McKinsey report: Cyprus ranks 6th in ability to enable foundation and scale-up of startups

Cyprus has ranked 6th in terms of its ability to enable the foundation and scale-up of start-ups, and 5th as regards its startup ecosystem's ability to contribute value to the national economy, in a report by global management consulting firm McKinsey & Company.

The firm’s recently published report: “Reinventing our economy from within – How Europe’s start-up ecosystems can learn from each other to ignite and scale up entrepreneurship”, delves into the European startup ecosystem, that is, the EU-27, United Kingdom and Switzerland.

Among other things, the report highlights how European countries differ in their ability to enable the foundation and scale-up of start-ups. Cyprus ranks 6th here, behind Sweden, Luxembourg, Poland, Denmark and the UK.

The report also touches upon ways that governments can facilitate the success of a start-up ecosystem, such as simplifying the administrative process of launching and staffing a start-up while at the same time making it less costly to a start-up’s bottom line to do so.

It cites the case of Estonia specifically, which has established Start-up Estonia, an initiative to provide substantial financial incentives to promote entrepreneurship. Among these incentives is a 0% corporate income tax on reinvesting and retaining profits within entities.

Today, in Estonia, it takes less than 30 minutes to set up a company in the digital e-Business Register platform and only two to three business days for the official registration, which utilises notary services enabled by non-bureaucratic and highly digitised processes.

Cyprus ranks 8th here behind leader Estonia, and Luxembourg, Ireland, Denmark, Finland, Switzerland and Netherlands.

McKinsey & Company also highlights how European start-up ecosystems differ significantly in their ability to contribute value to their national economies.

Cyprus ranks 5th here, behind Austria, Belgium, Bulgaria and Croatia.

“Across the 29 countries covered in our analysis, we see a few leaders emerging in terms of economic output overall, such as Estonia and Luxembourg,” it said. “However, no one country so far has managed to achieve high levels across all areas of value creation, meaning the number of companies, jobs in start-ups and scale-ups, and total market capitalisation. While Estonia has a high number of total companies and market capitalisation, only a small fraction of its total workforce is actually employed by these companies.”

Overall, the report found that Europe’s national start-up ecosystems hold significant potential to reverse the current negative economic trajectory; “Our analyses show the potential for start-ups to add 3.6 million to 8.1 million additional jobs to the economy and contribute $1.2 trillion to $3.3 trillion in additional market capitalisation.”

To achieve this potential, it said, the individual start-up ecosystems will need to improve performance in two key areas: early-stage entrepreneurial activity, which is defined as the number of adults starting or running a new business, and the successful scale-up of existing start-ups. While there are already pockets of success – in individual countries, select KPIs of a successful startup ecosystem show promising levels compared to the United States and the rest of Europe – to compete globally, both individual countries and the pan-European start-up ecosystem will need to become successful across all defining KPIs of a start-up ecosystem and orchestrate efforts to do so, it said.

To read the full report, click here