The rise of Gamedev in Cyprus: What attracts founders and investors

In recent years, Cyprus has transformed into a gamedev hub in Europe. It is now home to over 300 companies, including startups that are lured by investment opportunities. All this makes the island a paradise for game developers. But how did it all begin and what makes Cyprus so attractive for IT entrepreneurs? Nikita Krivelevich, Investment Director of Zubr Capital, shares his insights and observations.

Cyprus: from the brink of collapse to a new dawn

Today, it's hard to believe that before 2013, the IT business climate in Cyprus was very different. It had fewer tax benefits, a more cumbersome financial system, and a long wait to get a national passport. However, in 2013, an economic crisis hit the island. The country was on the verge of collapse. Surprisingly, it was this critical situation that sparked new growth.

Thanks to external support, the country managed to curb the crisis. It was an expensive lesson, and the Cypriot leadership decided to make the most of it. As a result, they tightened the country's financial legislation and made its economy transparent. This put an end to shady deals and inspired entrepreneurs from other countries to move to Cyprus.

So, what made Cyprus stand out in the competition for new investments? For example, the income tax was halved for owners and employees of newly established international companies for 20 years. Then, the corporate tax was only 12.5%, with the possibility of up to a 2.5% reduction if the company created intellectual property objects.

Finally, the tax on dividends and capital gains was 0% for foreigners. This fostered a favorable climate for drawing in IT founders and a vibrant community.

If a small single-owner company with a compact team came to the island, then they could all get startup visas instead of regular ones.

Those who came and stayed officially became citizens much faster than in many European countries. And not so long ago, it was possible to get a Cypriot passport by investing in real estate on the island.

Besides, the island can boast a clear sea, lots of greenery and warm weather all year round. In summer, the average temperature is about 30 degrees, in winter it is around 15.

This resulted in the emergence of a community of founders and senior executives in Cyprus. Therefore, investors became keenly interested in local companies.

Which leading game developers are already based in Cyprus?

The landscape of the Cypriot gamedev community is very diverse. It includes companies with multi-million budgets, small independent studios, mobile gamedev, blockchain projects, augmented reality games and many more.

For example, Wargaming, the creator of the online tank shooter “World of Tanks” is headquartered in Nicosia. The company's head office appeared in Cyprus in the spring of 2014. The giant 75-meter-high skyscraper became one of the tallest buildings in the city and cost the company € 20,000,000. And six months before that, at the height of the crisis, Wargaming invested in the shares of “Hellenic”, a local bank. That enabled this gamedev titan to strengthen its position on the island and laid the foundation for further development.

Since 2016, Nexters, a developer of mobile games, has also settled in Limassol. This company is one of the five largest independent mobile game development studios in Europe. The company's flagship product, a fantasy mobile RPG called “Hero Wars”, has more than 120 million downloads. And the company's revenue in 2022 amounted to $480 million.

Blockchain gaming is also settling down in Cyprus. Thus, the local Game-Ace studio was listed among top 10 developers of crypto games. It was founded in Nicosia in 2005, and has been making games for various platforms ever since. Its NFT project titled Nomadland is a role-playing and strategy game for PC. It raked in $ 3,040,000 from the outset.

Besides, in the autumn of 2023, Cyprus will once again host the White Nights international gamedev conference. It is expected that it will bring together more than 500 of the industry's top managers and will not only showcase gamedev companies, but also support high-quality networking.

From founders to investors

Talented startup founders with enormous experience in game development giants constantly appear in Cyprus. Meanwhile, successful top investors begin to invest their money and expertise in these startups.

This is how an ecosystem is formed, in which large companies generate new founders, who, in turn, receive investments from successful colleagues, grow and establish large companies themselves. Therefore, there is now a steady inflow of new projects and investors in Cyprus with an average cheque of up to $1,000,000.

Zubr Capital is currently interested in mobile game development. We invest at the stages when the project is ready to enter the market or has already achieved its goals and is willing to scale. To add to that, we want to see metrics proving that the company can potentially earn $50-100 million.

Gamedev trends and the future of the industry

Here are the key technologies that, in our opinion, will determine the development of the gamedev sector in Cyprus in the next 10 years:

1. AI development. It is already employed to create characters, dialogues, scenes, etc. In the future, it may reduce the development time for games and improve their quality.
2. Development of virtual and augmented reality. Studios have repeatedly tried to apply these technologies in games, but the whole thing stumbled upon gaming devices. They were of low quality, and not every gamer could afford them. But every year the situation changes, and new and more affordable devices appear. When there will be many more ordinary owners of devices, the games will definitely change.
3. Development of cyber sports. This is already a multi-billion market that will surge at double-digit rates until 2030.

Other trends, including new monetisation tools, cloud gaming, the ability to launch games simultaneously on both a PC and a smartphone should not be written off as well. All this moves the market forward and helps attract investments.

Investment risk and how to avoid it

Let us admit that investors cannot just invest their capital and get back to sunbathing on the beach. At the initial stages, it is hard to say with 100% certainty whether the product will succeed or fail. Investors should be aware that previous success is a good sign, but not a guarantee of a successful investment in this particular case. How can they deal with it? Our advice is to look at the game's metrics. And it's best to have a clear focus instead of diving into the creation of 10-15 projects at the same time.

Many talented entrepreneurs from high-tech industries have gathered in Cyprus. We are doing our best to help the ecosystem and the community develop and attract more business founders. Therefore, if you have ideas how Zubr Capital can help this, feel free to contact us. We will be happy to talk and discuss further.