In 2014, StudentLife, a Cyprus platform that offers valuable services to students, came into being in a corner of eSelis Copy Centre. But soon after, the startup came to wider attention as they won the competition for most innovative business ideas at the Cyprus Entrepreneurship Competition.
This put them on the radar screen of the Cyprus Business Angels Network (CYBAN), the only Angel Investment Network in Cyprus – this kind of investing involves individuals with cash who either solely or as a group help new startups both with expertise and money. The typical angel investor is ‘hands-on,’ meaning that he/she gets down and dirty with the business and helps make it grow.
CYBAN is just this kind of angel investor; the group has invested more than €4.8 million to date in startups with great potential.
CYBAN made a sizeable investment in StudentLife while it was still at the startup stage. “They believed in our mission,” writes Yiannis Hadjiconstantouras, co-founder of the company. Today, StudentLife has a whole network of platforms and stores just for university students.
“Since its founding, CYBAN has reviewed hundreds of businesses per year to find the most exciting and cutting-edge companies,” notes Andreas Koupparis, founder of the group in an interview with the Cyprus Mail.
“Using very strict selection criteria, CYBAN looks for startup ideas that have either global explosive growth potential, or which are innovative enough to succeed in the local market and selects up to 15 per year to pitch in front of its members at our Company Presentation Events. Each quarter, two or three startups make these presentations.”
“The CYBAN membership of investors represents a cross section of influential business leaders from Cyprus, including successful entrepreneurs and former CEOs, chairpersons and non-executive board members of large private and public companies.
The wide and varied nature of the companies expected to present to the network will allow the investors to leverage not only their financial capital, but also, their intellectual capital,” Koupparis explains. “CYBAN identifies, evaluates and selects the best investment opportunities for its members.”
CYBAN was founded in 2013, right in the midst of the financial crisis. “When local major banking systems were crumbling, and the unprecedented haircut of the deposits of tens of thousands of depositors in the island’s largest banks was taking place, a small group of investors decided they could make a difference both for themselves, and for the betterment of their local economy,” Koupparis says.
Sadly, there is relatively little involvement in this kind of investment in Cyprus, compared with other countries, Koupparis points out. “Yet it is badly needed. Attracting investment capital from foreign investors is undoubtedly an important tool for the development of the economy. However, no one can have the same confidence in the Cypriot economy and its businesses as Cypriot investors who have inactive funds in banks that can contribute directly and substantially to economic growth if channeled into the real economy with the right incentives,” Koupparis insists.
CYBAN’s plans are focused in attracting at least 250 new members in the next 2 years. The group is a member of EBAN, the European Business Angels Network, which brings together over 150 member organizations in more than 50 countries today. CYBAN is also a full member of GBAN, the Global Business Angels Network, a global community of business angel networks and organisations coordinated by the Global Entrepreneurship Network (GEN).
CYBAN should be able to grow in Cyprus, Koupparis says determinedly. “The average number of Business Angels in the EU is eight per 10,000 inhabitants. This means that, statistically, Cyprus should have over 600 Business Angels. With just over 40 members, CYBAN has the potential to attract more than 500 new members from Cyprus, according to European averages.”
But there are a number of challenges to angel investment in Cyprus, Koupparis warns.
“There are issues in education, for example. Many of the business plans that we receive are very poorly executed, with clear gaps in know-how of the startup members. This needs to be addressed by our education system.”
Then, there should be improved incentives for investment, he continues.
“CYBAN and its members were instrumental in advising the government in the amendment of the income tax law to create a Tax Incentive scheme that, since 2017, provides incentives to individual investors when investing in innovative companies. But, despite the high level of these tax incentives, the results were less than what we expected,” Koupparis says.
“Only a small number of investors took advantage of the incentives and we strongly believe that this is because of a mis-alignment between the level of expected innovation in the definition of “innovative companies” and the level of sophistication of local business angels.”
Koupparis proposes two ways to fill this gap: “We can broaden the definition of ‘Innovation’ or we can try to increase the level of sophistication of local investors.”
CYBAN will seek state financial support in this difficult and long-term effort. “We need to train our local investors, bring over more experienced investors from our colleagues in Europe, be in a position to evaluate more scientifically complex business plans (which can be a very expensive task) and get the right legal and accounting support in setting up investment structures with the right agreements in place.”