Cyprus Equity Fund in early 2023

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A nascent, but promising innovation ecosystem, will get another boost as authorities gear up to launch the Cyprus Equity Fund, said the Finance Ministry.

In an update to the House Finance Committee, in the framework of the budget discussion, the ministry told MPs that the Cyprus Equity Fund would go online in February or March 2023.

The Cyprus Equity Fund is the first equity fund supported by public financing, mainly injected into the country by the European Recovery and Resilience Fund.

The total budget of the Fund is €30 mln, with the majority (up to €27 mln) of financing coming from the EU-funded Cyprus Recovery and Resilience Fund.

The ministry noted that setting up the investment fund, which will support small and medium-sized enterprises, with an emphasis on startups and innovative enterprises, is progressing according to schedule.

Under the financing agreement with the EIB (European Investment Bank), European Investment Fund foresees the EIF will manage the Cyprus Equity Fund.

The EIF is at the final stage of selecting a Fund Manager.

In the briefing to Parliament, it was emphasised that within 2023, it is estimated that additional private funds will have been collected, and the Equity Fund will begin its investment project.

The state participation is €30 mln, of which €17.5 mln was included in the 2022 budget and €12.5 mln in the 2023 budget.

The main difference from traditional bank financing is that this investment fund will inject cash into a company by participating in its capital (equity funding) and will be eligible for dividend returns.

Finance Minister Constantinos Petrides said that the EIB’s assignment of the Fund manager would ensure it will not be derailed from the government’s investment policy.

According to Petrides, it follows the European Investment Fund call process, capitalising on stakeholders’ market expertise to adequately address the equity financing gap by supporting innovative entrepreneurship with the required initial and follow-on investments.

It will benefit emerging, and growing Cyprus startups and the innovation ecosystem powered traditionally by government grants, angel investors, incubators, and accelerators.

The contribution of entrepreneurship and innovation to economic prosperity has grown with the shift of the global economy towards a mode of production in which knowledge has become a key input.

“The challenges of the knowledge economy are critical to growth.

“Vigorous entrepreneurship and SME development are among the most important conditions for successfully meeting the challenges of a continuously evolving global economy,” said Petrides.

The Cyprus Equity Fund will also provide risk financing to companies primarily seeking seed capital to develop their business ideas and projects.