You might not think about Cyprus’ startup ecosystem much, or maybe you view it only as a relocation hub. That is what Cypriot startup community is afraid the most… that no-one noticed the change.
The island that once drew founders mainly for its tax and lifestyle perks is now showing the outlines of a real innovation economy, or so it seems from the most recent report on Cyprus startup ecosystem by Arsenii Dabbakh and his market research company InnoTechnics.
In this analysis I go through reports findings, however, I also wanted to get insights from the insiders.
To unpack what’s really changing beneath the surface, Tanya Romanyukha, General Manager of TechIsland, and Panis Pieri, startup journalist and entrepreneur, share a closer look from inside the ecosystem. Both have seen Cyprus evolve from a landing spot for relocated companies into a place where scaleups are starting to take shape.
As they explain, the question is no longer whether Cyprus can attract talent — it’s whether it can build on that foundation to become a builder, rather than relocation hub.
State of Cyprus startup ecosystem
The report counts 40 deals totaling $139 million in 2024, pushing activity above pre-COVID levels and highlighting a pipeline that, while busy at the early stages, thins out sharply after Series A. In deal count, pre-seed and seed rounds dominate; Series A appears, and Series B or later are rare — evidence of a late-stage financing gap that European founders and policy makers warn about frequently.
Sector-wise, fintech (20%) and gaming (13%) lead the Cyprus’ startup distribution, alongside B2B software (13%) and advertising/marketing (10%).
Investor geography reflects Cyprus’s international pull, U.S. and U.K. funds are active, as are Cyprus-based investors — while Europe remains the prime target for expansion, followed by the U.S. Founders say their top operational priority is expanding global sales, which matches the country’s positioning as a launchpad into EU markets.
The island’s founder pool is largerly international. According to the study and its survey base, roughly half of startup founders hail from CIS countries, and about 65% of surveyed founders have incorporated in Cyprus (with most physically residing and employing locally), underscoring that relocation has translated into genuine on-island economic activity. In parallel, around 40% of ICT workers are immigrants, a figure that speaks both to Cyprus’s openness and to the domestic talent gap that remains to be filled.
That internationalization story is central to how one the report’s author, Arsenii Dabbakh, frames the last few years:
“Cyprus, despite its small territory and population, is gradually turning into an interesting hub not only for tax optimization but also for the emergence of new startups. This became possible thanks to the efforts of the government, which not only introduced tax incentives but also launched support programs, creating a favorable climate for entrepreneurs to relocate. As a result, a network effect has appeared: many IT teams concentrated in one place, and the spark of the startup scene began to work.”
It is also important to note that external circumstances played their role, adds Dabbakh. The influx following regional geopolitical shocks accelerated that concentration — an uncomfortable origin, but one that has materially reshaped the island’s tech demography. Today, Ukrainians, Belarusians, Russians, people from Kazakhstan, and others from nearby countries, make up almost half of the startup founders in Cyprus.
What outsiders get wrong about Cyprus
Looking at mentioned report on Cypriot startup ecosystem, some questions opened up. Especially as Panis Pieri confirmed to me that international view of Cyprus is stuck in the past. “Most outsiders still see Cyprus as a tax and relocation hub,” he says, while the reality is different than many expect.
International investors and founders often miss how quickly Cyprus is moving up in startup and innovation, he explains:
“What they miss is the depth of the research base of the Universities and Centers of Excellence. They are producing competitive IP in areas like smart infrastructure, AI, maritime tech, and computer vision. These are not “nice-to-have” labs — they are internationally cited and plugged into EU research networks. The gap is not research quality but commercialization and scale-up funding.”
They also miss the size of the local startup movement, Panis adds. “Cyprus recorded one of the fastest growth rates in startups across the EU in 2025, with a 71 percent year-on-year increase. Another blind spot is the availability of incentives beyond corporate tax. The IP Box and long-term personal income tax breaks for high earners create a stack that is among the most competitive in Europe.”
“Finally, the sectoral edge is stronger than it looks from afar. Cyprus is not trying to be ‘the next Berlin or the next Silicon Valley.’ It is anchoring in niches: maritime and blue economy, fintech, gaming, deeptech and edtech. For investors, that means clearer entry points and customer proximity than in more generalist ecosystems.”
With that being said, let’s dive into nuances of those factors, and see where the challenges and opportunities for Cyprus really lie.
The “relocation hub” label — feature, bug, or both?
First and foremost I wanted to discuss the “relocation hub” label.
“[It] had positive and negative effects,” says Panis Pieri. “In 2023 alone, FDI reached €3.2 billion, with tech taking a bigger share. That inflow brought headquarters, talent, and vendors. Strong incentives from the Cypriot government, and Cyprus island lifestyle, attracted skilled individuals who chose to live and work here, complementing local talent and giving the island a more international outlook.” He adds: “This visibility boosted our extroversion and helped investment to follow talent.”
But there is a cost, he noted. *“The acceleration of relocation has also created societal pressure. The country’s infrastructure was not ready to handle such a sharp influx, and this has caused strains in housing, services, and affordability — especially in Limassol, which is considered the tech city of Cyprus.”
For Panis, the strategic risk is clear: “The risk is that over-reliance on relocation may delay the growth of deep tech and product-based companies.” So his challenge to the ecosystem is simple:
“Relocation was the entry point. The next phase is proving whether Cyprus can turn HQs into builders.”
What has changed?
The progress so far is real though, Panis concludes: “The good news is that ten years ago there was almost nothing. Today we have startups and scaleups that raised funds, launched globally, and made exits.”
Tanya Romanyukha also argues the “relocation hub” view misses what has changed. “I believe that this view overlooks the significant progress made in innovation. The local ICT sector is one of the fastest-growing in Europe, and Cyprus is now home to companies scaling globally, including unicorns such as TheSoul Publishing and SimpleApp. Beyond these, there is a growing pipeline of Cypriot startups developing innovative products with global potential.”
She mentiones examples like Malloc, a privacy and cybersecurity developer that joined Y Combinator; Embio Diagnostics, designing biosensor devices with EU innovation funding; Theramir, a biotech company developing miRNA-based cancer therapies with a US patent; RSL Revolutionary Labs, producing advanced cosmeceuticals exported internationally; Radiocode, a technology firm delivering high-performance portable radiation detectors and spectrometers with international exports — a solution now adopted by customers across Europe and beyond; and Foody, Cyprus’s leading food delivery platform, acquired by Delivery Hero and now scaling as part of a global network.
Tanya lands on the same end goal as Panis: “At TechIsland, we view relocation as the entry point, but innovation, product development, and global competitiveness are what sustain the ecosystem. That is why strengthening Cyprus’ innovation credentials — through R&D incentives, startup success stories, and visible corporate–startup partnerships — remains a key priority.”
Incentives that got Cyprus to where it is
Looking at the past, these measures might come sooner than later. If anything, the “relocation hub” label proves Cyprus didn’t grow its tech scene by accident. Tanya explains: “Cyprus has traditionally had a strong business-friendly ecosystem, with a highly educated local talent pool, a strategic geographic location, international flair, a non-dom regime, and the IP Box regime, all of which have encouraged international tech companies to consider Cyprus as a base.”
She also points that in 2021 the Cypriot government introduced an essential strategy to attract more international tech companies as part of its Vision 2035. Some of its most important concrete steps:
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- The Business Facilitation Unit that fast-tracks visas and company setup;
- A 50 percent first-employment exemption on income tax for up to 17 years;
- Reopened digital-nomad residency, adding another funnel for founders and remote professionals.
On-the-ground, these moves lowered the friction to land and hire. “As a result, the IT sector now contributes around 16% to the country’s GDP, which translates to €8 billion,” Tanya concludes.
The road to “builder hub”
Panis’s read is that Cyprus is through its foundation phase and now squarely in growth mode. As he puts it: “Cyprus is entering its second decade as a startup ecosystem, moving from its foundation phase into a clear growth stage.” The question ahead, he says, “is no longer whether Cyprus can attract talent and companies, but whether it can convert those advantages into globally competitive scaleups.”
So, what conversion levers can turn HQ addresses into product engines? Here is the sum-up of Tanya’s and Panis insights:
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- Early capital + accelerators. Tanya argues that Cyprus “would benefit from more robust accelerator programs and better access to early-stage capital,” so newcomers and locally born teams have structured pathways from MVP to traction without immediately needing to look abroad. Panis agrees on depth: “Capital is thin: the Cyprus Equity Fund is a first step, but early-stage VC needs more depth.”
- Commercialization & mobility. The bottleneck of Cyprus’ innovation isn’t science quality; it’s tech transfer and corporate procurement. Panis shares a checklist: clearer IP/ownership frameworks for spinoffs, university accelerators co-built with the private sector, and procurement channels that make it normal for large corporates to pilot and buy from local startups. “The private sector must play a larger role by setting up R&D centers and corporate venture arms, anchoring innovation locally,” he says. Tanya adds the importance of cross-border mobility, noting that joining Schengen (expected 2026) would make it simpler to move founders, investors, and customers through Cyprus — small frictions that compound for scaleups.
- Talent retention and upskilling. Tanya stresses the human foundations that keep teams anchored: “It is crucial to continue investing in tech education, reskilling and upskilling programs,” alongside the social basics that matter to families — affordable housing, modern office/R&D space, capacity in private English-speaking schools, and healthcare and cultural facilities. Panis adds that without deliberate local upskilling and retention, Cyprus risks over-dependence on imported teams.
- Stock options and incentives that reward builders. Tanya backs a modern stock-option framework as part of tax reform so startups can hire and retain scarce talent competitively. Together with the IP Box and long-term personal tax breaks for high earners, a clear options regime would round out an incentive stack that rewards creating IP and scaling products in Cyprus — not just registering entities.
Both of them converge on the same arc. First phase was relocation and density: the report confirms Cyprus now has the international founder base, sector concentration, and deal flow to matter regionally. Second phase is scale: “Relocation was the entry point,” as Panis said, now “innovation, product development, and global competitiveness are what sustain the ecosystem,” as Tanya concluded.
