Cyprus wants in on the Startup Nation game
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“We are not competing with Tel Aviv, we are competing with other European countries,” Invest Cyprus CEO George Campanellas told CTech during a one-on-one sit down at the agency’s offices in Nicosia. “You have your startup nation in Israel, and what do startups do? They scale up. The Cyprus offering is to start considering Cyprus as a potential location to obtain your second, third, or fourth office. That’s the whole point of what we’re trying to do with Israel. It’s about fitting Cyprus into the scale-up plans of Israeli tech companies.”
Last month CTech received an invitation on behalf of The Cyprus Investment Promotion Agency, the national investment promotion agency of Cyprus, to visit the county and better understand its recent efforts to transform itself into a European tech hub. With such close geographical proximity to Israel and an opportunity to enter the EU market, it was a trip too good to miss. The country has always been known for its lax tax laws and soft regulation, but this time it felt different: the country had high hopes for its post-pandemic future, and it intended to show us what it had in store.
“What we have tried to do the past few years, which is picking up lately, is to start developing Cyprus as a location for technology companies,” explained Campanellas. “The ‘Office-In-Name-Only’ model stopped years ago – we are not talking about PO Boxes anymore. We need substance.”
Today Cyprus has a population of roughly 920,000 with a median age of 38. Due to its positioning in the Mediterranean Sea, it has long served as an eastern trading post and found industry success with its maritime sector – currently making up 7% of the country’s GDP. Its main trading partners include fellow EU members Greece, Germany, Italy, and France, as well as the UK, Israel, and China. Its legal system is based on the UK Common Law principles, as well as abiding by the European laws set out by the EU.
Its position has always meant that it is an attractive choice for companies who want to penetrate the EU market and receive regulatory licenses that can easily be managed in other countries. Where the country saw success in the sea, it now wants to achieve again in the ever-expanding tech startup space.
Invest Cyprus is solely dedicated to attracting and facilitating foreign direct investment in the country. It works with governmental authorities and the private sector to maintain and expand the country’s international standards in legal and operating climate for business. It is clear the agency has its eyes on the prize, so to speak: its vision of “Cyprus 2035” is to help the country become a location where people can move to live and conduct business. Its FDI (Foreign Direct Investment) rate reached €22.2 billion ($23.8 billion; 81 billion NIS) in the last 10 years, thanks mainly to its shipping and travel sectors. Recently, its investment in communication has helped with the growth it has seen.
CTech’s visit to Cyprus helped us understand firsthand the state of the company and what it plans to do to help it attract more talent from the rest of the world. We visited Cypriot companies NIPD Genetics and ecommbx in the biotech and fintech industries, respectively, as well as explored the University of Nicosia. Forever forward-thinking, the institution is launching the world’s first degree in ‘Metaverse and NFTs’ set to start next year.
“NFTs are the most interesting area in the crypto space,” said university CEO Antonis Polemitis speaking about its focus on tech. “Perhaps it will replace Facebook.”
The University of Nicosia was established in 1980 and in 2014 became the first university in the world to offer a Master of Science in Blockchain and Digital Currency and the first educational institution to accept Bitcoin for tuition payment. Its ‘Institute for the Future’ department recently embarked on a partnership with Binance Charity, the philanthropic arm of cryptocurrency and blockchain infrastructure provider Binance, to provide scholarships for the program. According to Polemitis, students at the University of Nicosia originate from, in order: Greece, Cyprus, the US, the UK, Israel, Lebanon, Australia, and more.
CTech was also invited to visit the Troodos Observatory, currently under construction and designed with the hope to bring international ‘space tourism’ to the country. Planning to open in the summer of 2023, it will be an astronomical center working in collaboration with other European and International institutions. According to its lead architect Elena Tsolakis, it will also be collecting data for research to share with NASA.
And so Cyprus is working on attracting businesses and young talent to its shores – yet it became clear how much of its efforts depend on importing immigrants to tackle the high-paying tech jobs. Invest Cyprus admits that not enough effort is being done on a governmental level to improve education for local Cypriots. “We haven’t seen yet a serious reform in our educational system,” Campanellas tells CTech. “But tech companies are part of society, and these companies have a lot of CSR programs.”
It is concerning to think just how much emphasis is being placed on external talent to fill the positions that the country expects to create. It is possible that if those coming from the UK, U.S., or Israel are the ones securing placement in highly paid positions, then resentment might foster from locals who feel like they’re missing out on opportunities. Without fast government efforts to increase STEM education, and the university’s current trend of favoring students from overseas, it might take years before Cypriots finally catch up to those immigrating from other countries.”
One company that has settled into Cyprus is Israeli social trading and multi-asset investment company eToro, which set up an office in the city of Limassol soon after its founding in 2007. Acting as the European brokerage arm of the group, it is responsible for servicing clients throughout the member states of the European Union. Its R&D and marketing efforts remain in Israel, yet its Cypriot office is made up of 250 people from around the world.
“I think Limassol is more Tel Aviv, while Nicosia is more Jerusalem,” joked eToro’s Chief Operation Officer Avi Sela. The company hosted CTech in the seaside city roughly 40 minutes away from Nicosia to better understand its incentives to set up shop in the country. “It is very business-friendly and open for innovation. You can actually introduce new technologies here, test them, and find people that are willing to listen and evolve.”
An attractive feature of Cyprus, aside from its 15% corporate tax rate and access to European markets, is the fact that it can act as a testing ground for products and services. Due to the nature of being an island, Cyprus can offer Israelis what Invest Cyprus calls “a low-stake testing market” and make improvements before expanding out further.
According to Sela, the eToro office is made up of both local talent and those who have been educated abroad. Apparently, it is common in Cyprus for locals to seek education in major hubs like the UK or Netherlands, only to return a few years later to settle down. The 250-person office has taken up its home in Limassol, which in 2020 was classified as a ‘global city’ by the Globalization and World Cities Research Network.
For Israeli companies that considered relocation to Cyprus, the city has proven to be popular; the region has roughly 1,000 Israeli families and holds one of the country’s three Chabad Houses to foster a Jewish community.
“Cyprus was for us, over the years, a good host,” Sela said. “We found that Cyprus is very important to us, they have the right state of mind. They’re talented. And there was a lot of focus on getting the country to be there for fintech companies. It’s a good match.”
CTech’s visit to Cyprus helped change its view of what the country hopes to achieve in the future. First and foremost, it hopes to shed its reputation as nothing but a tax haven; once established offices are set up by foreign companies it hopes to foster an environment for tech innovation to match that of Israel. It hopes to maintain tourism and maritime sectors while growing fintech and communication opportunities. Its hope is that the country becomes a legitimate option for companies that can take advantage of everything it has to offer.
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