To lead in tech, Cyprus must fix funding gaps, red tape and community divides

Cyprus has long been seen as a tourist destination and a favourable tax haven, but it now stands at a pivotal moment: becoming a leading startup ecosystem in Europe. This was the focus of a recent panel discussion titled “Made in Cyprus: How to Make Cyprus a Leader in the Startup Ecosystem.” that I attended.

Changing Cyprus’ narrative

The first and crucial point raised was the need to shift Cyprus’ global narrative from being a mere tax haven to becoming a hub for innovation and talent. Currently, the island is best known for attracting wealthy individuals and businesses looking for favourable tax conditions. But this image has overshadowed Cyprus’s potential as a home for innovation driven companies. A recent influx of expat-led tech startups and more than 30,000 IT specialists demonstrates that the shift has already begun.

However, challenges remain. A significant barrier identified is Cyprus’s traditional mindset regarding careers. Still young Cypriots are often directed toward conventional paths such as law, accounting, and government employment. Startups, innovation, and entrepreneurship still aren’t mainstream career choices.

All the panelists emphasised the importance of fostering entrepreneurial thinking early. Initiatives such by Junior Achievement Cyprus, Cyprus Computer Society and the Paedagogical Institute, which provide entrepreneurial education and resources, are crucial. They demonstrate how effective such programmes can be in changing perceptions and increasing local startup interest.

Cyprus has seen an increase in international entrepreneurs and tech talent relocating to the island, attracted by its Mediterranean climate and relaxed lifestyle. Yet, integrating this talent remains a key issue. It is often that prominent tech companies talk on how relocating professionals often encounter bureaucratic hurdles, citing cases where visa processes took months, delaying hires and stifling momentum.

The government needs to provide better support, including family-friendly infrastructure. Some companies are already leading by example, offering welcoming initiatives for employees and their families, such as community integration programmes, comfortable office spaces and networking events that bridge international talent with local communities.

Another major hurdle discussed was fragmentation within the local startup scene. Despite the small size of Cyprus, the startup community often remains segmented by geography, industry and language.

The discussion highlighted how critical it is to unite these fragmented communities. One solution is to create more international oriented events in the English language bringing together startups, investors, tech leaders to foster collaboration and unified growth.

Access to funding is emerging as a critical challenge facing Cypriot startups. While global venture capital activity has grown significantly in recent years, Cyprus captures only a fraction of European investment. Cyprus currently channels only about 1 per cent of its GDP into R&D and innovation, far below Europe’s 3 per cent average target set for 2030.

The private companies and funds need to start spending more to secure their future.

Improving funding access requires both government and private sector involvement. Speakers advocated for creating specific investment incentives and easing regulations to attract foreign Vcs.

Countries like Estonia were cited as examples, having successfully positioned themselves as attractive hubs through clear regulatory frameworks, startup-friendly policies, and active governmental backing.

The government needs to streamline bureaucratic processes for startups, create dedicated startup visas to facilitate global talent acquisition and increase incentives for companies investing in research and innovation.

Let’s accelerate this ecosystem

Despite these challenges, Cyprus holds distinct advantages that could significantly accelerate its startup ecosystem, including its strategic geographic location between Europe, Asia and Africa, providing unique market access opportunities; a high quality of life with its Mediterranean climate, safety and attractive living standards; and notable cost advantages, with operational and living expenses considerably lower than major European hubs like London, Berlin, or Paris.

Companies such as Wargaming and GDEV – international gaming giants headquartered on the island – exemplify successful leveraging of these advantages. Their presence shows the island’s potential as a competitive global base.

Future outlook and immediate actions

Cyprus is currently in a growth phase, which represents a substantial opportunity for early movers. But delays or insufficient policy responses could squander this potential.

Practical next steps are a unified branding, positioning Cyprus internationally not just as a financial center but as a hub for digital innovation; enhanced government support through immediate reduction in bureaucratic hurdles; and investor incentives, with clear and attractive fiscal policies aimed specifically at startups and venture capital firms.

With strategic initiatives, governmental backing, and community integration, Cyprus is poised to transition from being simply attractive for tax purposes to becoming a recognised hub for innovation and global startups.

To realise this vision, stakeholders across government, industry and academia must collaborate swiftly.

Cyprus’s startup ecosystem stands ready to transform, but achieving global competitiveness will require immediate and decisive action.