Technology & Start-Ups

An Era of Disruption

The technology space in Cyprus is seeing a fresh boost with more state support to the sector, the launch of new national strategies to integrate innovative tech, and incentives to attract more IT start-ups and regional headquarters.

Promoting a digital economy, developing more secure and efficient global communications and launching incentives are top priorities for Cyprus to attract more business and investment into its technology sector. Already home to a number of international tech companies running their regional headquarters from the island and servicing clients in Europe, the Middle East and North Africa, Cyprus is also seeing increasing numbers of innovative start-ups on its shores.

The value of the Information and Communications Technology (ICT) services market in Cyprus is growing quickly. The country has great ambitions to become a regional hub for science and tech companies and has announced its full support and backing for innovators, start-ups and forward thinkers.

The growing interest and activity in this sphere has also spurred the country to make unprecedented moves and shift its focus to this area of the economy, underlining the importance of ICT as a catalyst to increase productivity and economic growth. In 2019, the government pledged to double expenditure on developing technology and increase private contribution as part of a 2019-2023 national strategy on Research and Innovation. The proposal envisions the future of the country as a dynamic and competitive economy with technological development, scientific excellence, innovation and entrepreneurship at its core. Another big reform in 2020 was the official establishment of a Deputy Ministry for Research, Innovation and Digital Policy to guide the country through its digital transformation. These moves highlight Cyprus’ efforts to finally take bold steps to be a part of the ongoing Fourth Industrial Revolution (4IR), which is accelerating at a rapid pace with the growing utilisation of new technologies such as artificial intelligence, cloud computing, robotics, 3D printing, the Internet of Things, and advanced wireless technologies. These developments have ushered in a new era of economic disruption, and Cyprus is ready to boost investment in this sector to secure its future as both an established international business centre and an emerging tech hub.

Tech HQ Location 

Several major international ICT companies have long operated regional headquarters in Cyprus, using the island as a hub for software development, system integration, testing services, R&D activities, project management, marketing and sales. Among these are NCR, a world leader in consumer transaction solutions, including ATM teller machines, and Amdocs, a leading multinational software and services provider to global communications and media companies. Others who have their global headquarters in Cyprus include Wargaming, a world-renowned video game developer, international VoIP IPBX software developer 3CX, and Viber, the popular online communications platform. Viber’s success in Cyprus is a good advertisement for the island as it seeks to attract more tech entrepreneurs. Viber was started in 2010 by a team of foreign nationals who needed an EU base with favourable taxation, so they set up their headquarters in Limassol. Viber grew rapidly and in 2014 was bought by the Japanese e-commerce giant Rakuten for US$900 million.

International heavyweights such as Microsoft, SAP, Oracle and IBM have been present in Cyprus for many years, and the island has long been a prime location for the fintech industry as it is home to hundreds of the world’s biggest forex brokers and online-trading platforms. But there is room for further development and growth in the sector for smaller innovative enterprises, such as Whipper, a ‘chat and play’ gamified digital messaging platform which opened its headquarters in Limassol in June 2017. Its founding team includes executives, investors and advisors from Netflix, Riot Games, Amazon, Swiftkey, Expedia, and Viber. The number of fintech and regtech firms, such as Spotware Systems and Point Nine, is also growing and taking advantage of Cyprus as a gateway into and out of the EU for various corporate services. 

With tech proving a growing sector in Cyprus, more than 100 tech companies joined forces in 2021 to showcase that Cyprus is an ideal place to live, work, and innovate. They launched Techisland, a non-profit organisation with a mission to promote the acceleration of the local tech ecosystem.

2022 saw new big-hitters invest in Cyprus, with European digital banking platform Revolut becoming the first entity to receive approval as a crypto-asset service provider from the Cyprus regulator. The authorisation will enable Revolut to offer crypto services to its 17 million customers in the EEA out of a new crypto-asset hub in Cyprus. Revolut said its choice was down to the sophisticated regulatory regime of the country, which has already attracted the likes of, eToro and BitPanda. Also leading US consumer services and applications software provider, TangoMe, announced plans to launch offices in Cyprus.

Other prominent players that have chosen Cyprus are TheSoul Publishing, one of the largest online publishers in the world with 1.5 billion followers. The company develops videos across 100 channel brands in 19 different languages, including some of the most-subscribed YouTube channels such as 5-Minute Crafts, Slick Slime Sam and Bright Side. Innovative software company BrainRocket is aiming to make Cyprus a central software hub in Europe, while global leader in trading and risk management for capital markets Murex is also bolstering its EMEA footprint from Cyprus. Also, Medicover, a multinational specialised diagnostic and healthcare services provider has invested in Cypriot innovative biotech, while US business process outsourcing provider SYKES – now part of Sitel Group – has been expanding its operations in Cyprus over the last five years.

Diversify or Die 

With its new focus on long-term development outcomes, Cyprus is determined to diversify and harness growth with a technology-driven economy. The biggest spender by far on IT in Cyprus is the financial sector, followed by the telecoms providers and the public service. Support and training services form the largest primary market in Cyprus, followed by project and outsourcing services. There is currently big demand for support services and skills training in ICT, especially as communications are increasingly moving to 3rd Platform technologies, such as mobile, cloud and big data systems. Services and software are expected to be the top-performing segments of the Cypriot IT market in the coming years, due to continuing demand for quality end-to- end solutions that focus on enhanced user experience. Innovation and specialisation will be key elements to succeed in the Cypriot market. For Cyprus to remain competitive largely depends on how it adapts to new realities like virtual banking, e-governance, agritech, new and renewable energies, as well as smart cities. Business success will depend on how new technological capabilities will be utilised, and education and retraining will be absolutely crucial. In the next five years, there is significant potential in further developing medical and financial technology, and Artificial Intelligence (AI) is also set to significantly change the way companies conduct their business.

New AI Strategy 

Whether it sparks excitement or fear, there is no denying that AI has already become an important part of our world by enhancing key business processes to help drive value. Today, companies are racing to adjust their operations to be able to capitalise on its transformational potential. Cyprus has taken a firm stance in establishing AI as a driving force for growth and increased productivity, and an opportunity to transform its economy.

Considerable progress has already been achieved in Cyprus by developing blockchain technology and a National Strategy for Decentralised Technologies has already been adopted. In January 2020, the Council of Ministers approved a new National Artificial Intelligence strategy with plans to establish applications to support the technological development of AI in domains such as universities, public and private sectors. The aim is to create an ethical and trustworthy foundation for AI development and to build an international cooperation network through Cyprus’ participation in EU initiatives. The strategy also serves as a tool to better engage with high-tech and start-up companies present on the island and to attract more players to help develop this segment.

Cyprus-based companies are already being noticed internationally in the AI sphere. For example, in its first outside investment fundraising, machine-learning company Omilia secured $20 million in funding from Grafton Capital to continue expanding its conversational AI technology built for customer care needs of global enterprises. The Cypriot company has built a virtual assistant and customer dialogue management system, where customers can experience human-level intelligence and machine-level efficiency when contacting a company, whether by phone, web chat, social media, SMS, email, or mobile app. The AI consists of proprietary speech-recognition software, voice biometrics, dialogue technology and machine learning, which the company claims has trained on billions of interactions since its founding in 2002. Now the service is fluent in 21 languages, serving clients such as global banks, mobile operators and insurance firms. The fresh capital will fuel go-to-market efforts in Western Europe and North America, where the company already has a lucrative customer base.

Deepening the Talent Pool 

Cyprus already has an extensive and internationally recognised pool of skilled professionals in financial and business services, but where this pool still remains relatively shallow is in the tech sector – a gap the country urgently needs to bridge if it wants to develop its IT landscape. Cyprus has attracted more than 7,000 IT pros, the majority of whom are seasoned and older professionals, not young graduates and execs who are a crucial demographic to secure the future of the sector. Nonetheless, the sector is short 3,500 professionals with upskilling and reskilling programmes flagged as important for the future.

Statistics on this subject are formidable. For example, although Cyprus has the second-highest tertiary educational attainment rate in the EU, it has one of the lowest proportions of Science, Technology, Engineering, and Mathematics (STEM) graduates at a time when nearly 46% of new jobs created in the EU require STEM skills, according to the EU Education and Training Monitor for 2019. There are many unskilled workers in the local labour force. Specifically, these are individuals aged 25-64 who are employees, self-employed or family workers. The proportions of those with low digital skills (32%) or only basic digital skills (34%) are higher than the EU average of 25% and 30% respectively. Those reporting above-basic digital skills are fewer in Cyprus (22%) than across the EU (36%).

The tech-talent shortage is a growing issue and challenge worldwide. The Cyprus government has recognised this as a key concern given the growing importance of digital technologies and artificial intelligence in the workplace. An ever-increasing sector, the field of information technology has a definite shortage in the supply of those who can work in the field, such as coders. Despite Cyprus already being a tech hub, industry experts note the need to increase the supply of competent employees to meet the demands of tech companies relocating to the island.

One move to tackle this came in late 2021 when Cyprus launched a new action plan to attract foreign businesses to establish or expand their activities on the island. Cyprus already provides many competitive advantages, but this new set of incentives is geared to ramp up interest for companies to set up headquarters in the country. The plan has taken into account the best practices from other European countries, with emphasis on domains related to technology, shipping, innovation, research and development, biogenetics and biotechnology, without excluding any other companies that choose Cyprus as their place of business. The new strategy which promotes foreign investment was implemented on January 1, 2022.

The education sector has adapted to this reality introducing curricula to supply more skilled graduates to the labour market. The local universities provide excellent bachelor and masters programmes in computer sciences and technology, consistently producing tech-savvy candidates to join the ranks of some of the world’s leading ICT companies. For example, the University of Nicosia (UNIC) broke new ground in university adoption of blockchain technology and offers the first certified online blockchain course (MOOC) and the world’s first master’s degree for digital currencies. More than 25,000 students have taken the MOOC and over 500 students have enrolled in the MSc in digital currencies.

Cyprus has also established several Digital Innovation Hubs (DIHs) such as the CYRIC Digital Innovation Hub, the KIOS Innovation Hub, the Robotics Control and Decision Systems (RCDS) Lab at the Cyprus University of Technology, and the Entrepreneurship Centre at the University of Cyprus. These DIHs are active in various market segments, such as agriculture, health, construction, transport, manufacturing and energy, and in a wide range of technological areas, including AI, Big Data, cloud computing and cybersecurity. The AI Expert Group considers the creation of a (virtual) AI DIH with dedicated AI research programs that could serve as a platform where the scientific and business community could access and share knowledge.

Also the country’s investment promotion agency, Invest Cyprus, announced in 2018 a collaboration with Singapore-based blockchain platform VeChain and the American organisation CREAM, which provides advisory services for projects and investments in the blockchain area. The objective is to create a new framework of cooperation, recommend policy reforms and establish the necessary legal framework to regulate the application of blockchain technology in Cyprus’ financial sector. Another non-profit organisation supporting the research of blockchain technologies is called Cyprus Blockchain Technologies (CBT), which is a consortium including the University College London, the Bank of Cyprus and KPMG.

Fostering Start-Ups 

Attracting more innovation and talent is key to Cyprus’ efforts to secure a digital future, which is why the country has introduced financial incentives for innovative SMEs and start-ups launching on the island. To entice more international talent from non-EU countries to launch innovative ventures in and from Cyprus, a pilot programme called the Start-Up Visa scheme was set up in 2017. Currently, the government is trying to make it as easy as possible for people to come and work on the island, for instance by launching the Digital Nomad Visa.

The move is expected to further boost entrepreneurship with the goal to create new jobs, promote innovation and research, and diversify the country’s business ecosystem. Approved applicants will initially get the right to live and work in Cyprus for at least a year, and if successful in launching their start-up and creating jobs, the visas can be extended indefinitely. So far, most interest has come from the Middle East, and given Cyprus’ proximity to the area it makes the island an attractive option for innovators from the region to stay close to home while working in a competitive and business-friendly environment with access to EU markets.

Attracting more tech pros to Cyprus will ultimately lead to cross-fertilisation among professionals and an increase in local start-ups. As the country’s tech eco-system grows, it will also bring venture capital through its SME Equity Fund. The government has allocated €20 million to this fund, and it will be used in combination with other lenders. These lenders will commit their own funds in combination with state money – without the expectation of any return. Distribution through banks will ensure that projects are vetted properly for viability before receiving funding.

Start-up accelerators like the Cyprus Business Angels Network (CYBAN), Cypriot Enterprise Link, Chrysalis Leap and Repower Cyprus have all boosted the environment, along with events such as Hack Cyprus Hackathons, the Clean Launchpad Competition, as well as Startup Weekend and Startup Live. Home-grown talent and a burgeoning tech landscape are launching inspirational success stories, and a new research centre on interactive media, smart systems and emerging technologies (RISE) was inaugurated in Nicosia in 2017. The project is a joint venture between the three public universities – University of Cyprus, Cyprus University of Technology, and the Open University of Cyprus – the Municipality of Nicosia, and two international partners, the German Max Planck Institute for Informatics and University College London.

As part of the new National AI Strategy, a vibrant start-up ecosystem will also be fostered through the development of an accelerator program to support the successful launch and survival of new AI business ventures. This program will provide expertise in developing AI solutions, and help firms access expert communities. Apart from creating opportunities to team up with other firms and research institutions, and facilitating the access to flexible and effective financial funding, this program will also provide dedicated support to testing and open data environments – including regulatory sandboxes. 

Going Digital 

In a bid to catch up to the rest of the EU in digital transformation and innovation, Cyprus is now taking huge strides and is determined to succeed in developing the sector for both companies and the state to better capitalise on innovative ideas and products. The country’s tech landscape is sure to see substantial growth in the coming years also thanks to its top-tier universities and research institutes providing increasing numbers of highly qualified staff and carrying out ground-breaking and technologically innovative projects. Automating public services, upgrading networks, and promoting entrepreneurship are key goals for Cyprus to strengthen its global competitiveness amidst the Fourth Industrial Revolution. An increasing number of technology companies are choosing to locate their operations to Cyprus because of its cost-effective services, favourable tax and business environment, and with new incentives and digital strategies in place it is no wonder the island is also emerging as a start-up hotspot for entrepreneurs to kick-off new ventures.

For more information, contact Cyprus' investment promotion agency, Invest Cyprus.

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November 2022

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