Press Releases

Event topic: What does it take to scale up a business?

Good morning and thank you for the opportunity to be part of this forum – a platform essentially – connecting policymakers, industry leaders, innovators and entrepreneurs, to provide answers to a vital challenge: how to grow and scale up innovative ventures. For us, as Government, this translates into how we can help the ecosystem navigate the journey from research to innovation, and also from bringing ground-breaking ideas to market, all the way to growing them into scaleups and successful businesses.

Scaling up a business is of course not just about increasing revenue or expanding market reach. It is about building a sustainable foundation for long-term success, while creating value and having a meaningful impact on society. It involves transforming an idea, product, or service from something small and localised into something that can compete on a larger scale, even globally. And management capital is indeed crucial here; more so than financial capital in most cases. Professor Kavadias, I am sure, will provide us with much insight in that respect.

The question for me is: where and how can the government play a role? Why here? Why in this country and not somewhere else? And in response to this question, I believe that our role as policy makers is to create an environment that is conducive to all of the following: research – innovation – talent retention and business growth.

Now this is quite broad and generic; however, it all starts with a vision, and there is one for Cyprus that we need to build on. It is called Vision 2035: for Cyprus to be one of the world’s best places to live, work, and do business in. That is where innovation, digitalisation, the green transition, a sustainable and resilient economy and a world-class educational system, among others, become strategic directions and key enablers.

If we do a deep-dive into our research and innovation (R&I) strategy, in particular, we have a smart specialisation strategy that focuses (essentially equally) on eight sectors: digital technologies, innovative materials, agri-food, shipping, renewable energy, space, health and environment. And that is everything that matters; everything that is important. However, in my view – and I will leave that for another discussion – we need to start prioritising and focusing on specific areas where we can truly make a difference, without, of course, excluding any of these dimensions. No one, especially small markets like ours, can excel in everything equally well.

For the past few years (3-4 at least), we have been talking about Cyprus becoming a regional technology and innovation hub, and I think that we can now talk about this more meaningfully than ever. Our almost non-existent R&I ecosystem 10-15 years ago, has now grown into a vibrant ecosystem with: 12 universities, 20 research organisations, 7 centres of excellence, but also more than 500 startups and scaleups, 3500+ researchers and 4000+ entrepreneurs. If we look at the map of the European Innovation Scoreboard 2024, Cyprus is the only country from south-eastern Europe to be part of the Strong Innovators group – and it is the 3rd year in a row, so it is no coincidence. The positive trajectory of our ecosystem is also reflected in the Global Innovation Scoreboard, where Cyprus is 27th globally, up from 28th last year. At the same time, Cyprus is now featuring in the Top 45 startup ecosystems globally according to the StartupBlink Global Startup Ecosystem Index and in the top 50 according to the European Patent Office, in terms of the number of patents issued.

All of this is complemented by an impressive growth of the Information and Communication Technology (ICT) sector, the fastest growing sector of the economy over the past five years, which now contributes more than 13% of the national Gross Domestic Product (GDP). This growth is driven by a developing community of tech multi-nationals choosing to bring their regional or global headquarters in Cyprus – and we need to build on and engage with this community.

According to the State of European Tech Report for 2024, presented last week at the Slush event in Finland, which examines the evolution of the European tech ecosystem over the last ten years, Cyprus now features in 8^th place in Europe (15^th globally) when it comes to capital invested as a share of GDP (%) by country. This is attributed, according to the report, to a large extend to Cyprus’ attractive package of reform measures and incentives. In fact, Cyprus recorded a 129% increase in Foreign Direct Investments (FDI) based on the analysis by FDI Intelligence of the Financial Times – which is the highest increase among European Union (EU) member states – with the technology sector leading the way.

Our package of tax incentives is indeed important and combines incentives both for the legal entities but also for the individuals, which makes it quite unique. We have a very competitive Intellectual Property (IP) regime, effectively reducing tax to 2.5%. Investors in certified Cypriot innovative companies are able to claim a 50% tax exemption, while corporates are allowed a 120% deduction on eligible Research & Development (R&D) expenses. At the same time, we offer attractive incentives to foreign workers to relocate to Cyprus, such as a 50% tax exemption for foreign nationals whose income is more than €55K per year (and that is for 17 years), the Blue Card providing more favourable work and residence conditions for highly skilled professionals, and the Startup Visa for launching innovative startups in our country. We are actually currently revising the Startup Visa scheme to make it more attractive and flexible, and we will soon be able to announce it.

As Innovation takes centre stage in the transformation of our national economy, we need, however, to focus beyond tax incentives. According to the recent Draghi report, Europe, despite being a leader in research in many respects, lags behind regions like the United States and China when it comes to disruptive innovation and scaling up innovative companies.

The knowledge generated by our universities, our research institutes, all our creative minds, can and should be harnessed to fuel the entrepreneurial engine that drives growth and progress. As the Minister of Innovation and Digital Policy, I am aware of the challenges our ecosystem is facing, in that respect. While there is no one-size-fits-all solution, the Government is committed to fostering an environment conducive to innovation and entrepreneurship, as I have pointed out earlier. This includes putting in place a range of tools and measures to support the ecosystem that extend beyond funding – which will, of course, always be a key component of our value proposition.

Through the Research and Innovation Foundation, the Government offers an array of competitive funding programmes that cater to all stages of the entrepreneurial journey, as well as a portfolio of knowledge-transfer and innovation support services available free of charge to the R&I ecosystem. In addition, the government-backed Cyprus Equity Fund will be operational by the end of the year, offering an additional financing source to innovative startups and small and midsize enterprises (SMEs). Having said that, we are, of course, aware that the growth of the ecosystem is creating the need to revisit our budgeting towards supporting this ecosystem.

One last point is the critical aspect of talent and skills; a scarce resource and a very challenging problem for all countries globally, not just in Europe. Linking education to real market needs investing in continuous reskilling / upskilling, while also introducing incentives to attract and retain top talent are key priorities. Micro-credentials and the collaboration of large corporates with educational institutions are gaining traction and it is up to the industry and the educational community to pick up the pace. With ICT specialists now accounting for 5.4% of the Cypriot workforce, recording a remarkable increase of 17% in comparison to last year, well above the EU average of 4.3%, we are making steady progress in building a strong tech workforce capable of spearheading innovation and digital transition. Cyprus, being small, has an important opportunity to build talent density – let us not forget that Cyprus has the highest % of graduates with tertiary education in Europe.

To that end, our governmental agenda includes a holistic digital transformation of education, trainings offered free of charge through the Human Resources Development Authority, which are currently being revised under the direction of the new Board of Directors, as well as Research & Innovation Foundation (RIF) programmes – such as PhD in Industry and Post-Doc that connect the research community with Cypriot enterprises.

Ladies and gentlemen,

Coming back to our role as government, I believe that a critical success factor will be finding the way to connect the dots; building stronger links between our research community, our innovating startup companies and our entrepreneurs, and also providing the needed ecosystem tools, services and resources for our researchers and entrepreneurial minds. So, let me close by saying the following; yesterday we had the 2^nd intergovernmental meeting with the Greek Government – as you may have heard.

As part of this discussion, in the area of research, innovation, technology and digital policy, we have discussed, amongst other things, the following that relate to this goal:

- Exchange experiences and practical knowledge to build a startup ecosystem platform in Cyprus based on the corresponding Elevate Greece platform. At the same time, explore the linkage of the two national startup registries in ways that matter for both countries. I know that this is an area of particular interest for the Centre for Entrepreneurship (C4E), and one where the Centre can contribute, so we will be reaching out.

- Work together with the Ministry of Digital Governance of the Greek government to participate in a common program for Artificial Intelligence (AI) factories under the EuroHPC initiative. This program aims to create an ecosystem that will provide access to computing resources, digital services and tools needed to grow activity in AI.

- Collaborate on joined calls between the two countries that will help with the extroversion of our ecosystems. In fact, just last week, we announced a first joined call with a total budget of 4m euros, 2m euros by each country.

These are two practical examples of what we need to do to create this environment that will allow meaningful growth for our ecosystem in a way that positively contributes to the economy and helps scaling up of innovating ideas and businesses.

I apologise for not being able to stay with you throughout this great experience due to a Ministerial Council meeting. I wish all of those competing today in the entrepreneurial competition the best of luck.

Thank you. 

(GS/NZ)