In 2004, tiny Malta stole a vital march on its European neighbors. The island nation, nestled between Sicily, Tunisia and Libya in the Mediterranean sea, launched remote gaming regulations–the first on the continent to do so.
It was a masterstroke. Today online gaming comprises 12% of the Maltese economy, generating €700 million ($826m) and employing 8,000 people. Over 300 gaming companies, including giants Betsson, Tipico and Betfair, are now stationed in the country, whose 436,947 inhabitants are squeezed into just 122 square miles, making Malta one of the world’s most densely populated nations.
That might make the traffic notoriously awful. But it certainly hasn’t deterred a small but growing clique of entrepreneurs, who, taking advantage of a digitally-savvy government and gaming’s riches, are building one of Europe’s most striking startup communities. They are facing significant shortfalls in talent and scalable capital. But Malta is becoming a full-fledged digital haven.
Valery Bollier is CEO and co-founder of OulalaGames, one of Malta’s most exciting iGaming platforms. A longtime betting industry leader he was, like many others, drawn to Malta in 2012 for its business-friendly tax and gaming regulations.
Today Oulala has established itself as a key player in the fantasy soccer market–one that, alongside esports, presents a huge earning potential for nimble startups. Buoyed by his success, Bollier and colleague Benjamin Carlotti last year launched Silicon Valletta (named for Malta’s pretty, historic capital), a non-profit aiming to create awareness for the country’s budding tech scene.
“Most of us members have been through the hardships of starting up a company so we are now glad to share our experience with newcomers,” Bollier tells Red Herring. Among Silicon Valletta’s members are many of Malta’s leading tech luminaries, including software firm Altaro, e-commerce platform DiscountIF and insurance provider Sherpa.
Business drew Bollier to Malta. But he was immediately struck by its people. “Maltese people have an amazingly positive vision of the future: most Maltese believe that tomorrow will be better than today,” he says. “As a startup, it is crucial that you are surrounded by such a positive atmosphere.”
Many others agree. Malta ranked sixth for quality of life on InterNation’s Expat Insider survey 2016 (Taiwan came in first). The country was also ranked highly at the 2017 Global Startup Ecosystem Report by Startup Genome, which praised Malta for its talent and market research. The country gets 300 days of sun each year, and the Valletta region is known for its great food and nightlife.
Language is another big draw for foreigners. English is the country’s official tongue, meaning that Malta will soon be the only official anglophone nation in the EU. Its airport is well-connected with the rest of Europe, and it is cheaper than London, Paris or Stockholm, three of the continent’s leading tech hubs.
Malta also managed to evade the 2008 financial crisis thanks to a stable banking system. But that stability can sometimes prove a stumbling block when it comes to convincing investors to pour money into startups.
“Risk aversion is mostly around the local angel investors,” says Simon Azzopardi, head of product at Sherpa, and Silicon Valletta president. “They are very few that understand startup-type investments. What Malta does not have, like other jurisdictions, is a case of too much capital. Startups need to work harder for capital, which means that those tech startups that raise capital tend to be of a certain caliber.”
That is not to say that scale is impossible: GFI is a Maltese-born tech company that has gone on to achieve unicorn status. The two main producers of the world’s smartphones use microchips made in Malta. Heatmap brand HotJar has also won many admirers in the European tech scene. But many of Malta’s investors prefer to spend their money on mainland Europe.
“(Maltese prime minister) Joseph Muscat confirmed in The Malta Independent that Malta is a ‘digital economy’ and ‘driven by technology’,” says Martin Leonard, founder of crowdfund and industry lobby Startup Malta. “New VC firms are absorbing this information now and reacting encouragingly to this promising opportunity. The partners in the new VC firms though will, in all likelihood, come from outside Malta.”
Tax benefits, great broadband networks and Europe’s leader e-government service, mean that starting a company in Malta is quick and easy. Access to politicians is also easy, and Malta’s government has funded many platforms itself. “However, if we’re talking about taking a company from an early-stage startup to a scale-up, then that’s another matter altogether,” says Jeffrey Romano, of meeting planner Scheduit. “Although one will find local mentorship and networking opportunities, they are much more limited when compared to cities like London and Paris.”
“Scaling requires many factors and they range from investments, to market size, talents, mentors and networks,” adds Alberto Pelliccione, CEO of cybersecurity and artificial intelligence firm ReaQta. “It is a very good place to bootstrap but when it comes to scaling – outside gaming – it’s probably better to move to other tech hubs in Europe, like Amsterdam or Berlin, or in the UK–where access to funds is much easier and there’s a much larger market for talent.”
Much of the issue is simply down to Malta’s small size. Any nation with a GDP of just $11bn will struggle to accommodate a large tech ecosystem. Many companies look to establish themselves abroad early. ReaQta is one of them. It is opening a branch in Amsterdam next month.
“The sector in which talents are available is mainly that of betting and gaming, which are the biggest sources of income for the island,” says Pelliccione. “Also keep in mind that attracting and retaining foreign talents in Malta is hard and expensive with a very high turnover.”
There is a serious shortage of talent in Malta. In the past five years the demand for software developers has increased tenfold, while its universities have struggled to keep up. The country’s median age has actually crept up in recent years, bucking regional trends, to 41.5 years. The population growth rate is just 0.29%, and many young Maltese have been tempted by better job offers abroad.
Bollier believes Malta has a “strong potential” to attract foreign talent. Around 70% of the iGaming industry’s workforce is foreign. “If we are unable to find a specific skill on the island, we fly it over to Malta,” he says. Azzopardi agrees that the country will find a way to solve its talent problem. But, he adds, “we cannot kid ourselves. Malta, like everywhere in Europe, talent is a challenge. Finding the right culture, attitude and quality of talent is not an easy task.
“I would set up an agency to speed up the process of employing third country nationals, a particularly hard-to-find resource,” he adds. “Europe has a problem and if Malta could win on speed and service when dealing with talent, then that will give Malta a leading USP.”
Startups may be a relatively new craze in Malta. But entrepreneurialism certainly is not. The small island group has long been a point of great strategic interest. Sicilians, Phoenicians, Byzantines, Romans and Arabs have all conquered it, while in the 11th century it became known as a headquarters of the Knights Hospitaller, who played a key role in the Christian crusades.
Today the Knights have evolved into the Sovereign Military Order of Malta, whose tasks are largely philanthropic. But Malta has remained a significantly important place–and its location plays no small role. Its history has meant, too, that its population have had to develop standalone industries for centuries. “Malta has been a nation of small business during many epochs,” says Leonard. “So it is wrong to say this is a recent conception.”
With iGaming leading the way, a solid Maltese tech community is being built. Silicon Valletta and Startup Malta are providing a vital leg-up for local businesses, while events like Startup Weekend, and the regionally-renowned ZEST conference, are bringing an international spotlight to companies outside the betting field.
“The betting market doesn’t lead the local tech market, but there is a symbiotic relationship between the two,” says Leonard. “Betting is an industry that is always hungry for new talent, new blood, new ideas and the latest new technology. That in turn attracts the best people who are savvy in new working paradigms and new technology, the sustained and accelerating change of 21st century business, as well as the new methods of social interaction and communication lost on those stuck in older ways of working.”
Malta now has the iGaming Academy, European Gaming Institute of Malta, and an iGaming-focused course at the Malta College of Arts, Science and Technology. The fruits of their labor are spilling over into the startup community. Since 2007 Malta’s government has been building SmartCity Malta, a minimum-€275m ($324m) project that it hopes will soon be completed, and which can provide a focal point for Maltese tech.
Malta is full of good news. And while scaling up a company is still difficult, the island nation is proving that where startups are concerned, it can more than pull its weight among Europe’s big fish. Bollier certainly agrees. “With all these business and personal factors added together,” he says, “I believe that Malta is one of the best places to live right now.”