The Current State of Crowdfunding in Malta
With the aim of re-identifying the current situation in Europe, we reached out to our international partners in the Altfinator Policy Network to provide in-depth insights on the Current State of Crowdfunding in Europe in 2020.
We have reached out to Mr. Matthew Caruana, a crowdfunding thought leader in Malta. Mr. Caruana is sharing with us insightful information about the current crowdfunding trends in Malta and about the expectation regarding the impacts of the new European (ECSP) crowdfunding regulation.
Mr. Caruana: There is Certainly Room for Further Growth
The State of Crowdfunding in Malta
Donation and Reward based crowdfunding was introduced in Malta in 2016 by one small platform, ZAAR, which was set up by the University of Malta and the Malta Business Bureau. This is, to date, still the only crowdfunding platform in Malta. The platform raised around €700k from around 130 projects. There is certainly room for further growth once the public is comfortable with the concept of crowdfunding and with more resources invested by the platform.
Malta has published requirements for investment-based crowdfunding platforms, but these are on the onerous side, including MiFID license and high capital requirements which have stopped platforms from starting off in Malta. These regulations also limit the issues up to €1million euros and they also have restrictions on the different classes of investors. Donation and Reward based crowdfunding are exempted from these requirements.
Future and Potential
I think there is good potential for crowdfunding in Malta as the country is investing in its Startup Ecosystem and there are several new technologies and industries that are moving to Malta. Moreover, the capital markets that had been set up for small and medium enterprises are now also too demanding and therefore SMEs need a new avenue to be able to raise finances. Furthermore, the country also has its Seed Investment Scheme which would be a key attractor if applied on the crowdfunding listings.
The challenge so far has been the regulations which would be overcome with the new ECSP regulations. Another obstacle that will need to be overcome is to raise awareness of this new type of financing amongst the investors who have so far snubbed the early stage investing route as opposed to investing in property and more secure bonds. This however is also changing with a new generation of investors, the increased accessibility to fintech applications and after the property market has crowded out people due to increased capital requirements and its lack of environmental credentials.
Reward based crowdfunding also has room for growth as it offers a huge number of benefits apart from financing. Such as idea validation, marketing, outreach and attracting loyal customers apart from attracting other types of investment. Reward based crowdfunding can be applied to various types of projects, start-up, and new product development and these are the types of projects that are struggling to get financing from other sources.