Deputy Minister: "Our vision is to create a mature and outward-looking startup ecosystem"

The ultimate goal of modernisation in any advanced society is to meet people’s aspirations for a better life. Philippos Hadjizacharias, Deputy Minister of Research, Innovation and Digital Policy, explains the need for a highly sophisticated startup ecosystem and describes how the Deputy Ministry is going about creating it.

How does the Cypriot startup ecosystem compare with that of other EU member states?

In 2022, Cyprus was upgraded to the category of “Strong Innovators”, ranking 10th among European countries on the 2022 European Innovation Scoreboard, which shows the innovation performance of EU member states and neighbouring countries. Furthermore, Cyprus’ progress was the highest among all EU member states. Our rapidly developing research and innovation ecosystem is a by-product of our policies to create a new pillar of growth, namely a knowledge-based economy. While the overall progress achieved is solid proof that we are on the right track, a lot more can be done in order to fully utilise Cyprus’ tremendous innovation potential.

Are there specific weaknesses in the Cypriot infrastructure which create obstacles for startups and need to be addressed right away?

According to a study conducted by the University of Cyprus’ Centre for Entrepreneurship in 2022, the majority of people active in the entrepreneurial ecosystem in Cyprus state that local conditions and infrastructure are favourable for startups. However, as in all things, there is always room for improvement. One of the main challenges we currently face is inadequate access to funding. The startup ecosystem in Cyprus is not yet mature enough and, therefore, its ability to attract high-risk investments, for instance, from business angels and venture capital funds or through crowdfunding is rather limited. Furthermore, the banks are not willing to invest in startups. It is worth noting, however, that studies have shown that securing sufficient funding is problematic throughout the European startup ecosystem, especially when compared to the American or Asian ecosystems. Given the small size of the Cypriot economy, the situation is particularly challenging in our case. Legislative restrictions on public university spinoffs are another major issue that needs to be addressed. I intend to engage in a dialogue with all stakeholders with a view to further improving the startup ecosystem in Cyprus.

How do you envisage the Deputy Ministry’s role in the development of the startup ecosystem and its contribution to the country’s GDP?

Currently, research and development as a percentage of Cyprus’ GDP is 0.85%, which is low compared to the EU average of 2.3%. One of the major benefits of innovation is its contribution to economic growth. Innovation can consequently lead to a higher standard of living. New products and services can make citizens’ lives easier, by saving precious time and offering solutions. The role of the Deputy Ministry is instrumental in fostering the maturity of our startup ecosystem and promoting innovative entrepreneurship. To this end, through the Research and Innovation Foundation (RIF), for some years now, the Deputy Ministry has been directly funding R&I activity and offering access to alternative financing for SMEs and innovative companies. Relevant programmes include Pre-seed, Seed, Innovate, Proof of Concept, Co-develop and Disrupt. The Government intends to further reinforce and improve a number of measures that have been put forward since the establishment of the Deputy Ministry in March 2020 and are currently in force. To mention a few, a State Equity Fund has been established in cooperation with the Ministry of Finance to provide funding to startups, while at the same time a tax incentive scheme and a startup visa programme are being implemented and legislative reform regarding startups by state universities is under way. Since 1 March, when I took up my duties at the Deputy Ministry, my colleagues and I have been studying these measures and evaluating their effectiveness so as to make adjustments, where necessary, and launch new initiatives.

What is your vision for the Cyprus startup ecosystem?

Our vision is to create a mature and outward-looking startup ecosystem that will serve as the main agent to commercialise research results and innovative ideas, thus contributing to the creation of a sustainable knowledge-based economy. To this end, in addition to what has already been mentioned, it is important to enhance the Deputy Ministry’s cooperation with the Ministry of Education to nurture an entrepreneurial culture in Cypriot youth, inter alia by introducing relevant courses to our educational system as qualified talent is key to sustainability.

To what extent will the planned digital transformation help startups?

Digital transformation is key to modernisation. Once achieved, it will eliminate time-consuming processes in the public service and will minimise the possibility of human error, thus reducing costly delays for companies. In other words, the digital transformation of our economy and, in particular, of enterprises will boost efficiency and competitiveness, as well as creating new business opportunities. To support the digital transformation of businesses and further spur innovation and entrepreneurship, the Government is subsidising the digital upgrade of enterprises through relevant programmes administered by the Ministry of Energy, Commerce & Industry.

This interview first appeared in the April edition of GOLD magazine. Click here to view it.