A pipeline for start-ups

Imagine that you are given €10 million as venture capital by the government to help start-up companies? Where would you begin?

The offices of Malta Government Venture Capital Ltd in Sliema are covered with sticky notes in various colours, and white boards list strategic management goals. It has certainly been a busy 18 months – but the company is now operational and has already helped five companies, and put together a network of 30 accredited investors, with new applicants already in the pipeline.

Consultant Aldo Giordano, who has decades of experiences from both the private and public sectors, stressed that it was important for MVC to get all its structures in place before the actual work started – but that demand for venture capital was high and there was no time to waste.

“There were two tracks that we had to work on simultaneously: looking out for suitable start-ups to invest in while at the same time ensuring that we had policies and procedures on which to base our operations,” he explained, listing everything from risk mitigation factors to an application assessment system and even designing the application forms.

This meant that while internal preparations were going on, Malta Government Venture Capital – or Malta Venture Capital as it better known – was already establishing a presence in the market, taking part in fairs and industry talks.

“We needed to put ourselves on the map,” he said.

The government had come forward in March 2024 when it became clear that many start-up companies that were unable to grow beyond the limits imposed by self-funding or government grants had to have access to venture capital, but this was a risky area that required a comprehensive framework.

The MVC’s remit is quite clear: it was aimed at start-ups which already had private third-party investors, and had a funding limit of €500,000 in the form of equity investment, matching the amount put up by the investor.

There could be a single investor or multiple ones, and they could be Maltese or foreign – the most important thing was that they passed all the due diligence tests.

Of course, there is another ‘term and condition’: the start-up must also have what Mr Giordano called an “economic nexus to Malta”. The definition of this nexus is quite broad, but given that the €10 million is taxpayer money, MVC is careful to ensure that there are national benefits, whether employment or research potential or financial gains for the economy through registering the company or subsidiary on the island, or even renting office space.

There are also limitations on the sectors involved, with MVC aiming at 27 innovative industries like FinTech, artificial intelligence and blue water industries, as opposed to traditional sectors like real estate which are already well catered for in terms of access to finance.

MVC is already looking at ways to leverage the existing pool of investors and start-ups seeking growth by ‘matchmaking’ them.

“Imagine if we were in a position to get start-ups to sign a non-disclosure agreement and then put them in touch with investors? And it also broadens the pool of eligible start-ups that can then come to us,” he said, adding that this was a medium-term plan for 2026/27.

“Investors are aware of the risks involved with start-ups but they are also aware that there is no gain without pain, if I can use this cliche: the potential losses on their investment are high, but so are their potential gains.”

Being able to think in the medium-term is a crucial factor as these investments tend to be for longer – say five to seven years – given the trajectory of success for most start-ups.

Mr Giordano explained that once the due diligence and proposal review process was concluded, applications went up to the MVC board, which can approve, reject or ask for more information.

“It has been interesting to analyse the applications and outcomes and we are already tweaking our policies and procedures to make the process more streamlined and efficient,” he said, adding that experience with the first few companies has enabled the MVC to draw up a comprehensive checklist to guide future applicants.

“This is a great help to applicants and will save them time and effort.”

The MVC has in the meantime also been improving its own systems. For example, where in the beginning of this journey, its legal team would take a few weeks to assess any queries, the process is now only taking a few days.

The process has become much more straightforward, with applicants presenting their business plan, cost structure and management team, for example.

“Of course, we look at their markets and where they fit in, but it is also about the team that they have – which is very important!” he said.

Once the start-up and relevant investor have been approved, MVC provides the venture capital – but does not take a seat on the company’s board, since it will shadow the investor.  It maintains a more ‘hands off’ approach, while providing advice and contacts, for example.

However, getting applications through the board is the end of a process and one of the main thrusts of the MVC is developing a more proactive exposure to the market.

“We'll try to take a more active role by going to the market rather than waiting for the market to come to us,” he explained.

One way the MVC is doing this is by getting involved with the competitive event organised by Malta Enterprise – called Pitch Black – which will take place in October.

This competition is aimed at companies which have raised more than €300,000 and a total of 14 companies will pitch their ideas at the end of October, eventually identifying two winners, a seed and a pre-seed company (depending on how long they have been in operation)

Another important collaboration is with the Private Equity and Venture Capital Association, which is also active in this important field, which had been identified by the Malta Financial Services Advisory Council as being a  solution to the potential bottleneck for the growth of the financial services sector.

Looking forward, another aspect that the MVC will eventually have to tackle is the €10 million limit, which means that if each pitch gets the maximum €500,000, only 20 start-ups can be assisted – although the reality is that few ask for the full amount.

Mr Giordano confirmed that there were in fact already discussions about topping up the original government fund, although he was unable to provide further details or whether this money would come from the government itself or other entities.

This is, however, an indication of the demand for venture capital and the potential that such a fund could offer.

The MVC provided the missing piece in the financing ecosystem, which includes not only commercial banks at the early stages but also the Malta Development Bank as the company develops, for example.

“When we talk about banks, we are not only talking about loans but also about the provision of services, such as bank accounts. It is very encouraging to see banks slowly moving out of their comfort zone and entertaining such requests,” he said.

“We help wherever we can. After all, part of our brief is to encourage this ecosystem.”

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