Market Gaps on Access to Finance - Bank of Valletta

Malta Business Bureau – <strong>Market</strong> gaps in access to finance
April 2013
hence enhance the chances of success during the start-up phase of a business venture in
selected sectors 42 through seed capital. The fund also aimed at investing in established
businesses seeking a capital injection for innovative projects 43 . The initial seed capital put
forward by Government amounted to c. €2.3 million (i.e. MTL 1 million), with further
funding envisaged from the EU and the private sector (including international venture
capital partner/s). Apart from initial funding, the fund was also planning to assist in
mediation between SMEs and banks, share potential credit risks with banks, and co-operate
with transnational bodies. About 10 applications from prospective start-ups were initially
received, but only a couple of applicants were eventually assisted and this fund did not
proceed further due to administrative difficulties. The fund was initially intended to be
managed by the MDC, with the eventual intention of forming the fund as an independent
entity, and potentially achieving public listing. It was envisaged that the fund would be selffinancing
from interest earned on preference shares and from the redemption of all
preference shares, and that it would break-even despite the inevitable losses from certain
failed investments. The establishment of a business angel network was also taken into
consideration. Apart from the applications received, interest in TVF was also shown by a UKbased
asset management firm/ fund manager, who was willing to develop and manage the
fund.
Malta Business Angels Network (MBAN; 2003) – a local network set up through a private
initiative to establish the idea of formal equity investment in Malta. The MBAN was set up in
November 2003 with its core function being to match Maltese entrepreneurs starting their
new venture, or seeking growth finance, with successful local entrepreneurs who actively
seek to invest equity capital and bring entrepreneurial know-how and experience to
enterprises with growth potential. MBAN provided them with the formal framework to do so
more effectively by facilitating start-up ventures, often considered to be high-risk
investments, and matching them to the right business angel. The entrepreneur must in
return be ready to offer a share of his business in return for equity finance 44 .
Technology Innovation Fund (2004-2005) – In an attempt to revamp the previous work
carried out on the TVF, it was renamed as the Technology Innovation Fund, re-offering seed
capital for start-up enterprises, preferential equity capital and the possibility of collaborative
agreements between industry and University.
Malta Venture Capital plc (2006) – Government set up a venture capital fund through its
investment arm Malta Investment Management Company Limited (MIMCOL), with the
intention of licensing it as a collective investment scheme. The company's aim was to fill the
gap in the economy's financing systems and assist entrepreneurs to find the required
finance to embark on projects and start up operations. It also aimed to encourage the
Maltese private sector to provide finance on a small scale but at high risk to regenerate
Maltese private enterprise, and provide finance for innovative processes and ideas and new
technologies. Government initially injected around €2 million, with the remaining capital
intended to be obtained from private investment 45 . The board of directors of this fund was
composed of government officials, bank representatives, and members from the business
community including key local businessmen.
In addition, the University of Malta set up a Research, Innovation and Development Trust in
2012 with an initial capital of €500,000 invested by Government 46 . Though not a venture
capital fund, this trust is intended to allow individuals and companies to donate money to the
trust fund either by earmarking their donations for specific projects or allowing the board of
trustees to manage the funds. Donations to the fund are tax deductible.
42
Biotechnology, IT applications, multimedia activities, software development, e-Business and e-Commerce, environment
and waste management, energy, marine applications, education and entertainment, and health
43
Ministry for Economic Services (2001), Budget Speech 2002; Times of Malta (2002), Lm 1m technology venture fund
launched
44
Times of Malta (2004), European business angels to converge in Malta
45
Times of Malta (2006) Malta venture capital set up with Lm 10m authorised capital
46
Times of Malta (2011), University appeals for private donations to new research fund; Times of Malta (2012), Malta
Freeport Terminals funds University research
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