Starting a new business often involves new challenges and experiences. Working for yourself without the safety net of being an employee can be a lonely, frustrating and challenging experience.
Still, new ventures founded primarily by young people who want to disrupt industries, change the world, and do it all at scale are among the most effective enablers for sustainable economic growth. Embedding training in entrepreneurial skills in our educational system has been the Holy Grail of policymakers for decades.
Despite the country’s underperforming educational system, some islands of excellence must be acknowledged and supported. The Europe Startup Nations Alliance (ESNA) has placed Malta as the fourth-best destination for innovative startups.
The factors that helped us achieve this prestigious ranking included the attraction and ability to retain new talent and the availability of digital tools as the primary communications tools between startups and government entities. Access to finance was considered one of the main challenges that must be addressed effectively.
The challenges that startup founders face are daunting. Business innovators dream of giving society something it needs but has not been created yet, generating impressive valuations that lead to an initial public offering and phenomenal return on investment. Rooted in innovation, a startup aims to remedy existing product deficiencies or create new categories of goods and services, disrupting entrenched ways of thinking and doing business for entire industries.
Today, venture capitalists are more like conservative bankers than the risk-takers of days past
The media is often filled with against-all-odds success stories of information technology and communications entrepreneurs who have introduced new services and developed new products that made them rich and created economic wealth for society. Fintech companies’ success has often inspired the collective imagination to romanticise innovative startups.
Of course, the real-world challenges that startups face are less poetic. Having the skill sets needed to achieve success is a challenge that every innovative entrepreneur faces. For instance, understanding the market is one big challenge. Without enough people willing to buy your product or use your service, a startup won’t succeed, no matter how great the entrepreneur’s idea may be.
Innovative and creative businesspeople may also lack skills in sound financial management. One needs to understand all the costs a startup will incur and calculate accurately how these costs are factored into the pricing and budgeting process.
The main challenge that most innovative entrepreneurs face is funding for their projects. The government has recently announced the creation of a €10 million Venture Capital Fund to assist innovative startups. Creating a venture capital fund is often considered the deus ex machina by politicians trying to find new ways of encouraging economic diversification through creative projects.
The popular mythology surrounding the venture capital industry derives from a previous era. The concept of venture capitalists who nurture innovative industries in their infancy through their risk-taking and hands-on operating experience may have been realistic four or five decades ago when the ITC industries successfully revolutionised the way businesses and individuals functioned.
Today, things are different and separating the myths from the realities is crucial to understanding the challenges of funding new innovative ventures. The popular myth is that venture capitalists invest in good ideas and plans.
Today, venture capitalists are more like conservative bankers than the risk-takers of days past. They are linchpins in an efficient system for meeting the needs of institutional investors like pension funds and insurance companies looking for high returns. The way forward is for government to continue addressing the challenges startups face by tackling bureaucracy, reforming the education system, and providing seed capital after expert analysis of new innovative projects.