Cyprus Entrepreneurship Ecosystem

curveball
Cyprus Entrepreneurship Ecosystem

A ROADMAP FOR ECONOMIC GROW TH
Sponsored by:
Cyprus Entrepreneurship Ecosystem A Roadmap for Economic Growth

Cyprus Entrepreneurship Ecosystem: A Roadmap to growth is a study (the Study) conducted by Curveball Limited (Curveball) and sponsored by Cyproman Services Limited and KPMG in Cyprus (KPMG). The contents and opinions included in this document do not necessarily reect the views of Cyproman Services Limited and/or KPMG. The sponsorship of this study aims to increase awareness of the entrepreneurial ecosystem in Cyprus, its challenges and most of all its potential, as well as encouraging the ecosystems growth and nurturing by benchmarking with best-in-class entrepreneurial ecosystems in the EU and the broader Eastern Mediterranean geography to support sustainable economic growth. It is intended as roadmap for economic growth in Cyprus and aims to assist entrepreneurs, policy makers, investors and other stakeholders to navigate and foster the nascent entrepreneurial ecosystem in Cyprus. Curveball retains the copyrights of this document. Curveball conducted this study by gleaning from secondary research from published information as well as primary research through access to professionals in the sector including entrepreneurs, academics, universities, venture capitalists, policy makers, multilateral organizations, voice of the industry organizations, law rms, private equity rms and consultancies. Curveball extends its gratitude to all the contacts for the valuable insight and time throughout the duration of this study. We are especially grateful to Dr. Gil Avnimelech, Mr. Yigal Elrich, Mr. Yadin Kauffman, Dr. Ed Mlavsky, Ms. Esti Peshin, Mrs. Karin Mayer Rubinstein and Dr. Daphna Schwartz for their personal time and input in this effort. Curveball would like to extend heartfelt thanks to Cyproman Services Limited and KPMG in Cyprus for believing in and sponsoring this study. Last but not least, special thanks to Patrick Myles for his keen editing.
Contents Foreword: Christophoros Anayiotos, Head of Transactions & Restructuring Advisory Services, Board Member, KPMG Limited Foreword: Costas Christoforou, General Manager, Cyproman Services Limited Executive Summary Chapter 1 - Denition and Role in sustainable economic growth Chapter 2 - A Baseline for Cyprus Chapter 3 - Best practice examples from Denmark, Estonia, Ireland and Israel Chapter 4 - Goal Setting for Cyprus Chapter 5 - A Roadmap to Growth Conclusions Glossary References i
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Nowadays, businesses undoubtedly operate in a continuously changing environment and are called upon to keep up with such change as required by globalisation, economic instability and increasing competitiveness. Todays entrepreneurial world is up against numerous challenges that invoke the need for change and the best possible efciencies in talent and innovation. In this study, Curveball Limited examines the factors which contribute to fostering a countrys entrepreneurial ecosystem, counter-balancing Cypriot socioeconomic reality in relation to countries exhibiting rst-rated entrepreneurial activity and ecosystems such as Estonia, Denmark, Ireland and Israel and providing a set of best practices to adopt and adapt in Cyprus to reinvigorate and foster the entrepreneurship ecosystem. Benchmarking Cyprus with peer countries with successful entrepreneurial ecosystems is of particular interest since Cyprus is a country which boasts exceptionally well educated youth, a robust tax regime, a highly experienced professional services sector, as well as rich reserves of natural and renewable energy sources. However, with the current nancial crisis limitations such as inadequate capital markets, high unemployment (hence the hundreds of unemployed youth with strong academic qualications), low competitiveness, high government debt, lack of liquidity within the banking sector and inefciencies of the public sector, are magnied and act as inhibitors to innovation and sustainable growth. Other country examples show that improved competitiveness, job creation and economic growth, have been achieved through fostering and investing in an entrepreneurial ecosystem, thus enabling creativity and innovation. As this study demonstrates, investing in the entrepreneurial ecosystem strengthens a countrys economic growth. Undeniably, a countrys future hinges on its ability to manage and nurture its most valued resource, its people. Investing in entrepreneurship reinforces a countrys economic growth and development as it enables entrepreneurs to start-up new companies, to create new products and services, and in the process create new jobs, new wealth and sustainable growth. At Cyproman Services Limited we are oriented towards the implementation of such an entrepreneurial ecosystem in Cyprus and we consider this studys ndings particularly important. This endeavour coincides with the philosophy of our company, which promotes a collaborative culture where talented and fully qualied individuals contribute to the maximum of their abilities. Additionally, we reward and value innovative thinking and diverse insights and strive to create mutually trusting relationships, by offering direct and effective client service through our expertise and professionalism. It is therefore with great honour that we offer our support and contribution to this effort to foster an entrepreneurship ecosystem and broader sustainable economic growth in Cyprus.
Sincerely, Costas Christoforou General Manager Cyproman Services Limited www.cyproman.com.cy

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Our countrys current economic situation leaves no one indifferent and we, at KPMG, being committed to our community, feel obliged to embark on and promote activities that will build strong foundations on which long term economic growth can be based. Such activities need vision and an open perspective. We need to create an entrepreneurial ecosystem that will think beyond the borders of our small economy, encourage innovation and enhance new initiatives. Innovative entrepreneurship helps economies diversify and makes them far less susceptible to sector or country-specic uctuations. Traditionally, wealth and entrepreneurship were interrelated with the ownership of physical assets. However, the globalization of trade and the progressively higher penetration of technology in commerce, industry, but also peoples personal lives, have amplied the use and hence value of intellectual property. The mobility and transferability of a business idea, boosts its value. The entrepreneurial ecosystem that we envisage begins with the capturing and conceptualisation of an idea all the way through to its nancing and materialisation. The principal aim of Curveballs study is to weigh up the current position in terms of entrepreneurial initiative in comparison to Cyprus perceived peers and, considering our key characteristics, to identify whether we have the key ingredients for succeeding. We embrace the studys inference that Cyprus possesses the key ingredients not only to develop an entrepreneurial ecosystem but to achieve bestofclass success in the future. A key ingredient of the recipe is an educated human capital, an established characteristic of the Cypriot young and older workforce. We need to work on aspects like the investment environment but also our entrepreneurial culture. We need a system that will hearten entrepreneurial initiatives, celebrate successful and why not failed attempts in order to encourage and cultivate the desired, visionary mentality. This study has a number of signicant conclusions and best practice suggestions. For us, this study is the rst important step in assessing the current situation. We hope that it becomes a catalyst so that we can all start thinking outside the barriers of our small country. The studys challenging enquiry: Can a Cypriot start-up carry out an IPO in NASDAQ by 2020? can and should become Cyprus target for our entrepreneurship ecosystem strategy.
Sincerely, Christophoros P . Anayiotos Head of Transactions & Restructuring Advisory Services Board Member, KPMG Limited www.kpmg.com.cy
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Executive Summary
Opportunity entrepreneurship funded by venture capital (VC) and private equity are key driving forces in creating new jobs. With the Cyprus economy facing its deepest crisis since 1974, the study makes the case that nurturing the entrepreneurial ecosystem in Cyprus will also foster organic growth in the next two to ve years and beyond. Authored by economist Marina Theodotou of Curveball Limited, an independent economic intelligence consultancy, with sponsorship from KPMG in Cyprus and Cyproman Services Limited, the study tackles these challenges, highlights the opportunities for Cyprus and sketches a roadmap to nurture the entrepreneurship Ecosystem in Cyprus and take a Cypriot start-up to an IPO, ringing the opening bell at NASDAQ in 2020. The study denes and highlights the key stakeholders and drivers of entrepreneurship ecosystems and VC activity, examines how Cyprus performs in these drivers vis--vis a peer group of countries in the EU (Denmark, Estonia, Ireland) and Israel, the best in class performer, identies key opportunities for improvement and recommends a set of best practices including specic tax incentives for Angel investors and start-ups to foster the entrepreneurship ecosystem in Cyprus in line with the EU Single Market Act and EU2020 goals. There are several key components of an entrepreneurial ecosystem including the legal and regulatory framework, culture, nance, human capital, voice of the industry and access to customers and markets. Cyprus lacks several components including culture and regulatory framework focused to innovation and risk appetite; access to nance through venture capital and private equity funds and the ability to articulate its success stories in ways that resonate to key opinion leaders, angel investors and venture capitalists locally and globally.
While Cyprus has an excellently educated workforce and Cypriots rank rst in EU27 in their dream of being self-employed, the gap between their dream and belief in achieving it is wide. An entrepreneurship ecosystem could help close this gap by fostering innovation and start-ups. Despite all odds and amidst dire nancial crisis, nascent grass roots entrepreneurial activity with disruptive innovation tech start-ups, hackathons, meet-ups and a start-up accelerator are sprouting fast in Cyprus. All of these initiatives need support: mentoring, funding and a supportive legal framework and a strong voice of the industry. With geography no longer being a decisive factor, access to customers and markets is largely
driven by expertise and innovation and here, Cyprus has three additional key strengths: robust professional services sector, favorable tax legislation and energy resources. A favorable tax break to VCs incentivizing them to invest in Cypriot start-ups focusing on, but not limited to, areas such mobile technology, cleantech, solar power, advanced vehicle technologies, smart grids wind energy, green and blue technologies could propel the economy out of the slump into organic growth.
Entrepreneurship is what happens at the intersection of history and technology.
Methodology
This study is structured around answering certain key questions, which carve the path of benchmarking and the roadmap for an entrepreneurship ecosystem. This is a hands-on roadmap document for key entrepreneurship ecosystem stakeholders: entrepreneurs, angel investors and venture capitalists, policy makers and academics among many others. It is written in easy to follow language, all references are provided both in the reference section for the hard copy version and as live links in the electronic version and includes a glossary of terms. Each of the ve Chapters answers a set of questions as follows: In Chapter 1: we set the stage with questions such as: What is an entrepreneurship ecosystem? What are its fundamental components? Who are the key stakeholders? How does an entrepreneurial ecosystem drive sustainable economic growth? Why is such an ecosystem important for Cyprus now?
In Chapter 2: we chart a baseline for Cyprus and the entrepreneurship ecosystem current situation, challenges and potentials with questions such as: Where are we today in Cyprus in terms of each of the fundamental components of the entrepreneurship ecosystem compared to peer countries and the best in class performers? In Chapter 3: we benchmark with the world class performer, Israel, and three peer countries in the EU: Denmark, Estonia and Ireland and we ask the following question: What can we learn, adopt and adapt from countries such as Denmark, Estonia, Ireland and Israel? In Chapter 4: we examine the challenges facing Cyprus and provide customized best practices Cyprus can adopt and adapt to foster an entrepreneurship ecosystem by asking the following question: What are the key priority areas for improvement and sectors to focus on for marketability of start-up ideas germinating in Cyprus?
In Chapter 5 we provide a roadmap for policy makers, entrepreneurs and investors to enable them to chart a course in the next eight years. We ask specic questions: What is the way forward? Which goals can we set? During which time frame and which stakeholders can undertake which tasks? Finally, we conclude with specic learnings that can help foster the Cyprus entrepreneurship ecosystem starting now, to 2020 and beyond.
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1.1 Denitions
Entrepreneurship Ecosystems: Denition and Role in sustainable economic growth

would be to undertake an innovative idea, to plan, organize, take risks and invest in it, in order to create value out of it. Putting the two terms together creates a new term entrepreneurship ecosystem which is dened as the elements individuals, organizations or institutions apart from the individual entrepreneur that are conducive to, or inhibitive of, the choice of a person to become an entrepreneur, or the probabilities of his or her success following launch. 1.2 Key Elements and Stakeholders Just like an ecosystem in nature, the entrepreneurial ecosystem comprises of several key components. In this report we will use the broad denitions of these factors as dened by Dr. Daniel Isenberg of the Babson Entrepreneurial Ecosystem Program (BEEP). All components are critical and must grow concurrently and in parallel. Here they are listed in alphabetical order:
Domains of the Entrepreneurship Ecosystem
Leadership Unequivocal support Social legitimacy Open door for advocate Entrepreneurship strategy Urgency, crisis and challenge
1. Culture, supportive to entrepreneurs and accepting of failure 2. Customers and markets 3. Entrepreneurs and their start-ups 4. Financing: angel investors, venture capitalists and private equity rms 5. Legal and regulatory framework 6. Liaisons 7 . Media (social media, publications, newspapers, magazines, blogs, TV, radio, etc.) 8. Private sector and professional services providers such as accountants and auditors, lawyers and duciary services amongst others 9. Universities and Research & Development ( R&D) Centers 10. Voice of the industry which includes associations such as the Chamber of Commerce, business associations, non-governmental organizations, informal entrepreneur groups, incubators, accelerators, etc.
As we embark on this study we need to dene certain key terms. We rst examine the denition and key components of an ecosystem, the denition of entrepreneurship and we then bring the two concepts together. We also examine key trends in entrepreneurship ecosystems, examine their role in sustainable economic growth and make the case as to whether an entrepreneurship ecosystem is needed in Cyprus to reinvigorate such growth.
An ecosystem is a community of living organisms (plants, animals and microbes) in conjunction with the nonliving components of their environment (things like air, water and mineral soil), interacting as a system. An ecosystem is dened by three key components: 1) the population or various stakeholders that have both developed and are the results of the ecosystem 2) the location where the ecosystem exists and 3) the broader interdependency and interaction between the various populations that constitute the ecosystem. Therefore, the network of interactions among and between organisms and their environment denes ecosystems. They are all linked together through the nutrient cycle and energy ow. In dening a term it is usually fascinating to break down the term etymologically, so in entrepreneurship we have the word entrepreneur , which denes the one who undertakes the organization, planning and risk of their own enterprise and is derived from the verb entreprendre used for the rst time apparently in France in 1862 and means to undertake . We also have the sufx ship which means to create something of value, to invest and is derived from the old Gothic verb schaeppen. One denition of being entrepreneurial
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Figure 1.2.1 below created by Prof. D. Isenberg shows how complex and interdependent an entrepreneurship ecosystem can be.
Early Customers Early adopters for proof-ofconcept Expertise in productizing Reference customer First reviews Distribution channels Networks Entrepreneurs networks Diaspora networks Multinational corporations Labor Skilled and unskilled Serial entrepreneurs Later generation family Educational institutions General degrees (professional and academic) Specific entrepreneurship training
Government Institutions e.g. investment, support Financial support e.g. for R&D, jump start funds Regulatory framework Incentives e.g. Tax benefits
Research institutes Venture-friendly legislation e.g. Bankruptcy, contract enforcement, property rights and labor Financial Capital Micro-loans Angel investors, friends and family Zero-stage venture capital Venture capital funds Private equity Public capital markets Debt
Policy Markets Finance
Success Stories Visible successes Wealth generation for founders International reputation Societal norms Tolerance of risk, mistakes, failure Innovation, creativity, experimentation Social status of entrepreneur Wealth creation Ambition, drive
Entrepreneurship Human Capital Supports

Support professions Legal Accounting Investment bankers Technical experts, advisors
Culture
Infrastructure Telecommunications Transportation & logistics Energy Zones, incubation centers, clusters
Non-Governmental Institutions Entrepreneurship promotion in non-profits Business plan contests Conferences Entrepreneur-friendly associations
Source: 2009, 2010, 2011 Daniel Isenberg
In this Chapter we dene these components and in Chapter 2 we review them in more detail along with some key metrics that dene them. 1.3 Propelling economic growth Several studies have shown that entrepreneurship invigorates sustainable economic growth because it generates new ideas, and new ideas create new jobs, new revenue and even new wealth which in turn generates taxes, encourages legal and regulatory reforms, fosters transparency and better governance, and makes a country more competitive vis--vis its peers. According to a study by Zoltan Acs and Attila Vargas and the Global Entrepreneurship Monitor (GEM) (http://www.gemcomnsortium.org/) project, there are two broad types of entrepreneurship. One is necessity entrepreneurship , where one starts a business to sustain themselves and/ or their families because they have no other choice, and the other type is opportunity entrepreneurship , whereby the entrepreneur has several choices but undertakes the one to develop an unexploited or underexploited market opportunity. According to this study, its the opportunity entrepreneurship that has a positive and signicant effect on economic growth. Specically, the study shows that countries with higher GDP per capita typically show a higher number of opportunity entrepreneurs who in turn create more new jobs and more growth. In this study we focus on fostering the ecosystem
for entrepreneurship but mostly opportunity entrepreneurship. 1.4 Fostering an Entrepreneurship ecosystem According to the World Entrepreneurship Forum (WEF), an entrepreneurship ecosystem grows organically in free market economies where individual enterprise is protected by law and therefore an ecosystem cannot be legislated or created and built as such. The WEF is a worldwide think tank focusing on the entrepreneur as creator of wealth and social justice. Founded in 2008 by Emlyon Business School and KPMG S.A. (France), joined in 2011 by ACE (Action Community for Entrepreneurship, Singapore), NTU (Nanyang Technological University, Singapore), Ville de Lyon, the Chamber of Commerce of Lyon and Zhejiang University, WEF promotes the entrepreneurial spirit in all elds of society and encourages all forms of entrepreneurship, integrating economic and social objectives. In a WEF interview of Professor Patricia Greene of Babson College, she states, a critical component of building an entrepreneurship ecosystem is leadership that is focused and committed to provide guidance, mobilize the community and sustain the effort . According to Dr. Greene, leadership can come from different stakeholders. For example, in the four most mature entrepreneurship ecosystems in the US (Silicon Valley, Kansas City, Boston and New York
City), different stakeholders took the lead. In Silicon Valley the ecosystem was clearly driven by the Venture Capital (VC) Community. In Kansas City, the Kauffman Foundation (www. kauffman.org) was pivotal, whereas in NYC Mayor Bloomberg played a key leadership role. In Boston it was the dynamism historically led by the business community. Several regions and countries have recognized the value of fostering the development of an entrepreneurial ecosystem and we often hear of brilliant successful examples apart from the United States. A few examples that stand out within the European Union are Denmark, Estonia and Ireland. However, the best in class country is Israel which has nurtured a now thriving entrepreneurial ecosystem. Such ecosystems are the result of decades of a conuence of factors. Z. Acs and D. Audretsch coined that Entrepreneurship is what happens at the intersection of history and technology so timing is important. We could further elaborate on this denition to include economic history and access of hi-tech technology, Internet and social media. Technology plays an important role in entrepreneurship both as an end with tech start-ups and as a means whereby technology empowers small businesses and start-ups to become more efcient and agile.
1.5 Entrepreneurship Ecosystem Metrics and Global Indices Why should we care about measuring indicators of an entrepreneurship ecosystem? The old but true adage of what you can measure, you can manage also holds true in being able to gauge the effectiveness of an entrepreneurial ecosystem. And since an entrepreneurial activity is a key driver of economic growth, wed better measure it. There are many metrics available to measure the success of an entrepreneurship ecosystem. Some of these include: number of patent applications submitted per year, number of entrepreneurs, number of start-ups per 100,000 population per year, R&D funds as a percentage of GDP , number of Venture Capital deals per year, number of public and private start-up funding schemes, number of engineers and developers per capita, the robustness of the legal and regulatory framework, Intellectual Property Laws, ease of not only registering but also diluting a company, tax breaks for Venture Capitalists investing in local start-ups and tax breaks for start-ups, etc. However, according to Golden Gate Ventures, an entrepreneurship ecosystem is more than the sum of its parts , and an investor needs to know more than just how many corporate or VC funds there are. An entrepreneur needs to know more than just how many start-ups were granted seed capital. Other not so linear metrics also play a key role in the success of an ecosystem such as the entrepreneurs risk appetite, cultural views relating to success and failure and societys acceptance of non-traditional, higher risk professions. In addition, there are several global indices measuring innovation and entrepreneurship across countries. For example, the Global Entrepreneurship Monitor (GEM) and the Global Entrepreneurship and Development Institute (GEDI) both produce global reports. There are dedicated research programs such as the Panel Study of Entrepreneurial Dynamics (PSDE) at the University of Michigan studying entrepreneurship. The Babson Entrepreneurship Ecosystems Project (BEEP) at Babson College has dedicated teams focusing on the analysis and best practice programs to assist countries or cities to foster their entrepreneurial ecosystems. The
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program is led by Dr. Dan Isenberg and core concepts are reected in his Harvard Business Review Article The Big Idea: How to Start an Entrepreneurial Revolution published in June 2010. We review the article in detail in Chapter 4. Foundations such as the Kauffman Foundation (www. kauffman.org) and the Skoll Foundation (www.skollfoundation.org) focus on innovation, education, research and policy around entrepreneurship and produce several research policy papers and indices. The World Economic Forum has a Global Agenda Council on Fostering Entrepreneurship comprised of Council Members from the private sector, academia and government, focusing on ways to foster global entrepreneurship. The European Commission publishes the Euro Barometer Survey on Entrepreneurship across the EU27 countries, a survey conducted by the Gallup Organization, which highlights several of the qualitative and quantitative metrics of entrepreneurial climate and activity in a country and benchmarks it against the EU27 . In Chapter 2 we review Cyprus performance with key indicators for each ecosystem component based on this Barometer Survey. 1.6 The Cyprus Challenge At the writing of this report, the Cyprus economy is faced the highest unemployment in over 38 years at 10.9% (with 25% youth unemployment), lack of liquidity in the banking system, the two largest banks in Cyprus highly undercapitalized and one of them taken over by the state, no signicant greeneld incoming foreign direct investment, lack of a vibrant capital market altogether and lack of entrepreneurial education. Is it all dark and gloomy? While this may be a rather bleak picture, there is a silver lining: Cyprus does have several advantages and assets that can be proven pivotal to fostering opportunity entrepreneurship and an entrepreneurship ecosystem, which in turn could invigorate an economic growth in the next decade. Entrepreneurship in Cyprus is not new, as 98% of the companies in Cyprus are small to medium enterprises and the result of necessity entrepreneurship.
An entrepreneurship ecosystem is more than the sum of its parts
Efforts to build an ecosystem are not new either. Since 2000, several incubators such as Diogenes at the University of Cyprus have been set up and have assisted a few companies to start up but have faced several challenges and most have withered. As of today, at the writing of this report, no Cypriot start-up has been listed on the NASDAQ or another foreign exchange. For the purposes of this document our time frame for fostering and reigniting entrepreneurship in Cyprus is the year 2020, which aligns also with the EU2020 agenda, and the brass ring we would like to aim for is actually a brass bell at NASDAQ. This study would like to place a challenge to the key entrepereneurship ecosystem stakeholders: Venture capitalists, entrepreneurs and policy makers in Cyprus and the broader ecosystem: to take a new, Cypriot startup to an IPO at NASDAQ and ring the bell in 2020. Can Cyprus do it?
This study would like to place a challenge to the key entrepereneurship ecosystem stakeholders: Venture capitalists, entrepreneurs and policy makers in Cyprus and the broader ecosystem: to take a new, Cypriot start-up to an IPO at NASDAQ and ring the bell in 2020. Can Cyprus do it?
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1. 2. 3. 4.
Entrepreneurship Ecosystem: A Baseline for Cyprus

In the last chapter we dened the key components of an entrepreneurship ecosystem as well as several global indices for measurement and benchmarking. In this section we review the performance of Cyprus in key indicators for each of the ten components. Cyprus is ranked neither in the Global Entrepreneurship Monitor (GEM) nor in the Global Entrepreneurship Development Index (GEDI) as of yet. (Curveball is in discussions with the GEM Executive Team about ranking Cyprus in 2013). We review Cyprus performance based on indicators from the EU Commission Analytical Report on Entrepreneurship, the Global Innovation Index 2012 and the World Bank Doing Business Report 2012. We review the following key ten components of an entrepreneurship ecosystem: Culture Customers and markets Entrepreneurs and their start-ups Financing: angel investors, venture capitalists and private equity rms 5. Legal and regulatory framework 6. Liaisons 7 . Media (social media, publications, newspapers, magazines, blogs, TV, radio, etc.) 8. Private sector and professional services providers such as accountants and auditors, lawyers and duciary services amongst others 9. Universities and R&D 10. Voice of the industry which includes associations such as the Chamber of Commerce, business associations, non-governmental organizations, informal entrepreneur groups, incubators, accelerators, etc.
Source: Flash Eurobarometer - Entrepreneurship in the EU and Beyond, Dec 2009
2.1 Entrepreneurship Ecosystem: Culture A culture that fosters entrepreneurship is characterized by innovative and disruptive ideas, accepts failure and encourages calculated risk taking, sees entrepreneurs favorably, gives failed entrepreneurs a second chance and encourages the feasibility of their aspirations. In this section we will review four key factors that dene such a culture: entrepreneurs as job creators, entrepreneurs seen unfavorably, preferred professions and difference between preference for being selfFigure 2.1.1
employed and feasibility of being self employed. As we see in Figure 2.1.1 in Cyprus 23% of the respondents strongly agree and an overwhelming 64% agree that entrepreneurs are job creators, for a total of 87% seeing entrepreneurs favorably as key drivers in job creation. Cyprus ranks slightly better then Estonia with a total of 86%, at par with the EU27 equivalent of 87% but lower than the peer comparison countries Ireland at 90% and Denmark at 92%. The best in class in this indicator is Finland with 97% perceiving entrepreneurs as job creators. Therefore, Cypriots agree that entrepreneurs are job creators.
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On the ip side there is the unfavorable perception of entrepreneurs. As seen in Figure 2.1.2, 75% of the respondents in Cyprus believe that entrepreneurs only care about their own wallet, which indicates mistrust towards entrepreneurs. Cyprus ranks well below the EU27 average of 54% and all the peer countries with Estonia at 65%, Ireland at 41% and the best in class in this indicator, Denmark with only 24% believing the entrepreneurs think only about their own wallet. Therefore, Cypriots see entrepreneurs unfavorably. At the same time, Cypriots show the highest score in their preference, compared to the EU average, for selfemployment at 66% rather than being an employee at 29% as seen in Figure 2.1.3. The EU27 average preference is 45% for being self-employed and 49% for being an employee. Cypriots therefore have a strong preference for being self-employed.
Figure 2.1.2
Figure 2.1.3
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Next we will review which are the most favored professions in Cyprus and the peer countries. As we see in Figure 2.1.4, where 68% believe that liberal professions are the most favorable, followed by managers in banks at 50% and top managers at 45%. As we can see entrepreneurs are not in the top three most favored professions in Cyprus despite the belief that entrepreneurs are job creators. All
the peer comparison countries rank entrepreneurs in their preferences with Denmark showing the highest percentage at 83%, Ireland at 64% and Estonia at 48%. Here we see that entrepreneurs are not among the top three most favored professions in Cyprus.
Figure 2.1.4
Source: Flash Eurobarometer: Entrepreneurship in the EU and Beyond, Dec. 2009
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As an overall review of the culture of entrepreneurship in Cyprus, we see that while entrepreneurs are considered job creators and Cypriots show the strongest preference among all Europeans for self-employment, entrepreneurs are neither perceived favorably nor chosen in the top three preferred professions in Cyprus. This disparity signies the need for to educate youth and the society in Cyprus about opportunity entrepreneurship. 2.2 Entrepreneurship Ecosystem: Customers and Markets The start-ups, which grow within an entrepreneurship ecosystem, need access to customers and markets to thrive and the ecosystem must facilitate such access with laws, regulations and agreements relating to ease of doing business, free trade, taxation and infrastructure. Today, with the power of the Internet, accessing customers and markets is targeted, specic and instantaneous.
Geography is not as dening a factor but economic sectors are critical as are unmet customer needs across geographies. To evaluate access to customers and markets we review three key indicators from the World Bank Doing Business Report 2012 for the ease of doing business. While all indicators relate to access to customers and markets directly or indirectly, we select ve pertaining specically to access to customers and markets, and Figure 2.2.1
World Bank doing Business Ranking 2012 Rank out of 183 Trading across borders Resolving insolvency Protecting investors Starting a business Paying taxes Dealing with construction permits Getting credit Getting electricity Enforcing contracts Registering property Cyprus 40 19 23 29 33 37 78 78 96 105 123
they are highlighted in Figure 2.2.1 below: trading across borders, starting a business, protecting investors, getting credit and enforcing contracts.
Ireland 10 21 10 5 13 5 27 8 90 62 81
Israel 34 10 45 5 43 59 134 8 93 94 147
Estonia 24 3 72 65 44 51 37* 40 48 29 13
Denmark 5 7 9 29 31 14 10 24 13 32 11
Source: World Bank Doing Business Report 2012, Note: * 2011
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In trading across borders, Cyprus ranks 19th from 183 economies and penultimate in our peer comparison group where Estonia is the best in class with a rank of 3. In protecting investors, Cyprus ranks 29th from 183 economies and ties in second with Denmark. Israel and Ireland are tied as best in the peer group with a score of 5. In starting a business, Cyprus ranks 33rd globally and third best in the peer group above Israel and Estonia and after Denmark and best in class Ireland. In getting credit, Cyprus ranks 78th globally and trails all peer group countries. Ireland and Israel are tied at 8th as best in class in the peer group. Finally, in enforcing contracts, Cyprus ranks last with a rank of 105th trailing all peers. Here the best in class is Estonia with 29. Its critical to pause here and highlight that Cyprus has some relative key strengths in the ease of doing business Figure 2.3.1
relating to access to customers and markets, but also has some areas requiring improvement. The relative strengths are important to the facilitation of the entrepreneurship ecosystem because Cyprus does not need to start from scratch to foster the ecosystem but rather concentrate its strengths in this realm. 2.3 Entrepreneurship Ecosystem: Entrepreneurs and their start-ups Under entrepreneurial activity, Cyprus shows a high entrepreneurship rate with one of the highest rates of businesses being operational or being set up thanks to a robust professional services sector. This is quite positive, however these numbers reect necessity entrepreneurship where entrepreneurs create the businesses out of need (and not opportunity) with a low risk tolerance as seen in Figure 2.3.1. In the comparison peer group for this study, we see that Denmark is the best in class with the highest score of 81% of entrepreneurship being opportunity driven. Ireland scores 57% and Estonia 47%, all higher than Cyprus.
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Cypriots seek entrepreneurship and their scores are very similar for necessity at 43% and opportunity at 42%. In examining the drive of potential entrepreneurs themselves, we look at an indicator referring to the degree that schooling has helped entrepreneurs develop a sense of initiative and an entrepreneurial attitude. Cypriots score the highest percentage Figure 2.3.2
across the EU27 when citing their schooling to have helped them in developing knowledge and interest in entrepreneurship, as seen in Figure 2.3.2 where 16% strongly agree and 48% agree, for a total of 64% who consider their education as a favorable driver to develop initiative. The EU27 average is 13% for strongly agree and 36% for agreement on this criterion. Here Cyprus blazes ahead of all the countries in the peer group.
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When comparing the preference for being self-employed vs. the feasibility of being self employed, Cypriots show the highest percentage across EU27 with a preference for being self employed at 64%, but only half of those believe it is feasible at 37% and a gap of -27 as seen in Figure 2.3.3. All peer countries score a lower gap between preference and feasibility, with Denmark at +10 where the percentage of respondents who consider it feasible to be self-employed is higher than the percentage of respondents who would prefer to be self-employed, indicating a can-do attitude. Ireland and Estonia show a gap of -13. The EU27 difference Figure 2.3.3
between feasibility vs. preference is -14 of feasibility vs. preference. Such a gap may imply in Cyprus that youth dont feel empowered to follow their dreams and aspirations due to various reasons. In fact, over 55% of youth in Cyprus are not involved in any organization or volunteer organization and of these only 35% explain their non involvement due to lack of interest. The remaining 20% of the respondent state that they are not involved because they dont have time and they feel left out of decision making by the overly politicized and run by the elderly, society. In addition, young Cypriots believe that they dont have the right tools to pursue entrepreneurship after school.
Preference vs feasibility - by country
% who would prefer to be selfemployed
EU27 COUNTRY Belgium Bulgaria Czech Rep. Denmark Germany Estonia Greece Spain France Ireland Italy Cyprus Latvia Lithuania Luxembourg Hungary Malta Netherlands Austria Poland Portugal Romania Slovenia Slovakia Finland Sweden UK Croatia
42 26 48 28 27 36 40 58 38 49 44 48 64 44 44 43 36 34 38 36 46 48 49 44 23 34 28 41 42
28 13 21 15 37 30 27 29 23 31 31 26 37 25 21 29 19 19 15 31 36 18 28 32 22 45 49 31 21
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Difference (feasibility vs preference)

-14 -13 -27 -13 +10 -6 -13 -29 -15 -18 -13 -22 -27 -19 -23 -14 -17 -15 -23 -5 -10 -30 -21 -12 -1 +11 +21 -10 -21
% who considered it feasible to become selfemployed
While these numbers are from 2009 and a lot has changed in the state of the economy during the last three years and is still changing, we see a few key highlights: Young Cypriots seek entrepreneurship, but opt for necessity entrepreneurship instead of opportunity entrepreneurship which is riskier but also more innovative. Young Cypriots strongly believe their education fosters their sense of initiative and entrepreneurial attitude but only half of them believe that becoming selfemployed is feasible. We see capability and aspiration on one hand but also lack of trust to the exogenous factors affecting the feasibility of their aspirations on the other. Fostering an entrepreneurial ecosystem will both inspire the young Cypriots and give them an opportunity to exercise and expand their learnings from school. Also, the ecosystem will provide the framework and platform for these youth to fulll and implement their aspirations. 2.4 Entrepreneurship Ecosystem: Financing The fundamental driver in economic growth of entrepreneurial activity is private equity and venture capital. Private equity is equity capital that is not quoted on a public exchange. Private equity consists of investors and funds that invest directly into private companies, with funds 2.4.1 raised from Figure retail and institutional investors, to fund Figure 2.4.1
new technologies, expand working capital within an owned company, make acquisitions or to strengthen a balance sheet. Venture capital (VC) is a type of private equity focused on start-up companies and entrepreneurs who have just the germ of a business idea. Empirical research shows that a vibrant venture capital industry is the cornerstone of a healthy economy . There are six stages of venture round nancing offered in Venture Capital, and they roughly correspond to the key stages of a companys development. Seed Money: initial nancing needed to prove a new idea, often provided by angel investors. Crowd funding is also emerging as an option for seed funding. Start-up: Early stage rms that need funding for expenses associated with marketing and product development Growth (Series A round): Funds for manufacturing and early sales Second-Round: (Series B round) Working capital for early stage companies that are selling product, but not yet turning a prot Expansion: Also called Mezzanine nancing, this is expansion money for a newly protable company Exit of venture capitalist: Also called bridge nancing, 4th round is intended to nance the going public process
There are two sides to venture capital: 1) the supply side, determined by the willingness and ability of investors to fund start-ups and 2) the demand side, dened by the quantity and quality of innovative companies looking for VC in return for prot resulting from growth. 2.4.1 Supply Side determinants for VC The key determinants of the supply side of VC are (a) market capitalization, (b) the legal and regulatory framework especially for VCs and Pension Funds and (c) the exit conditions in the stock market. In Figure 2.4.1 the schematic outlines broadly the key components and players in a Venture Capital Fund.
Cyprus has a formidable framework for alternative fund set up with various fund formations such as the International Collective Investment Scheme Funds (ICIS), funds that are known for exibility, robust regulatory oversight, transparency and tax benets.
The Cyprus professional services sector has both the experience and expertise to set up and run VC funds. One of the challenges is on the demand side for VC and the demand for nancing a start-up projects pipeline, which we review in the next section.
Venture Capital Firm

(General Partner)
Limited Partners (Investors)

(public pension funds, corporate pension funds, insurance companies, high net-worth individuals, family offices, endowments, foundations, fund-offunds, sovereign wealth funds, etc.)
Ownership of the Fund Fund / Investment Management
Venture Capital Fund

(Limited Partnership) The Funds ownership of the portfolio investments Investment Start - up Investment Start - up Investment Start - up
Source: UrbanRenewal
Source: UrbanRewal
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To analyze market sophistication for Cyprus, we review the scores for market sophistication, number of VC deals and the market capitalization based on the Global Innovation Index (GII). As we see in Figure 2.4.2 for overall market sophistication, Cyprus is ranked 20th out of 141 countries, which is a rather high score. Delving into specic indicators, we review the highest and lowest performance indicators. For Venture Capital Deals, as reported by Thomson Reuters in the GII, Cyprus is ranked 10th out of 141 economies. This indicator refers to data on private equity deals, with details, among others, on the location of investment, investment company, investor rms and funds. The series is based on venture capital deals from 1 January 2011 to 31 December 2011, with the data collected by investment location. The data are reported as deal per trillion dollars of GDP at purchasing power parity (PPP$ GDP). While this is a very strong performance for Cyprus, these deals are facilitated through Cyprus yet have destinations for companies with international operations outside Cyprus. As a result, the indicator above does report high activity however the VC investments take place elsewhere mostly due to more advanced entrepreneurship abroad and lack of pipeline of projects in Cyprus. On the other hand, this is an indicator that shows the strength and experience of the professional services sector in Cyprus, with the expertise to book over 126 trillion PPP$ GDP . The challenge we identify here is one that urges us to leverage this expertise of the professional services
sector, encourage a pipeline of start-up projects and essentially divert some of the VC deals to invest in start ups in Cyprus. Figure 2.4.2 Market Sophistication
Market Sophistication Overall ranking Venture Capital Deals/trillion PPP$ GDP Market capitalization, % GDP
Source: Global Innovation Index 2012
Cyprus 20 10 75
listed on the countrys stock exchanges at the end of the year. Listed companies do not include investment companies, mutual funds or other collective investment vehicles. The low score for Cyprus draws attention to the fact that the stock market activity is very small and there is no thriving capital market. Furthermore, in comparison with the peer countries as seen in Figure 2.4.3, we see that Cyprus fares quite low in market capitalization whereby Israel is the best in class in this category with a score of 3. In VC deals, Israel is again best in class, followed by Ireland and Denmark. In overall market sophistication, Cyprus fares better than Estonia, but trails Israel and Denmark. Ireland is the best in class in this group for this category.
While the deals are booked, the VC funds are not invested in Cyprus. This is underscored by the fact that the lowest performer in the category of Market Sophistication is market capitalization (also known as market value). Listed domestic companies are the domestically incorporated companies Figure 2.4.3
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The other two determinants of the supply side for VC are legal and regulatory infrastructure for VC and pension funds (which we will review in Section 2.5 Legal and Regulatory Framework) and exit conditions and trades for stock markets. Countries with deep and liquid stock markets and favorable conditions to conduct trade sales foster VC growth, which in turns fosters the entrepreneurship ecosystem of that country. The quality of the VC is underscored by their ability to bring a company to an initial public offering (IPO). Here, the professional services sector can play a signicant role in facilitating initial public offerings in active exchanges. NASDAQ is by far the most successful secondary market in domestic and international exchanges. Both European and Israeli markets have been positively affected by the liquidity provided by NASDAQ. Israel, being the best in class country in this analysis, and globally, oated 163 IPOs between 1991-2005. Of these, 43 oated in Europe and 120 on NASDAQ, raising 10.70 USD billion in the 1990s alone. An indicator of the depth and liquidity of the stock market is the total value of stocks traded and the ease of protecting investors. Figure 2.4.4
In protecting investors, which we have also seen in Section 2.2 Customers and Markets, Cyprus scores 76th from 141 economies in the GI Index. Protecting investors is important for the supply side of VC for all stages of funding from seed capital to angel investment to VC to private equity. As we see in Figure 2.4.5 below, for this peer group, Cyprus trails all other countries. The best in class for the peer group is a tie between Israel and Ireland, both scoring 94.2 out of 100. Referencing the total value of stocks traded, Cyprus scores 59th out of 141 economies. In this peer country comparison, Cyprus is the penultimate, with Estonia ranking the lowest, and the highest score being Israel with a total score of 38.27 and ranking of 17th out of 141 economies for this indicator. The value of stocks traded shows the depth of a stock market. Figure 2.4.5
Market Sophistication Overall ranking from 141 countries Protecting investors Total value of stocks traded
Cyprus 20 76 59
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On the supply side of VC, Cyprus has relatively solid market sophistication and certainly the expertise and capability and legal framework to book VC deals. However, Cyprus scores quite low on market capitalization in the number of active listed companies on the Cyprus stock exchange and total value of stocks traded indicating an inactive and illiquid secondary market, which in turn does not foster VC and entrepreneurial sustainable growth. 2.4.2 Demand Side determinants for VC The key determinants of the demand side of VC are entrepreneurial activity
and pipeline, R&D expenditure as a percentage of GDP and favorable company law and tax regime for startups and SMEs. In this section we review the entrepreneurial activity as dened by the number of new companies/ business density, R&D expenditure as a percentage of GDP and ease of doing business.
The best relative performance for Cyprus is the number of new businesses registered per 1,000 population aged 15-64 (in 2009), where Cyprus is ranked 1st in this category globally and for this peer group comparison. This is another conrmation of the strength and capacity of the professional services sector in Cyprus. Within the Creative Output category of the index, the ICT & business model creation refers to the extent to which information and communication technologies create new business models, services and products in a particular country. Cyprus ranks 66th in this indicator, which suggests that most of the activity in creating toplevel domains is not related to creating business models, services and ICT products. The best in class country in the peer group is Denmark, followed by Estonia and Israel. The lowest performance here is in the indicator for gross expenditure of R&D as a percentage of GDP , where Cyprus ranks 59th out of 141 economies. In the peer group comparison as seen in Figure 2.4.2.1, Cyprus also ranks low compared with EU countries this indicator. For this indicator the best in class is Israel followed by Denmark. This Global Innovation Index (GII) indicator of Gross Expenditure in R&D refers to total domestic intramural expenditure on R&D in a given period of time as a percentage of GDP . The GII denes intramural expenditure all expenditure for R&D performed by a statistical unit or sector of the economy during a specic time frame from any source of funding. The data is sourced from UNESCO and supplemented by World Bank info. Therefore on the supply side of VC while Cyprus shows the highest density of new business registrations per capital, the numbers dont follow suit when it comes to ICT start-ups and investment in R&D as a percentage of GDP . Therefore, once again, the capacity and ease of setting up a business are present in Cyprus but not the investment in local research and development from the government and the private sector into academia, start-ups, incubators, accelerators, etc. In fact, the Nicosia Knowledge District, the concept of the triple helix amongst university, private sector
Figure 2.4.2.1
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and government to promoted R&D and growth for Cyprus was adopted by the Federation of Employers and Industrialists, the Municipality of Nicosia and the University of Cyprus but unfortunately has not materialized due to bureaucratic and politicized intergovernmental disputes. And we can see now, to the detriment of the ecosystem of entrepreneurship in Cyprus. On a more updated and positive note, which is not yet captured by data and indices we would like to discuss here, some of the current growing efforts in Cyprus based start-ups mostly in the mobile technology arena. Two of these notably brand new start-ups are Cocoon Creations and Wajee Mobile Limited. Both took part in the recent rst ever hackathon in Cyprus, Hack Cyprus in Sept 1-2, 2012, the former as a sponsor and mentor to participating teams, the latter as a contestant and ultimate winner of Hack Cyprus. Cocoon Creations was co-founded by Michael Strouthos and Elena Georgiou Strouthos partners in business and married couple in life. Michalis is responsible for the ideation and marketing of the company whereas Elena is doing all the computer programming and high tech development. They believe that the creation of an entrepreneurial ecosystem in Cyprus will greatly help us grow and innovate even more . They created the Travel Treasure Hunt a fun mobile app game to learn a new city while visiting through a treasure hunt that brings gifts, discounts and coupons to winners by participating sponsors. ponsors. Cocoon Creations creates cross platform apps with intuitive and user-friendly interfaces performing to world-class standards. When we asked whats on their entrepreneurship ecosystem wish list, the three top wishes included mentoring by universities, the creation of an accelerator such as YCombinator and funding. During the Hackathon both Michael and Elena were present, offering mentoring to participating teams and nurturing their newly developing ideas. Cocoon Creations offered a prize to the team with the most innovative and team developed solution. Repilo made up of six graduate students at Imperial College
in London won, and the team created an app that automatically counts points during card games with the use of a mobile phone.
part of this change, to play a key role in this new wave both locally and globally said during discussion Vourkos and Mitrousis. A few other companies also have been successful in this arena for a while, such as SNQ which actually is a pioneer in Cyprus in mobile application development with the easy to use App Baker format which enables individuals without a technology background to create and submit their own mobile applications through the Apple Inc. store. Another notable mention here is also Wargaming.net is a premium online game publisher and developer and one of the leaders in the free-to-play MMO industry. The company has been in operation for over fourteen years and is headquartered in Cyprus. What is remarkable about start-ups like these is the resolve to plow ahead without much guidance or funding and rely on capability, optimism and hard work that dene most tech start-ups worldwide.
The creation of an entrepreneurial ecosystem in Cyprus will greatly help us grow and innovate even more at Cocoon Creations
A start-up, which offers mentoring to another start-up, shows both the willingness to pay it forward and the need for an accelerator and the broader entrepreneurial ecosystem in Cyprus. During an interview with Wajee Mobile Limited co- founders Andreas Vourkos and Vaseilios Mitrousis we learned that in May 2012, Wajee Mobile Limited. also won Microsofts Imagine Cup Competition with Braille Messenger (http://www.braillemessenger.com) a Windows Phone solution that allows visually impaired people to send and receive text messages. Wajee Mobile Limited is managing Braille Messenger and will be responsible for deploying and delivering this capability to all mobile platforms worldwide. During the Hackathon Hack Cyrpus 12, Wajee Mobile Limited after 32 hours of nonstop coding created an augmented reality game especially designed for the Hackathon. The world is going mobile and mobile phones have become a vital part of every persons lifeWajee seeks to be
The world is going mobile and mobile phones have become a vital part of every persons lifeWajee Mobile seeks to be part of this change, to play a key role in this new wave both locally and globally
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2.5 Entrepreneurship Ecosystem: Legal and Regulatory Framework The legal and regulatory framework of an entrepreneurship ecosystem must include laws and regulations friendly and supportive to entrepreneurs, investors, researchers and innovators among other stakeholders to foster a spherical development and provide the legal framework for growth. Such a framework includes laws, regulations and directives, which protect intellectual property, facilitate access to capital and promote research and development. They include regulations encouraging both investors and entrepreneurs such as easing the processes of doing business, registering and diluting a company, and of course providing a favorable tax regime with incentives to invest within the country. Cyprus has a solid tax framework supportive to both investors and starts-ups as seen in Chapter 5. In Figure 2.5.1 we review the International Property Rights Index (IPRI) for 2012 and we see that Cyprus ranks 25th out of 130 countries, faring better than Israel and Estonia in this peer group where Denmark is the best in class with the lowest rank out of 130 countries. The legal and political environment and physical property rights are the best performing indicators for Cyprus. In intellectual property Cyprus scores 6.2, which is the penultimate in the peer group above Estonia but trailing Israel, Ireland and Denmark. Figure 2.5.1
Intellectual Property Rights Index (IPRI) 2012 Country Rank out of 130 countries Overall Score (out of 10) Legal and Political Environment Physical Property Rights Intellectual Property Rights Cyprus 25 6.9 7 7.4 6.2 Denmark 6 8.2 8.7 7.6 8.4 Ireland 17 7.6 8.2 6.6 8 Israel 31 6.6 6 6.4 7.3 Estonia 28 6.7 7.1 7 6
Source: International Property Rights index (IPRI)
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2.6 Entrepreneurship Ecosystem: Liaisons and networks Networks, liaisons and networking are inherent to an entrepreneurship ecosystem and could be considered one of the most important factors of a successful ecosystem, if not the lifeline. Most networking initially happens informally in meet-ups for entrepreneurs, investors and developers such as open coffee events, TEDx events, hackathons and linkages with online groups or in person. In addition, networking also can take place in traditional local, countrywide, regional and global conferences, think tanks and foundations. In Cyprus there is a Cyprus Entrepreneurship Competition which is a business plan competition operating annually since 2003 under the umbrella of the University of Cyprus however more private sector initiatives are needed to further stimulate the ecosystem with short term guidance and much needed mentoring, after the competition ends. Key indicators to measure the depth and breadth of entrepreneurship ecosystem networks are the type and number of events taking place, number of attendees, number of followers on social media, topics and ideas generated. Open Coffee events are a good grassroots example. Currently there are over 2,500 open coffee members in over 83 locations worldwide. While entrepreneurship in the form of competitions and incubators has been present in Cyprus for over a decade, relying entirely on government funding and weighed down by bureaucratic processes and lack of prioritization have hindered growth within Cyprus. Cypriots excel abroad as in the example of PeoplePerHour created by Xenios Thasivoulou and operating in London and Athens. Nowadays, new initiatives are sprouting during the past 12 months or so and wetake a look at just a few here: The rst TEDx event in Cyprus took place in Nicosia at the University of Nicosia on November 30 2011 and was attended by 187 people. It was organized as an island wide event
entirely by volunteers. TEDx events are locally and independently organized events to provide a platform for ideas worth spreading with licensing from TED in the United States. For many, TEDxNicosia became the starting point for other initiatives such as the Cypriot Enterprise Link (CEL) says Co-founder Michael Tyrimos. CEL is platform of educating and connecting entrepreneurs, and organizing events such as the rst Hackathon, which took place September 1-2 2012 at the Cyprus Technical University and was attended by over 80 people from ten countries. In addition, another TEDxNicosia speaker Dr. Alexandros Charalambides himself, a nalist and winner respectively at Imperial and the University of Cyprus entrepreneurship competitions, decided to create an accelerator program ChrysalisLEAP to address the need of mentoring and nurturing a start up long after the competition, the handshake and the check are delivered with no other support. ChrysalisLEAP aims to begin operating in 2013 providing guidance, mentoring and seed nancing with local and global investor funding.
For many, TEDxNicosia became the starting point for other initiatives such as the Cypriot Enterprise Link (CEL) the rst Hackathon and an accelerator program ChrysalisLEAP
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2.7 Entrepreneurship Ecosystem: Media and Social Media The Media and the Social media play a fundamental role in communicating, connecting, networking, educating and spreading information amongst members of the ecosystem. In Figure 2.7 .1 we see four indicators relating to number of feature lms produced by a country, the number of newspapers Figure 2.7 .1
in circulation, Wikipedia monthly edits and YouTube video uploads. We see that Cyprus trails all countries in all the indicators, however also shows a signicant number of you tube video uploads. This particular indicator captures only the quantity but not the content of the videos.
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In an entrepreneurship ecosystem the use of social media and media is critical in highlighting success stories of start ups, educating citizens, informing stakeholders and potential investors and spreading the word instantaneously and at very low cost. The social media provides a virtual forum to share ideas, have discussions and dialogue on key issues with entrepreneurs, VCs and other stakeholders globally, instantly and only at the cost of ones time. 2.8 Entrepreneurship Ecosystem: Private Sector, Professional Services The private sector plays a critical role in an entrepreneurial ecosystem as it sets the example for new start-ups as well as provides learning and opportunities for improvement in things that did not work well in the past. The market forces and Adam Smiths invisible hand are still very much at work when it comes to an entrepreneurial ecosystem. Cyprus has a robust tax system anchored in over 45 double tax treaty agreements, a highly educated, specialized work force and a robust common law based legal system. With noteworthy efforts during the past two decades led by the tax, audit and duciary services rms, Cyprus has been able to structure a substantial feebased revenue stream, which has led to GDP growth and employment growth. Cyprus was placed on the OECD White List of tax jurisdictions in April 2009. This is a signicant vouch of condence in the strength and potential of the Cyprus professional services sector. Another key strength is the well educated, uent in English and experienced pool of professionals that make up the Cyprus professional services sector. According to the Cyprus Bar Association, there are over 10,000 lawyers in Cyprus and they can act as both solicitors and barristers as there is no distinction between the two in Cyprus. In addition, according to The Institute of Certied Public Accountants of Cyprus (ICPAC), there are over 5,000 certied accountants and auditors, who are mostly UK educated and certied, as well as a few thousand duciary services professionals and ancillary services providers. The professional services sector has solid expertise in corporate and merger & acquisition services, banking and nance, and real estate, and signicant expertise in tax
advisory, company registration and duciary services. Countries where the private sector invests in R&D show a higher degree and results of innovation. In Figure 2.8.1 we examine three key indicators: percentage of rms providing formal training to their full time employees, percentage of gross expenses in R&D performed by private companies and percentage of gross expenses on R&D nanced by private enterprise. We see that Cyprus has not reported any data to the Global Innovation Index in terms of the percentage of rms providing formal training to their full time employees which is surprising given the example of the professional services sector in Cyprus, that employs several hundreds of young graduates on full time basis while funding their accounting and auditing certications. Figure 2.8.1
For the next two indicators Cyprus trails all peer group companies. Israel leads in both indicators with the private sector having a leading role in R&D development and nancing, as we see further on in Chapter 3.
The professional services sector in Cyprus has solid expertise in corporate and merger & acquisition services, banking and nance, and real estate, and signicant expertise in tax advisory, company registration and duciary services.
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2.9 Entrepreneurship Ecosystem: Universities, cluster formation and R&D The collaboration between universities and the private sector is quite important as it expands learning and practice from the university and the theoretical approach of the classroom to the tried and tested approach in the private sector and vice versa. TThe scores in Figure 2.9.1 below are rather high for Cyprus which is positive on one hand and rather surprising on the other because we dont have much market evidence of this collaboration such as increased number of patent applications or IPOs in local or global secondary markets. Here again it is important to highlight efforts to create a research triple helix during the past decade to enhance the collaboration amongst universities, private sector and entrepreneurs. In Chapter 5 we provide recommendations to strengthen this opportunity. The best in class from our peer group are Israel for the university/ industry collaboration and Denmark for the cluster creation. Figure 2.9.1
In the next section we take a closer look at some of the best practices that the peer group countries have been implementing to understand a bit better their performance in building entrepreneurship ecosystems.
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3
Figure 3.1
Entrepreneurship Ecosystem: Best practice examples from Denmark, Estonia, Ireland and Israel
In this section we review some of the recent key best practices that have been tried and tested in the peer group countries. Here, it is important to note that these best practices are not one-size-ts-all, so we are not implying that they should be copied and pasted into the Cyprus state of things. Best practices are ideas and suggestions and some of them can be adopted and adapted to the needs of Cyprus to build an entrepreneurship ecosystem. For simplicity, we divide best practices into three main categories, one for each main stakeholder: the regulator, the private sector and the voice of the industry, which includes academia, NGOs and the entrepreneurs themselves. Before we begin the individual country best practice review it is worth reviewing the Global Innovation Index overall scores again in Figure 3.1. We see that Denmark leads, followed by Ireland, Israel and Estonia. Cyprus trails all peer countries with a score of 28 out of 141 countries. It is also worth noting that Denmark, Ireland and Estonia all have benchmarked with Israel in strengthening their entrepreneurial ecosystem during the past decade. 3.1 Denmark Denmark is ranked 7th globally in terms of innovation in the Global Innovation Index and has been able to implement key reforms to support their entrepreneurial ecosystem mainly by engaging policy makers at the ministerial level and all stakeholders including private sector, academia and of course the entrepreneurs in a positive outlook of entrepreneurship. Below are some key highlights of these best practices: Denmarks policy makers changed bankruptcy legislation, reduced administrative burdens and improved the access to capital. Denmark has since noticeably improved its framework for entrepreneurship and is actually one of the OECD countries that has improved its framework conditions most during the last ten years. With these changes, Denmarks leaders set the example with actions on creating an entrepreneurial mindset and culture. As seen in the report that we analyzed in Chapter 2, Danes have the most positive image of entrepreneurs and, together with the Irish, they are the most willing to give failed entrepreneurs a second chance compared to respondents in other EU Member States. In this regard, Denmark has also put a lot of effort into the Global Entrepreneurship Week (GEW). The Minister of Business and Economic Affairs directly hosts the annual campaign and participates in several meetings and conferences during GEW. Denmark has been part of the GEW since its foundation in 2008, and has been working on improving its entrepreneurship ecosystem year over
year, with most stakeholders involved in 100 events over seven days. Another successful best practice is an active Partnership for Education and Training in Entrepreneurship among four ministries: the Ministry of Culture, the Ministry of Science, Technology and Innovation, the Ministry of Education and the Ministry of Economic and Business Affairs. The inter-ministerial partnership cooperates on implementation of the strategy, including the coordination of other initiatives aimed at achieving targets and collaborating with the Foundation for Entrepreneurship. Few countries so far have actively invested in entrepreneurship education the way Denmark has by involving every level of education, earmarking funds and including entrepreneurship in the management of educational institutions. Following these educational initiatives over time will be very interesting. Denmark has also created a successful accelerator. Accelerators are organizations that provide startups with seed-investment, usually in exchange for equity, and limitedduration educational programming, including extensive mentorship and structured educational components. Symbion Accelerator has created two such programs: Gazelle Growth and Accelerate. These programs typically culminate in demo days where the ventures make pitches to an audience of qualied investors. Denmark passed on the Presidency of the European Union in 2012 to Cyprus and apart from also being a small country in population, market and geographic area, it can serve as a bright example of engaging government at the ministerial level to support the entrepreneurship ecosystem. 3.2 Estonia Estonia is the 133rd smallest country in the world in terms of land and population of 1.27 million, yet it produces more start-ups per capita than any other country in Europe and has one of the worlds most advanced e-governments. Estonia also has a low per capita income compared to other EU countries and the peer group we are reviewing, and a high unemployment
Global Innovation Index 2012 Rankings Rank 7 9 17 19 28 Country Denmark Ireland Israel Estonia Cyprus Score 59.93 58.68 55.99 55.34 47.89
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rate at 12.1%. It is worth noting that 17 .5% of the population lives below the poverty line. Perhaps the Estonian entrepreneurship success story is that of Skype. Skype is a proprietary Voice over the Internet protocol, which allows voice and video calls over the Internet for free. It was designed by a Swede and a Dane but built by Estonian engineers. Microsoft bought Skype in 2011 for reportedly 8.5 billion USD. The GDP of Estonia is 22.23 billion USD. Of the 20 nalists in Januarys Seedcamp, an entrepreneurmentoring program, four were Estonian including the eventual winner, GrabCAD, a social network for engineers which has 10% of the worlds mechanical engineers registered. According to Antti Vilpponen, CEO and cofounder of ArcticStartup, a site that follows entrepreneurship in the region, Estonia has three things in its favor: political leadership, the success of Skype and its culture. Estonias leadership support of entrepreneurship starts at the top with President Toomas Hendrik Ilves, who uses a 27-inch iMac on his presidential ofce desk, his MacBook Air and iPad2. He also writes tweets on his own Twitter account. The tax rate in Estonia is at and the access and use of computers very high. The combination of a at tax rate and technology has greatly facilitated e-government and paying taxes very quickly and efciently. In addition to e-taxes, Estonia has e-voting, e-health and electronic signatures are now accepted. During the writing of this report and in discussions with key gures from more mature ecosystems such as Israel, we have heard the importance and gravitas of one success story. Estonia has that in Skype. Local entrepreneurs such as Taavet Hinrikus of TransferWise, a currency-exchange service and Andrus Purde, cofounder of Achoo, a social networking website for professionals, agree that the local success story has inspired them. Estonians also believe that their history, small country size and culture have a lot to do with their entrepreneurial success. After years of Soviet rule,
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Estonias leadership support of entrepreneurship starts at the top with President Toomas Hendrik Ilves, who uses a 27-inch iMac on his presidential ofce desk, his MacBook Air and his iPad2. He also writes tweets on his own Twitter account.
Estonians learned a hands-on attitude, which is a prerequisite for a start-up. A very small local market forces start-ups to create and market ideas with global reach. This can-do attitude has red up a number of Estonian companies, including Erply, Fits.me, Fortumo and GuardTime, who have boosted their global proles by opening ofces in the US and UK. The nancial crisis has been another powerful trigger for the recent entrepreneurial renaissance in Estonia, pushing Estonians out of comfortable jobs and forcing them to consider selfemployment. Clearly the Estonian examples demonstrate that a tumultuous history, a small country size, a small local market can all be turned around and each can serve as an impetus to collectively reignite the entrepreneurship ecosystem of a country with similar perceived challenges like Cyprus. 3.3 Ireland Ireland is the 120th smallest country in the world in terms of size and has a population of 4.7 million. The Irish love entrepreneurs and have engaged everyone in the ecosystem including the government and the private sector. They created an award for Irish Entrepreneur of the Year, which was televised during prime time. The winner, Liam Casey, founded and manages PCH International, a venture-backed supply chain management company focused on the consumer electronics, personal computer, medical device and telecommunication industries.
Ireland also established an agency, Enterprise Ireland, for the development and growth of Irish enterprises in world markets. They help Irish enterprises start, grow, innovate and win export sales on global markets. Enterprise Ireland has ten ofces within Ireland and over 60 globally providing assistance to Irish enterprises in assessing opportunities, identifying routes to market, nding distribution partners, identifying potential partners and assessing competition, meeting buyers and assisting with setting up in foreign markets. Recently leased space in an ofce building in Midtown Manhattan will serve as an incubator for businesses hoping to expand into the American market. This focus on entrepreneurship is the culmination of about four decades of government policies that have lifted the economy from centuries of poverty to modern prosperity. Ireland entered the EU in 1973, revamped their tax and provides free education all the way through college level. In addition, the Irish government used direct equity investment to encourage Irish people to set up their own businesses. In the 1990s Ireland prospered by attracting numerous foreign direct investments, particularly from the United States. Enterprise Ireland is also providing initial capital for venture investment funds and supports research and development in Irish private sector companies and universities. This is the triple helix approach that has proved successful as it encourages a virtuous circle of movement and application of knowledge. The taxation system in Ireland has also provided a formidable legal and regulatory framework supportive to entrepreneurs and the ecosystem. Income tax rates in Ireland today are 20% on the rst USD 50,000 of income and 41% on income above that. But there are value-added taxes of 21% levied on all goods and transactions, with the exception of health and medical services, childrens clothing and food. The tax on corporate prots, though, is 12.5%, which is an incentive to own a business.
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Perhaps one of the most important factors is the support the older generation provides in empowering the new rising stars in the Irish economic arena. Mr Sherry of Enterprise Ireland said the passion behind the efforts to support entrepreneurs comes from a desire to make Ireland a better place. He says, Were old enough to remember when times werent good. We dont want to go back there. The Irish example of a successful entrepreneurship ecosystem highlights the proactive approach the government is taking with a well funded and empowered agency such as Enterprise Ireland which has a strong presence not only locally but also abroad. The tax system seems to have been a fundamental driver in attracting and retaining Foreign Direct Investment (FDI) but also energizing local entrepreneurial growth with global reach. Last but not least, the mentality of the older generation has been supportive to the younger generation with guidance but also empowerment to reach markets much broader and further away than Ireland.
3.4 Israel Israel is the 154th smallest country in the world with a population of 7 .6 million. Yet it has more companies listed on NASDAQ than any other country except the US and more engineers per capital than any other country in the world. As aptly described in Start-Up Nation , a book by Dan Senor and Saul Singer, the State of Israel is an incredible success story of a small country that has come to embody innovation and entrepreneurship. The book delves in to explaining what makes Israel, with answers ranging from the obvious practices which include the conglomeration of great universities, large companies, start-ups, suppliers, engineering talent pool and venture capital and the cultural characteristics where failure is not frowned upon, expertise and skills are shared in a collective and tight team approach learned during the time in the army, the Israel Defense Force (IDF). Some say chutzpah and leadership of visionaries such as President Peres and Ben Gurion before him are also factors. YOZMA. Israel created Yozma, a private public partnership, to jump start and foster start-ups and VC. The Israeli government invested a total of USD 100 million in the Yozma Program in the early 1990s. A total of USD 80 million was used to set up 10 private sector venture funds and the remaining USD 20 million was earmarked for direct investments in high-tech enterprises. From the outset, the government wanted to ensure that in addition to securing venture capital, the initiative would inject the expertise required into a rather inactive (at the time) Israeli venture capital market. Requirement for foreign partners. First of all, Yozma required each of the 10 funds to nd one foreign and one Israeli partner in the private sector. The purpose of this was to ensure that expertise and networks would accompany the capital from already experienced foreign venture capital funds and provide a mechanism for transferring knowledge and experience to Israeli investors.
The Irish example of a successful entrepreneurship ecosystem highlights the proactive approach the government is taking with a well funded and empowered agency such as Enterprise Ireland which has a strong presence not only locally but also abroad.
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Strong upside incentive. A strong upside incentive was built in for private sector players. 40% of the funds capital was public funds and the lucrative part of the agreement was that after a veyear period, the funds could buy out the governments options for the price of the invested capital plus interest. Eight out of ten funds chose to buy out the government later on. The Yozma initiative was successful. It succeeded in both kick starting Israels venture capital market and convincing foreign investors to turn their attention towards Israel. Up until 2000, driven in part by Israeli enterprises riding the crest of the dotcom wave, both domestic and foreign private sector investors invested sums that were many times greater than the governments investment. A total of 164 Israeli start-ups received nancing during this period and, as more than half the enterprises had successful exits, the funds showed good returns on investment. The Yozma, which has now privatized, was viewed as an enormous success in
Israel and the main reason why efforts to kick start the Israeli venture market succeeded in the early 1990s. In other words, the Israeli government served as a catalyst for the entire venture market, which led to a high level of private sector venture activity. In the late 1990s, the Israeli government had achieved full returns for the governmental venture investments equivalent to USD 100 million. As a result, today Israel has 45 funds. The result of these efforts is that today Israel has the worlds highest percentage of venture capital per capita.
Figure 3.4.1
Venture investments (USD millions) in Israel, 19702008 1970 1980 1985 1990 1995 1997 2000 2005 Venture 0 0 0 20 250 436 3,092 1,337 investment
Note: The gures for 1990 and 1995 are estimated. Source: G. Avnimelech, 2009.
2008 2,076
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A large scale reform of the system was carried out in 2003. All incubators went through a privatization process that gave ownership and operations to private sector partners, but the incubators retained their public funding. The idea behind this reform was to draw on the positive lessons learned from the Yozma Program: to promote partnerships with private sector players for the purpose of attracting expertise, networks and additional funding. Israel has implemented a successful and results oriented program in welcoming the diaspora. Since its founding in 1948, Israel has attracted a large number of immigrants. In 1948, the population of Israel was 0.8 million. Today, the population is slightly more than 7 million. The latest massive population growth took place in the 1990s. A total of 700,000 Russians immigrated to Israel from 1989 to 1996 and most were highly educated. Today, Russian immigrants comprise Israels second-largest population category. The Israeli Ministry of Immigrant Absorption (MoIA) is responsible for attracting and servicing all Jewish immigrants. The ministrys activities include outreach, welcome packages, tailored consultancy and advice to newly arrived immigrants. In addition, the Israeli Parliament passed in 2010 and amended in 2011 a tax law, the Angels Law , which specically fosters and welcomes local and foreign individuals to invest in private Israeli resident companies between January 1, 2011 and December 31, 2015, and those who do will be entitled to deduct the amount of their investment from their overall taxable income from all sources. The investment must be made in a qualifying Target Company , as dened. The amount of the deduction is capped at EUR 1 milion per Target Company, whereby an investor can invest in more than one company and enjoy the benet several times. Above all, Israel fosters the tenacity, brains and entrepreneurial spirit of its youth (both men and women) right out of high school and during their Israel Defense Force (IDF) training. Even though Israel has not explicitly attempted to commercialize military information technologies, there are still considerable spin-offs from the military sector. There are multiple examples of
the ow of competent programmers, technicians etc., who, after completing their military service, reuse or combine military technologies for civilian purposes. Senor and Singer (2009) call this phenomenon technological mash-up , meaning that technologies are used and combined across specialized elds or sectors. The precise number of Israeli enterprises that can be traced back to the military is unknown. Companies like Intel, Berkshire Hathaway, Microsoft, Cisco, Google, Alcatel, Deutsche Telecom, HP , Merck, IBM and many others have vital teams located in Israel made up of entrepreneurial and highly educated go-getters. The enterprises have a combined total of 50,000 employees in Israel (Eureka, 2010). According to Dr. Ed Mlavsky of the Gemini Fund, the Israel entrepreneurship ecosystem is sector agnostic , however, enterprises in the medical and biotech sectors account for a steadily increasing percentage of the incubators combined portfolio and today account for about 60% of all enterprises (see Figure 3.4.2). Figure 3.4.2
Source: Ofce of the Chief Scientist, Israel Ministry of Industry, Trade and Labor Note: The sector breakdown is per 31st December 2009
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The high level of R&D investment should also be seen in the light of the fact that many foreign companies have chosen to place their research activities in Israel. The organizational hub for Israels public initiatives in innovation and entrepreneurship is the Ofce of the Chief Scientist (OCS), under the Israeli Ministry of Industry, Trade and Labor. In addition to the national incubator program, the OCS runs a wide range of programming aiming to promote the transfer of knowledge and the commercialization of new knowledge and research. Many of these programs were launched during the 1990s, when appropriations for the OCS were also increased as in Figure 3.4.3. Figure 3.4.3
OCS budget (USD millions), 19802008 1980 OCS budget 39 1985 107 1990 136 1995 346 1997 397 2000 440 2005 263 2008 349
Source: Avnimelech, 2009.
The most important paradigm shift needed is the one on the cultural perspective about creating an entrepreneurship ecosystem by an entrepreneurship revolution in terms of the way things are thought of and done.
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The Ofce of the Chief Scientist includes other programs such as: MAGNETON. With an annual budget of USD 40 million, the program aims to develop generic and commercially viable technologies through consortia of industrial enterprises and highcaliber academic institutions in Israel. In addition, the MAGNETON program aims to promote already existing collaboration projects between research institutions and Israels industry. MATIMOP . MATIMOP is Israels national agency for international collaboration within industrial R&D. The author visited MATIMOP in July 2012. The unit promotes the development of R&D alliances between international and Israeli enterprises. MATIMOP works together with a number of European R&D programs, including the seventh framework program for R&D, EUREKA, Eurostars, Galileo, SESAR and Enterprise Europe Network. The MATIMOP program is the entity that will run the bilateral agreement on industrial R&D that Cyprus and Israel signed in November 2011. The counterpart organization to MATIMOP for the agreement in Cyprus is the Research Promotion Foundation. Israel-US BIRD Foundation. BIRD is part of a number of bilateral industrial R&D funds. BIRD specically targets the promotion of joint ventures between US and Israeli enterprises in industrial R&D. Each year, BIRD supports about 20 projects with an average turnover of more than USD 8 million. A societys ability to transfer knowledge from universities to the business community is a decisive competitive parameter in the global economy. Many people speak of a special Israeli mentality, expressed by the Hebraic concept of chutzpah which translates into something like devilmay-care , audacity or impudence (Senor and Singer, 2009). The concept captures what many people perceive as instrumental for creating a social culture that is particularly favorable for entrepreneurship and innovation. Research into entrepreneurship often distinguishes between entrepreneurship driven by opportunity and entrepreneurship
driven by necessity. For instance, it is emphasized that the high level of entrepreneurial activity in developing countries is explained by the fact that they do not have any other options (GEM, 2005). A related effect could easily be the case for Israel. As we can see in this Chapter there are many examples of best practices that Cyprus can adopt and adapt from Denmark, Ireland, Estonia and Israel to nurture its entrepreneurial ecosystem. These examples include strong championing from government leveraging the example of Denmark; creating Entrepreneur of the Year competitions supported by the private sector, such as the example in Ireland; highlighting a great success story, as Estonia has done; and last but not least, implement a tax break for angel investors along the lines of the Angel Law and an accelerator with public and private sector funding like Yozma as in the example of Israel. The most important paradigm shift needed is the one on the cultural perspective about creating an entrepreneurship ecosystem by an entrepreneurship revolution in terms of the way things are thought of and done. In the next chapter we review specics following an article by Professor Isenberg.
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Entrepreneurship Ecosystem: Goal Setting for Cyprus

In the June 2010 edition of Harvard Business Review, Dr. Daniel J. Isenberg highlights the opportunity governments are facing to ignite venture creation and economic growth based on example of countries ranked in the World Bank Doing Business Report. Dr. Isenbergs article presents research showing that, while there is no magic formula, government leaders in conjunction with the private and nongovernmental sectors can jumpstart economic growth by following nine fundamental principles to foster an entrepreneurial ecosystem. to actively focus on the convergence overlap of university research, private sector funding and government active participation to remove obstacles to make it happen. Here, unions need to be included and cooperative for a holistic approach to change. The state, at the highest level, which should be the ofce of the President, ought to actively foster funding, R&D as well as entrepreneurship practical applications on three practical key areas that can propel the economy to 2020. These may include alternative energy sources (solar, green and blue technologies), customer service excellence tied to bottom line prots in all services (banking & nancial services, hotel and tourism, government departments touching the customer and e-government). 2 Shape the Ecosystem around local conditions. In the case studies of Taiwan, Ireland, Iceland and New Zealand, Isenberg highlights that all four island , small countries, while different, had one thing in common. They actively focused on human capital; they welcomed expats and fostered their high potentials from their diaspora. Another stellar example of such growth is Israel where a combination of strong R&D, a solid welcome environment for diaspora and a culture that prized education, unconventional wisdom and implementing outside the box. Based on active and selfmanaging implementation of these paradigm shifts, Israel has managed to build a solid economy despite political instability in a not so peaceful neighborhood. Best Practice for Cyprus: The baby boomers in government and the private sector need to hold the reigns less tightly and rather foster the next leaders to take on and take the current growth higher, allowing them to implement
new ideas and accepting that new ideas are often costly. Worrying about losing prized cushy seats or appearing less knowledgeable than the Generation X and Generation Y is hamstringing an economy rather than letting it grow. Growth means reward and reward does not come without calculated risk taking. Instead, they need to foster an environment to retain the brains and welcome back the high potentials from the rich Cypriot diaspora around the world in several key disciplines, highlighted earlier. 3 Engage the Private Sector from the Start. Isenberg highlights the importance of government accepting advice from the private sector and provides the example of Taiwan where, in the 1980s the expertise did not exist locally. Taiwan reached out to its Taiwanese diaspora, consulting with high performers in various industries to provide spherical and tried and tested perspectives. The Taiwanese government went a step further: it actually built programs based on the suggestions of its diaspora and thus welcomed them back in the 1990s and put them to lead and run the new organizations. Best Practice for Cyprus: The private sector has a fundamental role to play in fostering the entrepreneurship ecosystem in Cyprus. In parallel, the
Cyprus was also ranked for the rst time ever in the 2010 World Bank Doing Business Report and came in 40th out of 183 economies. In 2011, Cyprus ranked 49th and in 2012 it is back up to 40th. In this chapter, we take D. Isenbergs nine principles and juxtapose them to the Cypriot reality for suggested best practice adoption and adaption and ultimately better results in the upcoming Doing Business Report rankings. 1 Forget about creating a local Silicon Valley for the basic reason that Silicon Valley is a result of the amalgamation of several key factors including technology, money, talent, critical mass of ventures, excellent research and development in conjunction with local academia and above all a culture that encourages new thinking and innovation, fosters change and tolerates failure. Best Practice for Cyprus: Maybe its best to forget about the Technological Park, an idea that is over 10 years old and has not moved from paper to practice for various reasons, mostly political and bureaucratic. The suggestion here is to focus instead on leveraging the triple helix; a concept widely analyzed by many, including the local Provost of the University of Cyprus,
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government and policy makers have to facilitate the ecosystem by diverting resources and focus to entrepreneurs rather than hold majority interest in private sector where the private sector is much more knowledgeable, agile and capable of delivering customer service and prots. Also, its time for the Cypriot governmental sector to actively foster the return of diaspora that excels in countries around the world including the UK, the USA, Canada, Australia in areas such as energy management, academia, medicine, management, engineering, research and engage them in decision making and implementation. Also, the local private sector needs to actively hire the talent, to be more open to calculated risk taking and more open to innovative solutions that interdisciplinary teams in their organizations may develop.
The private sector has a fundamental role to play in fostering the entrepreneurship ecosystem in Cyprus. In parallel, the government and policy makers have to facilitate the ecosystem by diverting resources and focus to entrepreneurs
4 Favor the High Potentials. High potentials take more calculated risks and generate entrepreneurial ideas with a very strong drive to succeed. While it may sound elitist, nurturing the high potentials helps propel economic growth, Isenberg notes. Job creation is at the crux of economic development. For example, while 500 entrepreneurs can be supported as well as one rapidly globalizing, 500-employee entrepreneurial operation, and they both create the same amount of jobs; the latter is more likely to put the country on the investment and economic growth map. The example of SABIS in Lebanon is an educational management organization that started as one school many years ago only to evolve to a 65,000-student organization in over 15 countries today. And all this while Lebanon experienced twenty years of war. Also, Enterprise Ireland, the countrys investment promotion agency created a program to foster high potential start-ups in Ireland. The denition of high potentials? 1 export oriented, 2 based on innovative technology, 3 can generate at least 1 million EUR in sales and 10 jobs in three years. Is this practical? Yes. Is it doable? Yes. Does it require empowerment and accountability? You bet! Empowerment and accountability are the two sides of the same coin: empowerment means allowing and delegating decision making, accountability means taking responsibility for calculated risk taking and reward. Best Practice for Cyprus: Stop the self-limiting approach of we are a small country with a political problem . There are many examples of small countries with very complex political problems such as Ireland that have been able to grow in strides. Excuses along the lines of its not our job from executives in key positions of organizations tasked to drive economic growth are energy and morale deators. To favor high potentials three basic ingredients are needed: money, brains and a platform to implement the new idea which implies trust, delegation of decision making authority, transparency and common sense. Cyprus happens to have plenty of all three: ample EU funding, ample researcher brains in all the universities and a dynamic private sector that can certainly provide the platform to foster, nurture and invest in the high potentials. This implies empowerment and accountability of the young high
To favor high potentials three basic ingredients are needed: money, brains and a platform to implement the new idea which implies trust, delegation of decision making authority, transparency and common sense. Cyprus happens to have plenty of all three
potentials: delegating decision making authority and innovative problem solving as well as holding people accountable for calculated risk taking and reward reaping. 5 Start with one success story. Most often all that is needed to jump-start an entrepreneurial renaissance is just one success story. A great example, which we have seen in Chapter 3, is Skype, the small start-up from Estonia that was eventually bought by Microsoft, giving hundreds of Estonians hope and the impetus to start their own companies. This is yet another example of a small , young economy and new member of the EU . Best Practice for Cyprus: Countries, Cyprus included, need to know how to tell their story in ways that resonate with various audiences. The targeted investor will need numbers and headlines. The tourist will need to hear about amenities and value for money. The entrepreneur will need to know how easy it is to move and establish a business in Cyprus. The executive spouses will need to know that there are good schools in Cyprus and they can nd a nanny or the special food little Johnny likes at the local supermarket. These are all different stories but they can weave the fabric of the beautiful and growing country that is Cyprus. What was our best success story? How many Cypriot start-up companies are listed on NASDAQ, AIM or another wellknown international stock exchange? Isnt it time to highlight and celebrate the achievement and potential of the Cypriot entrepreneur? Could a start-up like Wajee Mobile Limited or Cocoon Creations be the tenacious one to ring the bell at NASDAQ in 2020? Nothing moves a nation more than knowledge of its potential. What is the Cyprus potential? With initiatives like the
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Cypriot Enterprise Link (CEL), Hack Cyprus, TEDxNicosia, ChrysalisLEAP , Open Coffee events and other local and island wide efforts, valuable information about success stories can spread and re up the smart educated youth of Cyprus to drive this knowledge economy out of the recession. 6 Tackle Cultural change head on. Isenberg highlights Chile and Ireland as great examples proving that a paradigm shift and change in social norms are possible in less than a generation. Until 1980, all the young graduates in Ireland aspired to work in government, nancial services and accounting rms. Parents discouraged their children from venturing away from these jobs, worried about their stability and prosperity. By the 1990s with government fostering entrepreneurship and a few pioneers taking the plunge, hundreds of new software start-ups emerged. Some thrived, some failed but overall, the country had moved to a new era and had achieved a paradigm shift. Best Practice for Cyprus: The Irish experience of the 1990s could very well be the Cypriot reality of the 21st Century. All we need are those few pioneers, the 5% of the population that Margaret Mead has called as change agents to effect a paradigm change in the way Cyprus sees entrepreneurs and their potential by providing angel and VC investment, mentoring start-ups and assisting the talented ones to go all the way to an initial public offering. 7 Stress the roots. Here, Isenberg notes the importance of governments helping entrepreneurs strengthen the key comparative advantages of their country. Often, governments ood high potentials with easy money. This has not always worked well. Incubators that are well run and well managed may take up to 20 years to punch-in a tacit result on the increase of entrepreneurs in a country. Best Practice for Cyprus: On one hand, nurturing the incubators in a meaningful manner was perhaps a good idea during the past decade operating primarily with government funding they may take over 20 years to produce results. As we have seen with the Yozma example in
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Israel, investing in collaboration with the private sector and a ve year horizon plan with tacit, measurable results is much more benecial to all. 8 Dont over engineer clusters help organic growth instead. Isenberg points out that Porter himself explained that governments should not try to build industry clusters from scratch but rather observe where the entrepreneurs are veering and try to support them by paving the way. The failed examples of Germany and Singapore, who tried to set up biotech clusters along the lines of the California model, are highlighted. Best Practice for Cyprus: As highlighted earlier, the government, through organizations such as the Research Promotion Foundation and Private Public Partnerships, ought to foster grassroots initiatives such as the Cypriot enterprise Link, accelerators such as ChrysalisLEAP and other meet ups, research and development and entrepreneurs in alternative sources of energy, renewables, oil and gas, mobile technologies, customer service excellence training and implementation in tourism, banking, restaurants, hospitals and government departments touching the customer/citizen. The government and the private sector will require a fresh and innovative approach to implement this successfully by focusing on the needs of the researchers and entrepreneurs while managing return on investment and mitigate the associated risks. 9 Reform Legal, Bureaucratic and Regulatory Frameworks Isenberg points out that legal and regulatory reform are typically the rst and exclusive focus of governments, however, these take years to push through and are not always successful if not applied spherically and in conjunction with some of the other key factors discussed earlier in this document. Some of these include breaking down cultural barriers, educating entrepreneurs and promoting success stories. Isenberg also highlights that numerous entrepreneurs often succeed, using their wealth and status, in their push for reform despite inhibiting legislation and bureaucracy.
Best Practice for Cyprus: The private sector in Cyprus has managed to plow through bureaucracy and achieve reform very much along the lines of Isenbergs observations. The government is now called to further collaborate in such efforts in a holistic and spherical manner. It is important to connect the dots and evaluate repercussions of one reform in other areas of the economy as a whole prior to implementation. Also, one offs are usually not effective as they promulgate exceptional approaches as opposed to broader and deeper reform. Addressing holistically all the points that touch the investor from the starting point of thinking about Cyprus until they establish a presence in the country, identify the pain points from the investor perspective, implement changes, establish accountabilities and ensure that all involved: government, private sector and not for prots are aligned and performing with the same standards and client focused commitment because the competitive rhythms abroad and the region are increasingly faster. Haphazard mediocrity, lack of transparency and delays towards potential investors lead to lost business, lost reputation in the global markets and loss to the bottom line of the countrys and the private sector organizations balance sheets.
Perhaps the bottom line is that no matter how good a system a country has in place or how advanced its technology, it is its people that are and will always be the countrys greatest asset.
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Cyprus Entrepreneurship Ecosystem: A Roadmap to Growth

In this chapter we provide a specic road map to nurture the entrepreneurship ecosystem in Cyprus. As we have seen so far, in Chapter 1 we examined the ten main ingredients to an entrepreneurship ecosystem. In Chapter 2 we have seen that Cyprus fares relatively well in a few of these ingredients and has a lot of room for growth in some others both internally and vis a vis a group of peer countries we selected: Denmark, Ireland, Estonia and Israel. In Chapter 3 we examined specic best practices, which these peer group countries implemented and helped their entrepreneurship ecosystems grow. In Chapter 4 we tackled some of the main notions about entrepreneurship that require specic paradigm shifts to enable the Cyprus society to leverage its potential. Given all the best practice examples and the challenge we set forth at the beginning of this report about taking a start up from Cyprus to an initial public offering and ringing the opening bell at NASDAQ in 2020, we believe that we have provided adequate details to support such an endeavor. To do so, apart from the learnings of the other countries and a paradigm shift, we also require a specic roadmap for the next seven years from 2013 to 2020 and beyond. This roadmap hinges on the three comparative advantages of Cyprus: the robust tax regime serviced by a very capable professional services sector; a nascent pipeline of opportunity driven start ups and the recent sources of energy discovered in Cyprus. Our proposed roadmap has six milestones: 1- Launch Entrepreneurship ecosystem Pilot program in Nicosia We believe that it is critical to start setting up the entrepreneurship ecosystem with practical, hands-on plan at the city level. Nicosia has all the ingredients to foster such a pilot program including the professional services sector headquarters, the government headquarters, the entrepreneurs, the researchers, the
universities, the accelerator and above all the imperative need to develop economically vis a vis the other more afuent cities in Cyprus. Suggested responsible parties: Nicosia Municipality, liaisons, entrepreneurs, the private sector and a major university. Recommended Timeframe: First quarter 2013 onwards 2- Pass a Cyprus angel investor tax break law Specically we suggest that Cyprus policy makers and private sector experts draft a law to be reviewed and passed by Parliament during 2013. Such a measure will support the supply side of venture capital. Suggested responsible parties: Policy makers, Iiaisons and private sectorRecommended Timeframe: Recommended Timeframe: December 2013 The following section highlights how Cyprus can actually foster its entrepreneurship ecosystem through its tax framework.
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Promoting entrepreneurship via the Tax Framework

Fostering the entrepreneurship ecosystem generates growth; growth generates the creation of new jobs and employment, which in turn boosts economic growth. Tax frameworks through tax incentives help boost entrepreneurial activity because they provide a comprehensive support measure to both the supply and demand of start up funding: They can provide certain tax incentives to the interested investor and certain tax incentives to the start-ups and therefore fostering entrepreneurship ecosystem growth. Incentivizing the Angel Investor There are several best practice examples, however the one that stands out, is the Angel Law which was ratied in Israel in December 2010. The Israeli Ministry of Finance in partnership with the Ofce of the Chief Scientist in Israel came up with a very promising solution to encourage investment of new entrepreneurial activities and start-ups by incentivizing local individual Angel investors to put their money early into companies at seed stage. An amendment (already in place for 2 years) to the Israeli Income Tax Ordinance is offering a substantial benet to individuals (not companies) investing by way of contribution in exchange of shares (and not purchase) in Israeli start-ups operating in R&D and innovation. The amendment provides that individuals who invest in private Israeli resident companies between January 1, 2011 and December 31, 2015, will be entitled to deduct the amount of their investment from their overall taxable income from all sources. The investment must be made in a qualifying Target Company , as dened. The amount of the deduction is capped at just below EUR 1,000,000 and may be split over the specied Benet Period which includes the year in which the investment was made and the two subsequent tax years. The investor must hold the shares in the Target Company for the duration of the Benet Period. The Angel Law provides a very promising framework for energizing investment in entrepreneurship
and addressing the supply of angel investment in an entrepreneurial ecosystem It would be important for the Cyprus Government to very well consider the introduction of an Angels law incentive as the benets will be many and broad for the Cyprus economy. Such a law would not only incentivize angel investors to invest in start-ups registered in Cyprus, it would increase investment liquidity in the market, it would foster innovation and new ideas generated by start ups and companies in dire need of funding and would also increase the number of companies registered at the Registrar of Companies in Cyprus generating new business for the professional services sector including nee company advisory in accounting, tax and audit and duciary services. Cyprus, being a service center jurisdiction, could very well benet from the introduction of such incentives. Incentivizing Start-ups In the recent years, there has been an attempt to introduce a range of tax provisions aiming to boost entrepreneurial activity and enhance growth. The most important tax measures aiming towards the inducement of investments are among others:
1) Favorable Intellectual Property (IP) regime that grants an 80% notional deduction on royalty income and capital gains upon disposal of IP and 5 year amortization period 2) Depreciation is provided at the rate of 20% on plant and machinery (excluding application software and tools for which a higher rate was provided) instead of 10-15% (depending on the type of plant and machinery) and at the rate of 7% for industrial and hotel buildings acquired during the tax years 2012 2014 (instead of 3-4% depending on the type of building). The accelerated depreciation rate incentivizes the acquisition of plant and machinery and buildings for years 2012-2014 in that depreciation reduces taxable base and therefore the tax liability of the startup would be less than if the normal depreciation rate was used. 3) The amounts invested for the acquisition of plant, machinery and buildings (with the exception of saloon motor vehicles) will reduce accounting prots that ought to have been distributed as dividends for the purposes of dividend taxation. This measure applies for years 2012-2014 (inclusive) and relates only to protmaking businesses. Therefore, taxation on deemed dividends occurs on a lesser amount and thus the tax liability is reduced. In Figure 5.1 below we review an example of this incentive.
Figure 5.1
Accounting Profit: 1,000 Amounts invested in plants and Machinery: 500 Amounts deemed for distribution (and thus subject to tax): 1,000 70% = 700 Before the Incentive Amount deemed for distribution No incentive 700 After Incentive Amount deemed for distribution Less amounts invested in plants and machinery (as per incentive) Total amount subject to deemed dividend tax 700 (500)
Total amount subject to deemed dividend tax
700
200
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The quest for innovation however, should never cease to evolve. Further measures may be introduced, both general and industry targeted so as to enhance the carrying out of entrepreneurial activity especially in the light of the EU Single Market Act II context. In introducing further measures, Cyprus has to take into consideration the impact and benet of the measure whilst at the same time respecting the framework set by the European Union with regard to competition and state-aid. For example, incentives can be provided in the form of a tax relief for eligible activities in areas such as mobile technology, smart grids, greener modes of transport, renewable energy, alternative fuels, solar and wind energy, green and blue technologies, medical research among many others. Such activities may include: a. the tax relief can take the form of a further tax deduction from taxable income b. Tax Relief may also extend from cost to reduction of personal tax for employees involved in R&D activities. c. Enterprises receiving funding from the Ministry of Commerce, Industry and Tourism for equivalent purposes (e.g. R&D companies, etc.) d. Conditions may be put in place in relation to the eligibility of the start-up companies (e.g. the enterprises should develop ideas, products and services products and ideas that will benet the Cypriot economy by ensuring that the IP stays in Cyprus and the patents are registered from Cyprus
e. Further accelerated Depreciation allowance (already granted for certain years in terms of plant and machinery and industrial and hotel buildings) may be provided for assets relating to research infrastructure specically as well as for the use of low-emission cars used in the business (referring to vehicles entitled to depreciation, i.e. not private motor vehicles). When it comes to enhancing the entrepreneur ecosystem, taxation can prove to be a very effective medium. The reduction of tax liability can be a fascinating prospect for the angel investor and may prove to be the deciding push for the realization of the investment. Cyprus should consider the introduction of tax incentives as the cornerstone for its Growth Plan. If startups pave the future, incentivizing the start-ups is a key move in setting the path for economic growth.
The reduction of tax liability can be a fascinating prospect for the angel investor and may prove to be the deciding push for the realization of the investment. Cyprus should consider the introduction of such tax incentives as the cornerstone for its Entrepreneurship Ecosystem.
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3- Support Accelerators To enhance the demand side for venture capital we recommend that the private sector support the creation of accelerators such as ChrysalisLEAP , which is now being set up. The support can be in the form of mentoring potential start-ups in business planning, nancial and managerial accounting, funding the set up of the program and encouraging investors to review the start-ups seeking funding. Suggested responsible parties: Professional Services sector, Iiaisons and entrepreneurship community Recommended Timeframe: 2013-2020 on an annual basis 4- Launch a Cyprus Venture Capital Fund and Program By mid 2014 provided that recommendations 1 and 2 above are implemented, it would make sense to launch a Cyprus Venture Capital Fund that invest in the growing start-ups pipeline created by, but not limited to, the accelerator. The fund can be set up along the lines of Yozma, thus a public private venture with the requirement of private buyout by 2019. Suggested responsible parties: The private sector (mainly nancial and professional services rms), liaisons and the policy makers Recommended Timeframes: Launch in 2014 and privatize in 2019
5- Implement a global social media campaign starting in 2013 Apart from ratifying such regulation we recommend a robust public relations campaign globally mostly through the use of social media (such as google+, Facebook, twitter, LinkedIn, YouTube, Flickr) which bears a fraction of the costs to travel around the globe and can target potential investors specically, personally and directly on their smart phone or tablet about Cyprus and the opportunities it offers in angel investing and Venture Capital. Suggested responsible parties: Mainly the professional services sector and the entrepreneur networks and accelerator, the Chambers of Commerce, Federation of Industrialists, Universities and the Cyprus Investment Promotion Agency. Recommended Timeframes: Start up 2013-2015; Follow up 2016-2018 and Wrap up 2018-2020 6 - Fly to New York City for the rst IPO at NASDAQ If most of the above is put into action and the roadmap is used for this entrepreneurship ecosystem journey, we are condent that at least one start up will be ready for an initial public offering and we will arrive at NASDAQ in 2020. Suggested responsible parties: Policy makers, Liaisons, entrepreneurs, private sector, universities, associations, chambers of commerce, federations, networks, media, research foundations and the President of the country. Recommended Timeframe: November 2020
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Conclusion: Cyprus 2020

At the writing of this report, Cyprus is standing at a critical juncture. On one hand, Cyprus is facing dire straits with regards to its economy. On the other hand Cyprus has three fundamental ingredients to foster and nurture an entrepreneurship ecosystem: a sophisticated tax regime, some of the besteducated youth in Europe and energy sector potential. With strategic and visionary planning, goal setting, funding and collaboration of all stakeholders including VC and private equity investors, policy makers, liaisons, the private sector, academia, NGOs, accelerators, and of course the entrepreneurs themselves Cyprus can foster a thriving entrepreneurship ecosystem in this decade and onwards. The combination of these three assets with several best practices that Cyprus can adopt and adapt from other successful ecosystems we studied in this document including Denmark, Estonia, Ireland and Israel amongst others, make a compelling story of potential for reigniting the economic growth of Cyprus in 2013 to 2020 and beyond. Nowadays, with internet companies having market capitalization at 1 trillion USD such as Apple Inc. and market values of the magnitude of 98 billion USD such as Facebook, a country with a GDP of 25 billion USD such as Cyprus, will have completely buried the potential for future generations growth if it does not jump on the technology/start-up/VC/entrepreneurship bandwagon to foster growth across key sectors including the natural gas sector, renewable energy and all the others that are outlined in well drafted signed and sealed bilateral agreements. We believe that this document provides enough compelling data and makes the case that Cyprus can and must begin fostering an entrepreneurship ecosystem, which will become a driving impetus to restart the engines of the stalling economy of Cyprus back to the path of sustainable growth.
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Glossary
Accellerator A program, which mentors and accelerates the growth and success of a start-up company Angel Investor An individual who provides capital to a start-up company and usually invests his/ her won money Entrepreneur Someone who creates a new company, a start-up Entrepreneurship Ecosystem The elements and stakeholders: individuals, organizations or institutions and interactions amongst them that are conducive to, or inhibitive of, the choice of a person to become an entrepreneur, or the probabilities of his or her success following launch Equity Ownership in a company Necessity Entrepreneurship Setting up a company, a business or start up our of necessity to earn an income Opportunity Entrepreneurship Setting up a company or start-up to address an opportunity or an unmet need in the market Venture Capitalist A person or company that invests in a start-up Venture Capital The investment made in a start-up VC Fund The investments that make the investment collection of a VC Private Equity Private equity is equity capital that is not quoted on a public exchange. Private equity consists of investors and funds that invest directly into private companies, with funds raised from retail and institutional investors, to fund new technologies, expand working capital within an owned company, make acquisitions or to strengthen a balance sheet Seed Funding Initial funding for a start-up in its very early stages Start-up A new venture, a new company based on an idea or opportunity
47
References
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42
Wikipedia www.wikipedia.org Definition of Verb Entreprendre www.Wiktionary.org Shaeppen Verb www.Learning-org.com Entrepreneurship ecosystem www.wikipedia.org Daniel Isenberg Entrepreneurship Ecosystem Strategy as Economic Policy Presentation in Ireland www.alliance.ie Acs, Z. and Audretsch D. ( 1991) Innovation and Small Firms, MIT Press World Entrepreneurship Forum (www.world-entrepreneurship-forum.com) World Entrepreneurship Forum (www.world-entrepreneurship-forum.com) Silicon Valley www.siliconvalley.com Kauffman Foundation www.kauffman.org Mayor Bloomberg www.nyc.gov/mayor Acs, Z. and Audretsch D. ( 1991) Innovation and Small Firms, MIT Press Golden Gate Ventures (www.goldengate.vc) Gem Global Entrepreneurship Monitor www.gemconsortium.org GEDI www.thegedi.org Panel Study of Entrepreneurial Dynamics (PSDE) www.psed.isr.umich.edu BEEP add details (BEEP) (http://www.babson.edu/enterprise-education-programs/ babson-global/Pages/entrepreneurship-ecosystem.aspx) Isenberg D. www.entrepreneurial-revolution.com World Entrepreneurship Forum www. world-entrepreneurship-forum.com Euro Barometer Survey on Entrepreneurship www.ec.europa.eu/policies/sme/factsfigueres-analysis/eurobarometer Cyprus Mail Sept 1, 2012 www.cyprus-mail.com Diogenes Incubator www.diogenes-incubator.com/ EU 2020 agenda www.ec.europa.eu/europe2020 NASDAQ National Association of Securities Dealers Automated Quotations www. nasdaq.com IPO Initial Public Offering Definition www.investopedia.com Global Entrepreneurship Monitor www.gemconsortium.org Global Entrepreneurship & Development Index www.thegedi.org EU Analytical report, Flash EB No 283 www.ec.europa.eu Global Innovation Index www.globalinnovationindex.com World Bank Doing Business Report 2012 www.doingbusiness.org World Bank Doing Business Report www.doingbusiness.org Zenios, S. 2011. Innovative Cyprus . http://www.fbrh.eu/zenios/ pp. 35-37 Investopedia http://www.investopedia.com/terms/p/privateequity.asp#ixzz26WewspEG European Private Equity and Venture Capital Association www.evca.org British Venture Capital Association Benchmarking UK venture Capital to the US and Israel www.bvca.co.uk Stages of VC financing Wikipedia http://en.wikipedia.org/wiki/Venture_capital Cyprus Alternative Funds Handbook https://www.kpmg.com/CY/en/WhatWeDo/ Industries/Documents/CYPRUS%20ALTERNATIVE%20HANDBOOK%202011.pdf Global Innovation Index www.globalinnovationindex.com Black B., Gilson D. (1999) Does Venture Capital require an active stock market? Journal of Applied Corporate Finance 11(4):36-48 NASDAQ www.nasdaq.com Avnimelech G. and Teubal, M. (2008) From direct support of business sector R&D/ innovation to targeting venture capital/private equity: a catching up innovation and technology policy life cycle perspective Econ.Innov.New.Tech. 17(1&2): 89-107 Zenios, S. 2011. Innovative Cyprus . http://www.fbrh.eu/zenios/ pp. 201-227
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54 55 56 57 58 59 60 61 62 63 64 65 66
67 68 69 70 71 72 73 74
Cocoon Creations www.cocooncreation.net Wajee Mobile Limited (www.wajeemobile.com) Cocoon Creations see Ref 46 YCombinator- add link Repilo https://itunes/apple.com/cy/app/repilo Wajee Mobile Ltd - see ref 47 SNQ Digital www. Snqdigital.com International Property Rights Index 2012 http://internationalpropertyrightsindex.org Open Coffee events www.opencoffeecyprus.org TEDx are local, independently organized events about ideas worth spreading The first TEDx event took place in Nicosia on 30 Nov. 2011 (www.TEDxNicosia.com) Hackathons are events in which computer programmers and others in the field of software development, like graphic designers, interface designers and project managers, collaborate intensively on software projects CEL www.cypriotentrepriselink.com Article: Is this island paradise for entrepreneurs? http://www.inc.com/jessica-stillman/ cyprus-entrepreneurial-education-boost-europe.html Adam Smiths invisible hand http://en.wikipedia.org/wiki/Invisible_hand Ortmans, J. Denmarks Active Investment in Entrepreneurship Nov. 1, 2010 Global Entrepreneurship Week, www.unleashingideas.org, Global Entrepreneurship Week http://en.wikipedia.org/wiki/Global_Entrepreneurship ccellerator http://www.forbes.com/sites/kauffman/2012/08/08/evaluating-the-effectsof-accelerators-not-so-fast/ http://new.1corptech.com/newsletter/GazelleGrowth_Accelerace.pdf Susan Cohen Chapell Hill Been Rooney: The many Reasons Estonia is a Tech Start-up Nation, WSJ.com /online.wsj. com Estonia www.cia.gov Skype: http://en.wikipedia.org/wiki/Skype Estonia www.cia.gov Why Its starting to look like Estonia Is Europes Startup Hub, http://articles. businessinsider.com/2012-02-23/europe/31090025_1_estonians-skypeentrepreneurial-activity#ixzz26jsYZsbB Flanigan, J. Entrepreneurship Takes off in Ireland. New York Times www.nytimes.com http://www.crunchbase.com/person/liam-casey http://www.enterprise-ireland.com/en/About-Us/ Enterprise Ireland http://www.enterprise-ireland.com/en/About-Us/Our-Locations/OurLocations-Worldwide/ Flanigan, J. Entrepreneurship Takes off in Ireland. New York Times www.nytimes.com Senor, D. and Singer, S. Start-Up Nation The Story of Israels Economic Miracle. Council on Foreign Relations 2011. www.startupnationbook.com Isenberg, D. www.entrepreneurial-revolution.com Feld, Brad and Mendelson, Jason: Venture Deals
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Marina Theodotou Marina Theodotou is an economist and entrepreneur with over 20 years of professional experience. In 2010 she founded Curveball Ltd (www. curveballlimited.com) a Cyprus based boutique consultancy currently leading efforts to foster an entrepreneurship ecosystem in Cyprus. In 2007-2009, as Director of Business Development and Operations at the Cyprus Investment Promotion Agency, she led efforts to rank Cyprus in the World Bank Doing Business Report. Between 2004-2007 , as the Jordan ofce Country Director of the Financial Services Volunteer Corps, (www.fsvc.org) she focused on technical assistance for the Central Bank and the Association of Banks in Jordan. Between 19952004 at Bank of America (www.bankofamerica.com), she held roles in Trade Finance, Internal Audit, Corporate Treasury, Risk Management and Strategic Benchmarking in Charlotte, NC and New York City. In 2003 she earned a Six Sigma Black Belt at Bank of America. In 2009 she was voted 23rd of the 100 most powerful businesswomen in Cyprus by InBusiness magazine. She is a member of Rotary International (www.rotary.org) and earned the Paul Harris Fellow Award in 2012. In November 2011 she founded and curated TEDxNicosia (www.TEDxNicosia.com). She is one of ten EU Commission Women Ambassadors for Entrepreneurship in Cyprus. Since 2012, Marina is a co-founder of the rst accelerator in Cyprus Chrysalis LEAP (www.chrysalisleap.com). She is also a founding member of Eleftheria, a citizens action group in Cyprus promoting change and reform. She speaks and writes extensively in her areas of expertise. She holds a Bachelors (with honors) and a Masters Degree in Economics from the University of South Carolina and the Universitys 1992 Outstanding Undergraduate Academic Award in Economics. She is an IEMA certied Climate Change Leader (2010). She speaks English, Greek, French, Italian, basic Spanish, reads and writes Arabic and is learning Turkish.
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Can a start-up from Cyprus carry out an IPO at NASDAQ by 2020?
The information contained in this document is of a general nature and for informational purposes. Please seek appropriate professional guidance to act on this information in line with your particular needs and situation. Curveball Ltd. Produced by Curveball Ltd. www.curveballlimited.com Designed by: KPMG Limited Publication Name: Cyprus Entrepreneurship Ecosystem: A Roadmap to Economic Growth ISNB Number: 978-9963-2863-0-0 Publication Date: November 2012 Printed on recycled material

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Cyprus Entrepreneurship Ecosystem

Cyprus Entrepreneurship Ecosystem A Roadmap for Economic Growth

Sincerely, Costas Christoforou General Manager Cyproman Services Limited www.cyproman.com.cy

Entrepreneurship is what happens at the intersection of history and technology.

Entrepreneurship Ecosystems: Denition and Role in sustainable economic growth

Policy Markets Finance

Entrepreneurship Human Capital Supports

Source: 2009, 2010, 2011 Daniel Isenberg

An entrepreneurship ecosystem is more than the sum of its parts

Entrepreneurship Ecosystem: A Baseline for Cyprus

Source: Flash Eurobarometer - Entrepreneurship in the EU and Beyond, Dec 2009

Source: Flash Eurobarometer - Entrepreneurship in the EU and Beyond, Dec 2009

Source: Flash Eurobarometer: Entrepreneurship in the EU and Beyond, Dec. 2009

Israel 34 10 45 5 43 59 134 8 93 94 147

Source: World Bank Doing Business Report 2012, Note: * 2011

Source: Flash Eurobarometer - Entrepreneurship in the EU and Beyond, Dec 2009

Source: Flash Eurobarometer - Entrepreneurship in the EU and Beyond, Dec 2009

Preference vs feasibility - by country

% who would prefer to be selfemployed

Source: Flash Eurobarometer - Entrepreneurship in the EU and Beyond, Dec 2009

Difference (feasibility vs preference)

% who considered it feasible to become selfemployed

Venture Capital Firm

Limited Partners (Investors)

Ownership of the Fund Fund / Investment Management

Venture Capital Fund

Source: Global Innovation Index 2012

Source: Global Innovation Index 2012

Source: International Property Rights index (IPRI)

Source: Global Innovation Index 2012

Source: Global Innovation Index 2012

Source: Global Innovation Index 2012

Source: Global Innovation Index 2012

Source: Avnimelech, 2009.

Entrepreneurship Ecosystem: Goal Setting for Cyprus

Cyprus Entrepreneurship Ecosystem: A Roadmap to Growth

Promoting entrepreneurship via the Tax Framework

Total amount subject to deemed dividend tax

Conclusion: Cyprus 2020

Can a start-up from Cyprus carry out an IPO at NASDAQ by 2020?

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