By Jan Debets
Hi Panayiotis, what has your journey been up till now – and how did you end up creating a network of business angels?
Hi Jan, thank you for having me. I have studied (PhD) Mechanical Engineering at UMIST in Manchester, UK, where I also worked on patented technologies. I also did a couple of things outside of the job, working with colleagues on developing breakthrough innovations. In 2000 I founded a company with one of my colleagues, CNE Technology, which at the time primarily focussed on providing testing and calibrating lab services. It was the largest lab in Cyprus and were providing services to more than 1000 companies. Initially I was involved in many positions, including sales, building and maintaining contacts with all those different clients. In 2006 I created the R&D department. Within 6 years, my team implemented more than 30 R&D projects mainly providing novel solutions to industrial SMEs. At that time, we won international tenders and build custom made instrumentation for clients. In 2012 we initiated the development of our own product solutions but my partners didn’t want to continue so I left the company in 2013.
When did you create CyRIC?
Around 2013, and in the middle of the financial crisis in the island, I created CyRIC to focus on making disruptive innovations happen in Cyprus. We saw that in Cyprus there was a lot of need for innovation services for startups. I was also inspired after going to Israel in 2014, where I saw many success stories of incubators. In 2016 I founded Gravity Ventures incubator, the only one currently in the country. In 2010 I co-founded CARIE, the Association for R&D companies in Cyprus. From that role, I helped a lot to change the research and innovation policies and mindset in the country, from being geared only towards academia to support also the industry, transforming academic ideas and knowledge into products that can have a real impact to the economy.
How did CyRIC grow?
A real change for us was when we established the relationship with EBN. They taught us that being an incubator means a lot more than being an accelerator, especially in a small country like Cyprus where innovation ecosystem was at its infancy. We gradually saw that startups need long term support and continuous follow up funding to survive. In the meantime, I already had done my first angel investments myself, in 2014. However, what really opened my eyes to the importance of early stage investors was when I took part in the ESIL project study visits to France and Italy. I realized our existing initiatives where really not up to date. Afterwards we started conversations with the EIF and our own government, which are still on going, about creating co-investment funds.
Where do you invest in?
I have invested in 15 startups so far, 3 of them are spin-offs of CyRIC’s R&D Center. The Gravity incubator has no specific sector focus while our R&D Center is focus mainly on Biotech, IoT and wearables as well as other long-term investments.
Why do you think your investment ecosystem is underdeveloped?
In Cyprus we have a few VCs and high net worth individuals mainly from Russia. But they do not invest locally - they are here mainly because of the low taxation. Furthermore, VC’s are looking for startups which have growing sales. What is amazing is that there are lot of Cypriots and foreigners investing in real estate in Cyprus, which in most cases is very overpriced and not even that valuable. So I see a lot of potential in Cyprus for angel investing in technology startups which has higher returns.
How have you tried to work with the government to change this? T
he best way is to work with government to promote this. e have spoken with government and push for legislation for tax deduction when an individual invests in innovative companies. The maximum in 3 years is 300k investment with a 50% tax deduction. Unfortunately, this legislation came to an end - but due to COVID-19 an extension was given recently for another year. Another legislation with regards to issue of passports to third country individuals, which said to either give €75k to the Funding agency or to a certified innovative company. Unfortunately, this process had delays, and a lot of bureaucracy, and didn’t work as expected. We are happy to see that the government supports innovation and for the first time they understand the importance of funding high risk and early stage startups and innovative companies. Before, the government would spend €500 million in less than 7 years on universities in the Technology Readiness Levels (TRL) 1 to 5. So most of this money was given on building proof of concepts and prototypes. There were never calls for supporting high risk companies to work from a prototype at TRL5 to a real product TRL9. Now there are. Now, there are funds up to 1 million Euro for more mature technology startups which is important to make it angel investor ready.
What remains the biggest barriers for angel investors to invest?
The deal flow side: I think the main problem of Cyprus right now is showing the investors great startups. We need some success stories. Almost all investment in early stage startups failed before in Cyprus. There was only a couple of success stories one in deep-tech and another one in Food delivery with a successful exit. I also see the importance of incubators in developing great startups out of academia. This is slowly changing. We have better experience in picking the right companies to invest in. We have seen the difficulties of academics becoming CEO’s. All in all, you need startups with great founders.
What kind of industries does the Cypriot ecosystem excel in?
We are very good in health and ICT. Approximately 40% goes to the healthcare sector and 40% to ICT. We see now more focus of funds in deep tech. But this is good. Deep tech startups need a lot of help because founders do not always have business acumen. A great majority of the startups are focused in building software applications. Most of them are failing because of the very small market in Cyprus.
In 5 years, where would you like to be?
We would like to invest a lot in early stage startups. In Europe we see a lot of good startups failing in early stage, because there is no angel investing. I think there is a lot of potential in Cyprus and what the government is offering with their new grants is very important since many startups can raise the maturity level of their team and the product so Angel investors can jump in. At the end of the day, we really need angels to invest in technology startups. That is where the value is in Cyprus and can raise the level of our local ecosystem internationally. We have other thriving industries in Cyprus, like tourism and Forex trading. So there would be fintech opportunities as well.
In what way does Cyprus benefit from its proximity to Israel?
Cyprus really is a gateway for Israeli companies in Europe. One of the reasons is our low tax and incentives. For example, Cyprus has the IP box regime. If you are a foreigner in Cyprus you only pay 12.5%, and you don’t pay the extra taxes that Cypriots do. All revenues from IP licencing invoices are deducted 80% so the tax is only 2.5%. This attracts a lot of companies. We have a lot of security startups coming to Cyprus from Israel. The Israeli investors are very well developed but tend to normally invest in their own startups only. However, when the ecosystem grows in Cyprus, we will get attention from their VCs. Their angel investors are more advanced and could lead the investments. Again, a key thing for us is success stories.
So all in all, your focus will be in strengthening the deal flow side of the equation?
We see that investors are surprised by the opportunities of investing early. In addition, academics have to learn, for example about the valuation of their technology which remains very important, it’s make or break. We see that our research institutions are more open now to collaborate with industry, thinking about what the commercial value of their work is, and angel investors can help as well.
How do you gauge if an academic has potential to be an entrepreneur?
I usually I ask them simple questions such as, do you want to be an entrepreneur? Will be able to dedicate time to grow your startup globally? You have to bring them down to earth in order to be able to help them.
How then do you describe to them the path/life of an entrepreneur?
It’s all about what they are willing to sacrifice. If you cannot sacrifice your time, it’s difficult to become a successful entrepreneur. Our job is to help them through their entrepreneurial journey. Most of the founders of successful tech companies in Cyprus are PhD graduates. Of course, it’s also about the abilities. Entrepreneurs are about running companies. You must have a person who can run a business. Or if it’s an academic, passionate about following the company until the end.
Finally, which of your startups in your portfolio is ready to scale in Europe (which one would you like to put in the spotlight)?
We have a few good startups that are ready to scale in Europe. One of them is Capsule Skateboards, a breakthrough startup revolutionizing the sport with a new deck material with superior properties capable in personalizing decks to the profile of the user. We have helped from very early stage in developing the technology and now we have helped them build their first production line. Soon will be ready to start production and initiate global sales.