Malta-based tech startup founders possess more experience and practical business knowledge than their global counterparts. Yet, their ambition to leave a mark in global markets is lower. This emerged from the 2018 Global Startup Ecosystem Report (GSER) by Startup Genome, which was published in collaboration with the Malta Communications Authority (MCA). The report exposes the ‘DNA’ of founders based in Malta and highlights the country’s strongest technology sub-sectors.
The GSER’s focus is exclusively upon technology startups, understood to be new ventures that leverage digital technologies to deploy innovative business models. They are typically market disrupters that hold the potential for rapid, global growth. Since such startups operate at the bleeding edge of technology, the risk of failure is substantial.
Therefore, they need to extensively rely on the surrounding business, support and regulatory environment – known as the ‘ecosystem’. In this respect, the report provides a comprehensive assessment of leading ecosystems across the globe, thereby generating crucial insights for policymakers and ecosystem builders.
Broadly speaking, Malta is portrayed as an emerging ecosystem that is an appealing alternative to established digital hubs such as Silicon Valley or London. The ecosystem is still in the activation phase, that is, the first stage in the ecosystem’s growth path. This stage is marked by a comparatively small startup population and related activity, which shapes the characteristics of founders in Malta.
One such characteristic is founders’ awareness and application, of theories on starting and scaling a tech startup, such as the lean startup approach. Local founders reported low levels of theory awareness. Despite this, the business methods applied by most founders still align to theoretic best practices, suggesting an innate readiness. Initiatives such as startup bootcamps and training programmes make a significant contribution to raise founders’ know-how.
Malta is portrayed as an emerging ecosystem that is an appealing alternative to established digital hubs such as Silicon Valley or London
As an ecosystem in the activation phase, most founders’ activity is marked by limited ambition to make a global impact. In particular, very few Malta-based founders claimed products with a Total Addressable Market (TAM) size worth $30 billion or more. The predominant focus on smaller markets suggests that founders’ targets are not yet truly global.
Founders in Malta are further described as having a builder, rather than an entrepreneur, mindset. Founders with a builder mindset demonstrate the necessary qualities to successfully scale a later-stage business with a validated business model. On the other hand, the entrepreneur mindset is more ideal to successfully launch a new venture and take it through its early days. This finding could be linked to Malta’s low score for knowledge of startup theories, which is typically more relevant to early-stage ventures. On the other hand, founders in later-stage businesses are more likely to leverage practical know-how, as opposed to theory, to sustain their firm’s growth.
Surprisingly for a small island ecosystem, local connectedness in Malta was found to be lower than average. This result draws on three related factors: the sense of community in the ecosystem; the number of relationships between founders; and the extent of ‘collisions’ or serendipitous encounters between founders.
This implies that more must be done to foster a deeper sense of community and knowledge sharing in Malta. This is imperative: local connectedness is “strongly associated with higher startup performance”. Startup Genome notes, however, that the primary factor behind connectedness is relationships, not physical proximity.
“No matter how many startups work next to or near each other, if they don’t help each other or even really know each other, their companies (and the ecosystem) will suffer”.
Overall, Malta is identified as “an ecosystem to watch” in three sub-sectors: blockchain/DLTs, fintech and gaming. Malta shows strong potential in these areas, stemming from ongoing regulatory developments and existing success stories, particularly in financial services and gaming. Furthermore, the report describes Malta as a strategic, dynamic hub that is particularly ideal to attract UK businesses seeking stability and continued access to the European market.
In order to increase Malta’s international appeal and further develop the ecosystem’s maturity, Startup Genome recommend interventions aimed at facilitating more connectedness in the local community; increasing early-stage funding support; and accelerating top startups towards high-value exits.
The report also notes that emerging ecosystems – like Malta – cannot reasonably expect to be competitive across all technology sub-sectors. Instead, the focus should be on achieving excellence within a small number of sub-sectors. This advice dovetails with Malta’s ongoing push to establish itself as a leading player in blockchain and the pursuit of growth through fintech and gaming innovation.