Today’s global economy is fuelled by innovation and technological development. The pandemic drove technological innovation at breakneck speed, further enabling the digitally driven fourth industrial revolution to take hold across the world. Part of the growth of technological innovation can be attributed to the various venture capital (VC) funds that not only fund selected companies, but also contribute to national and regional broader economies.

As seen in Greece in 2013, the Joint European Resources for Micro to Medium Enterprises (JEREMIE) fund embarked on a crusade to revitalize the interest and investments in Greek startups to inspire economic growth and innovation. Five years later, in 2018, their efforts kindled an unquenchable fire of Greek funds being launched such as Equifund, a fund-of-funds programme, investing in Greece’s startup ecosystem. This series of events led to the exit, acquisition, funding, or IPOs of 721 Greek founded or linked startups from 2010 to 2021. In the coming years, we are likely going to see events of a similar scale in Cyprus, taking the startup ecosystem of the island to new heights.

In a recent episode of Future Talks, host Michael Tyrimos spoke with Yiannis Eftychiou and Demetrios Zoppos about Cyprus’ new VC fund, 33East. The two founders and entrepreneurs bring vast experience to the table. Yiannis had left Cyprus for the UK and started his career there as an engineer. His next career step was joining the corporate world as a consultant to technology and media companies, as well as large-cap private equity investors who sought out technology investments in Europe, which is where he acquired his taste for investments. 

At this stage, he was working with the UK government’s investment fund, British International investment, investing across emerging markets in Africa and Asia. He has invested in technology companies at the early-stage across enterprise technology, fintech, and other verticals and deployed more than $240 million in growth capital. Through his experience, he has also built an extensive network with venture capital investors and startups across the region.

The other piece to the 33 East puzzle, Demetrios Zoppos, has been building startups for the past 25 years, having co-founded 3 companies. He is one of four founders of the luxury hospitality app, onefinestay, which was sold for €170 million, bolstering his prestige within the startup and investing ecosystems. Demetrios has been an active angel investor in more than 20 startups and has backed a number of Cypriot founders. Demetrios and Yiannis came together to build a Cypriot venture capital fund modeled on international best practices. Their vision is for Cyprus to become producers and exporters of technology rather than just consumers. 

Earlier this year, the European Investment Fund (EIF) committed €27 million to 33East from the Cyprus equity fund, the first venture capital fund in Cyprus backed by public resources. This will be combined with a further €10.5 million from private investors, bringing the 33East fund target to a total of €37.5 million. The fund will be split into two compartments; a venture compartment geared towards pre-seed and seed-stage funding with a pool of €35 million, and a €2.5 million acceleration compartment.

33East will fund 10-15 startups from its €35 million venture compartment over a 4-5 year period, with tickets ranging from €500,000 to €1 million. These startups will have either been founded in Cyprus or will have links with Cyprus and will already be on the path to commercialisation with a team, prototype and potentially some traction.

The €2.5 million acceleration compartment will provide financing of up to €200,000 and aims to back 15-20 startups over a 4-5 year horizon. It will largely focus on applied research startups at the pre-commercialisation stage.

Whilst 33East will be a generalist fund, it will focus on startups which hold the best promise to scale internationally - and these are likely to be in sectors such as fintech, gaming, and enterprise software. They also aim to support Cypriot entrepreneurs operating in Europe and in the US.

When analyzing the Cyprus startup ecosystem, 33East notes several local successes, but also a number of Cypriot founders who left the island due to the lack of venture financing. They also realized that there are several innovation ecosystems in Cyprus including:

1. An ecosystem of technology startups in Nicosia, that has generated companies such as Foody, Fileminders, Malloc, Terra, and others
2. The applied sciences ecosystem including academic centers of excellence across the island, and also research-based accelerators such as Cyprus Seeds
3. The foreign-speaking innovation ecosystem, primarily in Limassol and Paphos

The two founders of 33 East acknowledge some significant success stories within each of these ecosystems. However, they noted that many startups which focus on Cyprus as the initial target market struggle to scale. Cyprus has a small domestic market, which may not be representative enough as a test-bed for an initial product offering. 33East will try to identify startups that can scale internationally and encourage Cyprus-based entrepreneurs to aim their ambition at an international level from the get-go.

As the global economy is currently experiencing an economic downturn, they believe now is an attractive time to start a VC fund in Cyprus. Technology is here to stay and building a venture fund dedicated to Cypriot startups is a necessary step to support the transition to digital. It is also a great time for founders to build new, enduring businesses as the war for talent subsides and they can focus on setting up the correct business fundamentals.

Their vision is to help transform Cyprus into a regional startup breeding ground, and reverse the brain drain the island has been experiencing the past decade. They draw examples from Greece and the uK where the vibrant startup ecosystems entice entrepreneurs. 33East aims to help shape Cyprus along similar lines. Whilst the UK and Greece are significantly larger than Cyprus, Yiannis and Demetrios believe the island has great potential to break out of its cocoon and become an innovation hub.

VC funds are all about accelerating the growth of promising products and teams, elevating their capacity for impact. They help their selected companies directly but can also contribute to the wider startup ecosystem and the Cyprus economy. With 33East’s establishment we may likely be seeing the start of Cyprus’ transformation to a technology-based economy. 

If you are a startup founder, an entrepreneur, or looking to bring your idea to fruition, 33East encourages you to reach out to them or apply online via their website. Their target is to start their operations by the end of 2023, however they stated their interest and capacity to offer more than funding in the form of mentorship, brainstorming, and ideating.

Watch the full Future Talks episode here to find out more about 33 East, their backstory, and their vision for the next ten years.