Malta’s equity drought: Why local start-ups are forced abroad for funding

**In need of equity: Why Maltese start-ups are struggling to keep pace with Europe**

When 28-year-old game developer Martina Camilleri walked into the Bank of Valletta branch in Birkirkara last February, she carried two years of audited accounts, a 40-page business plan and the confidence that her mobile-puzzle studio had just hit one million downloads. Forty minutes later she walked out with a polite “no” and the feeling that her balance sheet—asset-light, IP-heavy—was written in a language only Silicon Valley understands.

Camilleri is not alone. Across the islands, a growing chorus of founders, agritech pioneers and boutique manufacturers are discovering that Malta’s risk-averse banking culture and shallow equity markets are becoming a structural brake on ambition. “We are literally giving away our future in 20-page term sheets signed in London because the cheques we need can’t be written here,” she says, sipping a Kinnie on the terrace of Valletta’s Grand Café. “That’s not just a funding gap; it’s an identity crisis.”

**Equity gap by the numbers**

The latest European Investment Bank “Access to Finance” index places Malta 26th out of 27 EU states for venture-equity penetration, with only €17 of venture capital per inhabitant versus €140 in Estonia and €326 in the Netherlands. While Malta Enterprise’s tax-credit and micro-guarantee schemes have helped early-stage companies reach proof-of-concept, follow-on Series A rounds above €2 million remain elusive. Only four Maltese start-ups have raised equity rounds larger than €5 million in the last decade; three of them relocated headquarters to Dublin or Lisbon within 18 months.

“The problem isn’t capital availability per se—Maltese households hold €14 billion in bank deposits,” explains Dr. Stephanie Borg, head of research at FinanceMalta. “The problem is cultural: we still equate share ownership with the 1990s IPO casino, not with patient wealth creation.”

**From ħut to unicorn: the village mentality**

Walk into any village band club and you’ll hear the same refrain: “Stocks? That’s what lost my nanna her BOV shares in ’99.” The memory of the Malta Stock Exchange’s boom-bust cycles lingers like last week’s festa fireworks, colouring every conversation about equity risk. Consequently, family offices prefer bricks—tourist rentals in Sliema, warehouses in Ħal Far—over intangible tech bets they can’t drive past on a Sunday morning.

The result is a paradox: Malta has the EU’s highest rate of household business ownership (one in four families runs a private enterprise) yet one of the lowest rates of external equity finance. “We are a nation of shopkeepers, not shareholders,” laughs Ivan Bartolo, whose cloud-kitchen platform JustEatMalta had to register in the UK to attract €3 million last year. “My uncle will lend me €50 k against my mother’s house, but ask him for €50 k for 5 % equity and he looks at me like I’m hawking timeshares in Gozo.”

**Policy crossroads**

Government is waking up. The newly launched Malta Equity Ventures Programme (€60 million co-invested with the European Investment Fund) aims to underwrite 40 % of every local Series A before 2027. Meanwhile, the MSE is consulting on a “SME Growth Market” with relaxed free-float rules and tax-neutral conversions of family holding companies. Yet critics warn that without institutional investors—pension funds, insurance giants—the marketplace risks becoming a ghost town.

**Community fallout**

The equity drought seeps into daily life. Talented developers emigrate, not for salaries but for option schemes that could turn €10 k into a Marsascala penthouse. Agritech start-ups that could save 30 % of the island’s water usage languish because green-tech funds want co-investors on the ground. Even the festa feels it: sponsorship banners from scaling tech firms are replaced by crypto casinos whose billboards flash where equity might have rooted.

**Conclusion**

Malta’s next chapter depends on rewriting a cultural script that prizes bricks over bytes, coupons over convertibles. Until a teacher in Rabat comfortably buys €500 of shares in a local AI start-up the way she now buys €500 of Malta Government Stock, founders like Camilleri will keep boarding low-cost flights with term sheets tucked between passport pages. The question is not whether Malta can produce unicorns; it is whether Maltese capital wants to own them while they still graze at home.