Cyprus technology sector reaches €5.9bn but startup funding gap remains

Nicosia, Cyprus. Cyprus’ technology sector directly contributed €5.9 billion, or 16.2 per cent of GDP, according to KPMG’s latest study, but the country continues to face gaps in funding and infrastructure for locally founded startups.

The sector directly employs about 48,200 people and supports around 79,000 jobs, while its wider economic impact is estimated at up to €11.9 billion.

Sector growth and employment

Between 2016 and 2025, information and communication technology increased its contribution by 435 per cent, the fastest growth rate in the European Union. Value added per ICT employee reached approximately €158,000, about 36 per cent above the EU average.

The sector’s growth was supported by Cyprus’ EU jurisdiction, headquarters regime, use of English as a working language and the arrival of companies seeking to relocate operations quickly.

Of the sector’s 48,200 jobs, around 12,400 are held by non-EU nationals. Over the past decade, non-EU employment in the sector grew by about 30 per cent annually, compared with roughly 6 per cent for Cypriots.

Startup infrastructure

Most of the growth has been linked to companies founded elsewhere that relocated operations to Cyprus, while the number of significant technology companies started in Cyprus has remained limited.

Areas identified as requiring further development include early-stage financing, legal structures for founders, employee stock-option arrangements, Series A funding, experienced company builders and access to first paying customers.

The Research and Innovation Foundation mobilised €207 million over five years through more than 140 calls, supporting nearly 800 projects and creating more than 1,300 skilled jobs. It attracted about €47 million in private investment, equivalent to roughly 23 cents of private funding for every euro of public funding.

Investment and accelerator programmes

The Cyprus Equity Fund, the country’s first venture fund backed by the European Investment Fund, has €26 million available for investments ranging from €100,000 to €1 million.

Plug and Play opened in Limassol this spring with six programmes planned over three years. The initiative, backed by the Deputy Ministry of Research, Innovation and Digital Policy, the Research and Innovation Foundation and corporate partners, targets about 60 startups and 500 jobs.

The article argues that co-investment by private capital and government, with private investors leading on the same terms, could expand available startup funding.