Crowdfunding – Is Malta a viable option?

Simply put, crowdfunding is the process of asking the general public for startup capital for new ventures. In this way, entrepreneurs and early stage business owners can lessen (or even bypass) the need for bank loans or high-interest funding, and can instead take an idea to the public asking for their support en masse.

Crowdfunding can be very beneficial for both sides. On one hand, it can provide for an alternative method of financing which can be attractive when borrowers struggle to qualify for full funding from traditional sources (i.e. banks, private equity firms). In addition, crowdfunding campaigns can bring with them more than financial support: the entrepreneur can conduct proof of concept, glean volunteers, test the popularity of a new product and have the opportunity to pre-sell. Crowd investors, on the other hand, can invest directly into early stage businesses that can turn in to profitable opportunities.

Could such an attractive option – already a major trend on an international scale – not catch on in Malta, could it?

 

Certainly not. In a decade of transformation, prior to joining the EU in 2004, Malta reformed its commercial and financial sectors by amending its existing laws and introducing new legislation, placing them in line with EU standards and international best practise. Since then, an actively supportive government and a robust regulatory framework give Malta qualities associated with a well-established and reputable jurisdiction, both sustainable and effective in regulating a range of financial services.

In this scenario, Malta’s ongoing efforts to present itself as an international hub for innovation are encouraging the growth of this new financial service. Malta has acceded to this rising trend with the launch of the first local crowdfunding platform in 2015. Whereas the launching of the first local crowdfunding platform was a recent realisation, the funding of local projects through other non-locally based crowdfunding platforms was still pursued by local entrepreneurs.

Providing a high level of confidence as well as considerable cost advantages, many businesses have already chosen Malta as the perfect location for accruing capital for their projects and making their businesses flourish.

The jurisdiction provides a stable Eurozone economy, safe business environment, friendly taxation and business ownership regulation, while ensuring strategic connections to Northern Europe, the US and the growth economies of Asia, Middle East and North Africa. For potential investors Malta offers many opportunities including Investment Tax Credits and Micro Investment benefits unrivalled in the region. For startup companies Malta is well placed to support small enterprise and it presents a vibrant location with a workforce of young naturally English-speaking graduates.

Furthermore, both start-ups and early stage companies in Malta are notably carefully guided, aided by a number of business initiatives that were created with the intention to offer them assistance. These business incentives include Takeoff business incubator, Malta Enterprise, and the Ministry for the Economy, Investment and Small Business, among others.

These key elements make it easy to see why Malta is fast becoming a growing European jurisdiction for financial services and especially for the crowdfunding industry.

 

Abacus comment

Being a new alternative form of financing, crowdfunding is almost by definition focused on high-risk/high-return opportunities. The primary objective of any crowdfunding projects should always be to optimise investment returns and have funds skilfully managed in order to make the business flourish.

With this aim in mind, you need the support of a financial service provider with the resources and expertise to allow you to focus on achieving your overarching objective, whilst ensuring that all aspects of the back office operations are delivered to the highest standard of quality and integrity to support the growth of your investment business.

As a flexible and proactive administrator, Abacus has extensive experience in helping clients to find the best solutions to meet their needs. Whether a startup, an early stage company or small business, we can assist you processing applications or redemptions in the fund, issuing contract notes and statements to investors, maintaining the books and records of the fund, whilst ensuring continued monitoring of the fund for compliance with the scheme’s investment restrictions and with all local regulations.

If you would like to know more about the services we provide or discuss your specific requirements, please contact Paul Watterson at paul.watterson@abacusiom.com or call on +44 1624 689 750.

 

Written by Marta Bellamoli, Marketing Co-ordinator