The Cypriot startup ecosystem beyond tax benefits

Cyprus, the sunny 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 is much more to Cyprus’ startup success story than meets the eye.

Buy cheap, sell high

At first glance, Cyprus might seem like 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 tiny nation. But that would be a mistake. Cyprus is quietly positioning itself as the next big thing on the European startup scene, and savvy entrepreneurs are taking note.

The principle of “buy low, sell high” is a cornerstone of successful investing and applies equally to choosing a location for your startup. Cyprus, with its relatively nascent ecosystem, offers precisely this opportunity. Unlike saturated markets like London or Berlin, where competition is fierce and costs are sky-high, Cyprus presents an opportunity to get in early on 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 major 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.

Furthermore, the concentrated nature of the Cypriot startup scene creates a unique sense of camaraderie. Entrepreneurs are not just creating their own businesses, but collectively shaping the future of the entire ecosystem. This collaborative spirit has led to the emergence of numerous coworking 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 tax incentives to foster its startup ecosystem. Here are some examples:

1. Plan Cyprus Tomorrow: This comprehensive strategy includes significant investments in 5G networks, fiber 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 start-ups.

3. Deputy Ministry of Research, Innovation and Digital Policy: Created in 2020, this ministry is dedicated to promoting digital transformation and fostering innovation.

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

Support from the European Union

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

1. Horizon Europe: The main EU funding programme for research and innovation, with a budget of €93.5 billion.

2. InvestEU Programme: Provides crucial funding and support for innovative SMEs and start-ups across the EU.

3. Digital Europe Programme: A €7.5 billion funding plan focused on developing the EU’s strategic digital capabilities.

4. European Smart Capital 2023: Paphos was named a European Smart Capital last year, leading to several improvements to its digital infrastructure.

Strategic geographical advantage

Perhaps most interestingly, Cyprus is taking advantage of 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, taking advantage of the island’s role as a bridge between continents.

Taking advantage of the diaspora

Theo Paphitis, Tasoula Hadjitofi, Peter Abraam and Dr Linda Papadopoulos are just a few of the standout 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. Programmes such as the “Invest Cyprus” initiative aim to attract these experienced professionals back to Cyprus, injecting valuable knowledge 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 inside look at the key players and resources you should know about:

1. IDEA Innovation Center: IDEA is more than just an accelerator – it is your gateway to the Bank of Cyprus’ extensive network. They offer tailored mentoring programmes and can put you in touch with potential clients in the financial sector.

2. Cyprus seeds: If you come from academia, this is your first choice. They specialise in turning research into viable businesses and offer not only funding but also crucial guidance on intellectual property rights and commercialisation strategies.

3. Chrysalis JUMP: For those working in the cleantech 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 Centre): Don’t underestimate the value of your high-tech labs. If you’re developing hardware or need specialized testing, CyRIC can save you thousands of dollars in equipment costs.

5. RAISE: While RISE is primarily focused on research, it is the best option to stay on the cutting edge of AI and emerging technology. Its regular workshops and seminars are goldmines for networking with potential tech company co-founders.

6. Technology Island: This industry-led nonprofit is your ticket into the broader tech community. Their events are where you’ll meet potential investors who understand the dynamics of the local market.

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

8. Gravity Companies: This new player in the ecosystem focuses on early-stage funding. It is known for being founder-friendly and can offer valuable introductions to its global network.

9. Aristotle: ARIS is a relatively new accelerator that stands out for its focus on deep-tech startups. If you work with cutting-edge technology, its specialized mentoring can be a game-changer.

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

Looking ahead, it’s clear that Cyprus’ startup ecosystem is about much more than favourable tax rates. It’s about seizing opportunities in an unsaturated market, taking advantage of a unique geographic position and building a collaborative community from the ground up. For entrepreneurs willing to look beyond the obvious options, Cyprus offers the chance to be part of something truly special – a startup ecosystem on the verge of exponential growth.

In the startup world, timing is everything. And for Cyprus, the time is now. The question is not whether this tiny island nation can compete on the global stage, but rather how long it will take for the rest of the world to realize what is happening here.

About the author

Arian Adeli is the Founder and CEO of Evernomic, a venture studio that builds, backs and buys synergistic startups in the software, advertising and services sectors.