Malta Is A Good Test Market For Ambitious Startups. But One They Need To Quickly Outgrow.
In many ways, Malta is the ideal place to set up a startup. The island contains most of the complexities of bigger countries - both in demographics and business infrastructure maturity - yet everything is tightly compressed in over 320 km2. This makes it easier to roll-out a product, get customer feedback and fine-tune the offering. Beyond those obvious benefits there are other advantages that founders truly come to appreciate once they are here; the closeness of the community makes it much easier to get introductions to all important business contacts then it is elsewhere.
The beauty of it all is that if a product succeeds here then there is no reason why it shouldn’t do so in other, bigger, markets. Perfect the model in Malta and then use the resulting template to grow elsewhere. This is not simply theory; it is a model that has worked very well in the past with the various home-grown success stories.
There remains a lot of work to be done to foster a successful startup eco-system on the island but, as pitches to prospective founders go, that is quite an alluring one. It should also be all the encouragement that any prospective founders looking at Malta as their startup host need.
What Malta does not offer, however, is time. It is a good test bed but any startup with global ambitions needs to quickly outgrow a potential consumer market capped at five hundred thousand (and an even smaller business community).
For a startup, growth isn’t everything; as with any business, cash is. Yet growth ranks almost as highly. Any startup that has launched its offering and isn’t showing healthy month-on-month growth will struggle when it comes to attracting the interest of potential investors. That has always been the case but is even more so in the current market when capital is scarcer than it has been for the past two decades.
That is why any company that starts operating in Malta needs to start looking at new markets almost from the very beginning.
For confirmation of that, one only needs to look at nearby Tunisia. In recent months there have been two highly noteworthy deals involving Tunisian startups; that which saw BioNTech acquire the artificial intelligence firm InstaDeep in a deal valued at $682 million and also the one where Swedish software company Medius acquired the fintech startup Expensya for an undisclosed amount.
What is even more noteworthy is that, whilst both deals involved companies founded in Tunisia, both startups predominantly had international customers.
This was not accidental. In a recent interview the co-founder and CEO of Expensya Karim Jouini said. “Tunisia’s market is very small, so any company would very quickly move internationally.”
There are big differences between the Tunisian and Maltese markets but the underlying sentiment for any startup with global ambitions remains the same: once they use the domestic markets to get to a model that works, they have to look beyond the immediate borders very quickly.
Any founder whose plan does not include that ambition from the very start might end up with a strong domestic company – which, clearly, is no bad thing – but anything beyond that might be out of reach.
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I consider the ability of the founders to build business internationally as a litmus test. Those founders that were looking to Malta to validate their international growth potential, I feel always struggled. Whereas those founders that used Malta as an operations base, but who already disposed of an international network or client base, usually fared much better.
For those aspiring founders that do not have a working model for building internationally I would suggest to spend 2-3 years working alongside a person with an international profile and pick up methodologies for business development