MALTA Trends and Developments Contributed by: Josef Cachia Fenech Gonzi and Cherise Abela Grech, GTG Legal
have made it simpler to secure seed money, but Maltese start-ups frequently need to approach international venture capitalists in order to grow. By being closer to investors and customers, this may result in promising businesses moving their headquarters to bigger markets or even mov - ing important activities overseas. Malta runs the danger of losing out on the talent and economic advantages when that occurs. The ecosystem is also hampered by low visibility: a lot of invest - ment agreements in Malta go unreported (found - ers frequently do not disclose funding rounds), which means that success stories do not always receive the recognition they require to motivate others. The story of Malta as a developing hub may be hampered by the absence of publicly available investment data, which could make it more difficult to attract new entrepreneurs or investors. Lastly, there are drawbacks to relying too much on public sector assistance. The VC industry has been stimulated by government initiatives, although having the state as a key investment source carries some risk. Compared to private venture capitalists, public funds might make decisions more slowly and with different moti - vations. Malta’s state venture fund must attract private investment rather than drive it away. The ability of such plans to show returns and professional - ism will determine their success in persuading private investors to co-invest instead of assum - ing the government will handle all initial funding. If this is not done correctly, there is a chance that start-ups will become reliant on government assistance and find it difficult to switch to com - pletely commercial funding sources. In conclusion, Malta’s modest market, talent and capital scale, as well as the growing pains
of a young ecosystem, are the main risks and obstacles facing VC in the island. Talent short - ages, cultural risk aversion, a lack of local capital throughout growth stages, and external varia - bles like tax changes and regulatory compliance are some of the main problems. In future years, there will probably be a great - er emphasis on developing industries. Malta- based fintechs now have the chance to compete throughout Europe thanks to EU-wide efforts like the Digital Finance Package and open banking legislation. If they are successful, they will attract more VC funding. Malta may be considered a compliance-friendly jurisdiction for the develop - ment of AI products because of its dedication to AI and its implementation of the EU AI Act once it becomes operative, which could attract AI start- ups from less regulated areas. Now that the wild west of cryptocurrency exchanges has subsid - ed, the blockchain industry is likely to change its focus, possibly concentrating on institutional and enterprise DLT solutions. If trends like asset tokenisation and decentralised infrastructure persist, with businesses like PEAQ setting the standard, Malta’s early investment in blockchain technology may render successful. A success - ful game studio exit or a well-attended e-sports league in Malta might lead to a small cluster of gaming start-ups backed by specialised inves - tors, making e-sports and gaming another potentially recognisable vertical for the country. With the advent of new innovation programmes and incubators (sometimes in collaboration with universities), the future of education seems bright. The facilities required for start-ups to flourish will be provided by infrastructure initia - tives such as the extension of co-working spaces and innovation hubs (for instance, the proposed addition of new tech labs to the Malta Life Sci - ences Park). In the event that Malta continues to
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