The Malta startup scene: Uncertain outcomes, a worthy investment

This article featured on Tech.Mag issue 3, 2021 as part of a feature on the startup ecosystem in Malta. https://bemags.com/magazines/techmag

It’s a few years that Malta is progressively making efforts to attract new businesses and startups. For example, one of the latest initiatives is the introduction of a “start-up visa”, included in the Budget 2022. 

To better understand the real opportunities that the island has to offer and to explore the local scene, Federica Tadiello spoke to Adrian Galea, a passionate and savvy manager who knows the local startup ecosystem very well and who critically thinks that Malta has still a lot to do to attract talents and gain a privileged position in the European landscape. 

The good news is that it looks like there is a vibrant community of entrepreneurs with compelling stories to tell. 

Can you please introduce yourself and your job?

I am admin and moderator of “Malta Startup Space”, a Facebook group that keeps its members updated about happenings, events and transactions concerning Malta connected startups and entrepreneurs. The group and page have a simple mission, that is, to showcase the Malta startup ecosystem. On a quarterly basis, I issue a newsletter with the most noteworthy transactions linked with the Malta startup ecosystem, and I have been pleasantly surprised that it is relatively easy to find good stories to tell.

Further to this, I earn my living as a portfolio & finance manager for venture capital funds and high net worth individuals, who seek to build and manage portfolios of early-stage startups. In particular, I am part of the team of BITKRAFT Ventures, a U.S. based venture capital firm with $USD 500 million assets under management, for digital games, esports, crypto games and interactive media.

Can you give us a general overview of the Maltese startup scene? How does Malta position itself in the European landscape?

I usually refer to the Malta startup scene as one that is “non-systemic”. What I mean here is that there are no best practices or norms in place for a startup to go from idea stage to MVP, to incorporation, to finding investors and scaling. Critically, I think we lack people in ecosystem support organisations who have hands-on experience in scaling large international startups. The tough question is how do we attract such talent to choose Malta as a location from where to build their initiatives when Malta has little to no success stories to reference. There are promising initiatives in place, TakeOff at the University of Malta have a well-organised setup with experienced operators, StartInMalta, operated by Malta Enterprise handles government-led support schemes and there are privately led initiatives like Business Angels Malta (BAM) and Pitchora that are a first attempt to match private business with startups. We do have a few success stories, Hotjar and Altaro being the easiest to reference. These startups, with a strong Malta connection, boast international relevance, so success can be achieved with the right skillset and mix of talent. However, I attribute their success to the merit of the founders and the individuals involved rather than the ecosystem from which they emerged.  Overall, I think Malta’s appeal remains intrinsically linked to it being an island for sun, fun and heritage, that is English speaking and in the crossroads of the EU and the MENA region. 

Talking about the entrepreneurship and talents on the island, what do you think are the most interesting startups to keep an eye on?

The next generation seems to be led by Weavr, a FinTech startup, eCabs, a Transport and Mobility startup, and EBO an A.I. startup. There are other compelling startups that have received support from Malta Enterprise in regulatory, A.I., gaming and cannabis sectors but I know too little about these companies for the moment. I am also sure a number of FinTech startups have applied for M.F.S.A. licensing and keep Malta as their HQ, but there is little to no information about them. The good thing, as I mentioned earlier, is that each passing calendar quarter new stories emerge.

 

In Malta Startup Space we also like to celebrate Malta connected initiatives, such as Peaq, a Berlin-based blockchain initiative led by a Maltese founder, Flasc, an offshore energy initiative in the Netherlands and Smart Assets a 1$ billion valued Fintech based in the U.S. founded by a Maltese national. It is critical to count these as members of the community as the amount of knowledge, contacts and experience they can give back to the next generation is immeasurable. Furthermore, I keep in contact with Maltese technical professionals who are early employees at startups doing great things across Europe, as well as in Dubai and in the US.

What are the opportunities for those who are trying to set up their own startup in Malta? What does the island have to offer in this sense? And what is your opinion about them?

Unfortunately, I don’t have a comforting answer here. I personally relocated to Madrid because the opportunity to advance my career in startups and venture capital was more promising if I moved to one of the leading innovation hubs in Europe. Just to give an example as to why, I recently attended a conference in Berlin, during my return flight I happened to be seated next to a lawyer who focuses on venture capital and in front of us, eavesdropping on our conversation was a startup founder. We spent the entirety of the flight discussing the fundraising landscape in Europe. Those encounters just do not happen in Malta.

 

A solution is to engineer those situations with strategic events. For example, I am part of the Silicon Valletta community which organises casual get-togethers for tech entrepreneurs in Malta. Also, back in the day, Malta held an annual startup event called Zest. It was a celebration of startups and innovation, I thoroughly enjoyed each edition. Its successor became the Malta Blockchain Summit which was very business and regulation focussed and not for me. Hopefully, pandemic permitting we can bring back high-quality startup focussed events. 

Malta Startup Space’s goal is to keep the community connected in between meetups and events, it’s basically your daily dose of startup friendliness.

 

Another promising novelty I follow closely is the Digital Nomad trend. Malta’s initiative here is the Nomad Residency scheme. I hope this will attract digital and tech talent to Malta, who over time will build relationships with other Malta-based founders from which promising startups will emerge. I do recommend people interested in this space attend the meetups being organised on the island around digital nomads.

 

Finally, the more promising startups that pitch to me are from high ranking executives from successful international businesses located in Malta. The sectors are usually Fintech, iGaming, Marketing and Tech, wherein these emerging founders would have witnessed first-hand how the companies they were employed at grew to international relevance and they spot an opportunity to build their startup around and use the connections they built over time to make in-roads. I nickname these “2nd Generation” founders, and these individuals I believe, hold the best promise for future success connected to Malta.

Do you think that Malta has the potential to become - in some years time - a startup-friendly place such as Berlin or Estonia?

Potential and hope are the last to die, so yes! And given Malta’s dependence on tourism, financial services (now greylisted) and real estate, tech entrepreneurship is a clear nominee for a future building block for a much-needed diversification of Malta’s economy.

 

The European startup ecosystem, with few exceptions, is government-centric and dependent. Venture Capital funds across Europe have EU and government bodies as their anchor investor, and many startups are competing for EU institution-led government grants and schemes.

Europe is a far cry from the American capitalist model with less than 15% of the global share of VC coming from Europe.

Some say this may be a good thing, because although fewer startups emerge, the ones that do, tend to be more capital efficient and have more robust unit economics, but the spirit of true “venture” is grossly diminished when it comes to the funding landscape in Europe.

Malta seems to mimic the same lethargic symptoms that the rest of Europe suffers from. What Maltese founders sorely lack is a sense of competitiveness, at an international scale. Many of the proposals I review are a copy of innovative ideas witnessed overseas not yet present in Malta. Whereas this may make for a good lifestyle business, it does not have the hallmarks of an international disruptor. 

 

A suggestion here is that Malta Enterprise grants could be awarded on a semi-annual basis to the top 10% ranked applicants. This will create a sense of competition as opposed to the sense of entitlement some local startups seem to demonstrate.

Recently, it has been announced that the American tv show "Shark Tank" will have its Maltese version. What are your thoughts about it?

Unfortunately, I have a boring answer to this. I just do not know enough about this news story, I have not met with anyone involved and I do not want to indulge into speculation. I wish the producers, whoever they may be, good luck and “break a leg” as they say in showbiz and I hope the investor panel will be smart, witty and entertaining so as to put on a good show.

 

What I will say is that I have invested in building a successful career for myself in startups and venture capital, and I hope my journey will inspire others to follow suit, whether as professionals in the field or as entrepreneurs. Likewise, Malta Startup Space is showcasing success stories as they emerge, again reinforcing that startups can be a compelling and interesting career path.

In general, I'd like to know what motivates you in your job and why did you decide to work with startups? Why are you so passionate about them?

Eight years ago I left my job at a corporate firm with a career path in place to join a startup in Hamrun in a shared corner office. In my first week on the job, I travelled to Switzerland to attend an event held at a global top ranking university organised by the startup I had just joined. I met business leaders, university professors and startup founders that day. Three pitches took place, one was by a female founder dressed in an exoskeleton suit, the other was for a drone that could bounce off the walls of the lecture room at full speed and keep operating as though nothing happened, and the third was by a university professor who pitched light-based sensors for autonomous vehicles because two years earlier a family member perished in a traffic accident.

 

Great startups are being built by founders with a career of excellence behind them in engineering, healthcare, scientific research, finance or tech. The system in which they previously operated is restrictive for true innovation, so they break the status quo and forge a path for themselves. Startups require great founders above all else. If taken seriously, they can change the world we live in for the better. That’s the opportunity that inspires me every day!

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