island’s favourable tax regime has certainly played a role in this growth, there’s far more to Cyprus’s startup success story than meets the eye.

Buy Low, Sell High 

At first glance, Cyprus might seem an unlikely contender in the global startup race. With a population of just over a million and an economy traditionally reliant on tourism and financial services, it’s easy to overlook this small nation. But that would be a mistake. Cyprus is quietly positioning itself as the next big thing in the European startup scene, and savvy entrepreneurs are taking notice. 

The principle of “buy low, sell high” is a cornerstone of successful investing, and it applies just as well to choosing a location for your startup. Cyprus, with its relatively nascent ecosystem, offers precisely this opportunity. Unlike saturated markets such as London or Berlin, where competition is fierce and costs are sky-high, Cyprus presents a chance to get in on the ground floor of something potentially transformative. 

Small Size, Big Advantages 

The country’s small size, often seen as a limitation, is actually one of its greatest assets for aspiring entrepreneurs. In a compact ecosystem, networking becomes infinitely easier. You’re not just another face in the crowd; you’re a significant player in a growing community. This accessibility extends to government officials, investors, and industry leaders — connections that could take years to cultivate in larger markets. 

Moreover, the concentrated nature of the Cypriot startup scene creates a unique sense of camaraderie. Entrepreneurs here aren’t just building their own businesses; they’re collectively shaping the future of the entire ecosystem. This collaborative spirit has led to the emergence of numerous co-working spaces, incubators, and accelerators, creating a support network that rivals those found in more established startup hubs. 

Government Initiatives 

While tax benefits are attractive, the Cypriot government is going far beyond fiscal incentives to nurture its startup ecosystem. Here are some examples: 

1. Cyprus Tomorrow Plan: This comprehensive strategy includes significant investments in 5G networks, fibre optic cables, and digital skills training for the workforce.

2. Research and Innovation Foundation (RIF): A government-funded organization that provides grants and support for innovative projects and startups.

3. Deputy Ministry of Research, Innovation and Digital Policy: Established in 2020, this ministry is dedicated to driving digital transformation and encouraging innovation.

4. Cyprus Intellectual Property (IP) Box Regime: Allows technology startups to reduce their corporate tax rate from 12.5 per cent to an effective 2.5 per cent on income derived from qualifying intellectual property.

European Union Support 

Cyprus’s EU membership provides startups with access to various support mechanisms: 

1. Horizon Europe: The EU’s key funding program for research and innovation, with a budget of €93.5 billion.

2. InvestEU Program: Provides crucial funding and support for innovative SMEs and startups across the EU.

3. Digital Europe Programme: A €7.5 billion funding scheme focused on building the EU’s strategic digital capacities.

4. European Smart Capital 2023: Paphos was named the European Smart capital last year, leading to various improvements in its digital infrastructure.

Strategic Geographic Advantage 

Perhaps most intriguingly, Cyprus is leveraging its unique geopolitical position at the crossroads of Europe, Asia, and Africa. This strategic location, combined with the country’s EU membership, makes it an ideal launchpad for startups looking to expand into multiple markets. It’s not uncommon to find Cypriot startups with customer bases spanning from London to Dubai, capitalizing on the island’s role as a bridge between continents. 

Tapping into the Diaspora 

Theo Paphitis, Tasoula Hadjitofi, Peter Abraam, and Dr. Linda Papadopoulos are just a few notable names from the island’s extensive list of impressive talent. Cyprus is also tapping into its diaspora, many of whom have found success in tech hubs around the world. Programs like the “Invest Cyprus” initiative are aimed at attracting these experienced professionals back to Cyprus, injecting valuable expertise and international connections into the local ecosystem. 

The Ecosystem 

As a Cypriot entrepreneur, you’re in luck. Cyprus is home to a diverse and supportive network of organizations dedicated to the local startup scene. Here’s an insider’s look at the key players and resources you should know about: 

1. IDEA Innovation Center: More than just an accelerator, IDEA is your gateway to the Bank of Cyprus’s extensive network. They offer tailored mentorship programs and can connect you with potential clients in the financial sector.

2. Cyprus Seeds: If you’re coming from academia, this is your first stop. They specialize in turning research into viable businesses, offering not just funding but crucial guidance on intellectual property rights and commercialization strategies.

3. Chrysalis LEAP: For those in the clean-tech space, Chrysalis LEAP is invaluable. They have deep connections with environmental agencies across the EU, which can be crucial for regulatory compliance and funding opportunities.

4. CyRIC (Cyprus Research and Innovation Center): Don’t underestimate the value of their high-tech labs. If you’re developing hardware or need specialized testing, CyRIC can save you thousands in equipment costs.

5. RISE: While primarily research-focused, RISE is your best bet for staying ahead of the curve in AI and emerging tech. Their regular workshops and seminars are goldmines for networking with potential tech co-founders.

6. TechIsland: This industry-led non-profit is your ticket to the wider tech community. Their events are where you’ll meet potential investors who understand the local market dynamics.

7. Cyprus Business Angels Network (CyBAN): When you’re ready for your first serious funding round, CyBAN should be on your radar. They have a track record of backing local startups and understand the unique challenges of scaling from Cyprus.

8. Gravity Ventures: This newer player in the ecosystem focuses on early-stage funding. They’re known for being founder-friendly and can offer valuable introductions to their global network.

9. ARIS: A relatively new accelerator, ARIS stands out for its focus on deep-tech startups. If you’re working on cutting-edge technology, their specialized mentorship can be game-changing.

10. Youth Board of Cyprus – Youth Entrepreneurship Development Programme: Don’t overlook this if you’re under 35. They offer tailored support, including small grants and co-working spaces, specifically designed for young Cypriot entrepreneurs.

As we look to the future, it’s clear that Cyprus’s startup ecosystem is about much more than favourable tax rates. It’s about seizing opportunity in an unsaturated market, leveraging a unique geographical position, and building a collaborative community from the ground up. For entrepreneurs willing to look beyond the obvious choices, Cyprus offers a chance to be part of something truly special — a startup ecosystem on the verge of exponential growth.

In the world of startups, timing is everything. And for Cyprus, the time is now. The question isn’t whether this small island nation can compete on the global stage, but rather how soon the rest of the world will catch on to what’s happening here. 

About the author

Arian Adeli is the founder and CEO of Evernomic, a venture studio which is building, backing and buying synergetic startups in the software, advertising and service sectors.