Start-ups bring out the talent, attract investment, and spark innovation says Bernard Agius, business and innovation development manager, Malta Communications Authority.

Why are start-ups important for the Maltese economy?

We are living in the knowledge age where innovation is the main driving force behind economic growth. Start-ups are the brains behind many of the technological innovations and the business disruptions around us today, especially on the internet. Start-ups are dynamic, ingenious and can afford to take a risk.

I think it’s important to have a clear understanding of what start-ups are. Start-ups are relatively newly formed, ambitious companies that address gaps in value chains, and use technology to devise replicable and scalable solutions. One major and common trait of a start-up is failure, which is considered to be an important element on the route to success. It’s very important to stress that start-ups are born global by default.

Start-ups can bring many benefits to the Maltese economy. They offer high quality employment, a specific type of investment, and export activity. They attract the best talent from around the world, generate intellectual property, and inspire others, typically the younger generation, to follow suit. They partner with established firms and become heavy users of existing infrastructure and services, often making a case for further innovation. They grow and pay their dues, but ultimately, they provide the opportunity to link Malta to the global business community.

Is disruption a positive or negative element for Malta?

There are always two sides to the same coin, but it all depends on the angle you choose. Disruption certainly challenges established businesses. To give one example, just consider the music industry and how the whole value chain has been disrupted by the likes of Spotify. The biggest losers are the well-known names that used to control talent and the distribution channels. Artists at the very top are also losing out as their revenues shrink, while traditional broadcasters have lost on audience following and advertising revenues.

On a more positive note, disrupters and consumers are on the winning side of the fence, at least in the short term. Yet few realise that disruption also presents opportunities for those who were previously barred from the industry. For instance, artists may benefit from a long tail market with lower barriers to entry and gain access to bigger markets. Equally, the displacement of gatekeepers and the formation of new value chains will cascade into further start-up activity.

Disruption is essentially no new phenomenon – it has happened in the past and will continue to happen in the future. The difference is that now we are dealing with disruption within globalised markets at much faster speeds and greater intensity. We must realise the implications of being small and how a small economy can come out on top. Ultimately, we need to find the opportunities and act on them.

Does Malta need a shift in mindset when dealing with start-ups?

Yes, with the biggest shift in mindset being that from thinking local to thinking global. We are a small economy and we need to locate opportunities and ensure that we are able to maximise on them. We need to identify niches in the digitally enabled markets where we can make ourselves attractive to specialists to cluster and operate from Malta. This is nothing new – it’s the same strategy that Malta adopted in the past and one which yielded some of the major economic thrusts in our economy. We just need some energy in this regard.

Furthermore, it’s not just the public sector that needs to be challenged. The business community also needs to understand that disruption waves will hit our economy, irrespective of how much of a defensive political and economic stance we adopt. Such a bearish stand tends to be a European trait, clearly evidenced by the superiority of US and Asian markets, which have been less hostile to innovation and have produced some of today’s leading technology firms.

Hence, businesses must start to view start-ups as an opportunity for business partnerships, diversification, growth and potential investment. Perhaps they too can learn a thing or two from the start-up culture.

Not many are aware that Malta already has a thriving community of start-ups, which are busy developing and acting upon their ideas, quietly behind the scenes. Some are extremely successful. They are into everything from e-commerce, health and communications to digital games and big data, among many others. This community is made up of a diverse group of individuals with different nationalities from Europe and beyond, who have discovered Malta for various reasons. Having foreign talent based in Malta is imperative because successful start-ups need world-class talent. It’s highly unlikely that a start-up would find all the talent it requires within a small population like Malta.

We need to identify niches within digitally enabled markets and make ourselves attractive to specialists to cluster and operate from Malta

Which are the areas where start-up opportunities lie?

This is a question that would be best answered by the entrepreneurs themselves given that they are the ones who will ultimately get it right. What I can talk about is the trends we are observing right now.

I think digital media will continue to offer a fertile space for disruption and start-ups mainly due to an ever-greater demand by consumers, continued technological developments, and major changes in the EU rules on copyright. We can expect more over-the-top developments and more pan-European players, such as Netflix. The disrupters themselves also stand to be in the line of fire. One can expect to see more blurred lines between the channels and the mediums, increasingly limiting the ability to easily distinguish between digital games, audiovisual material and print. Innovative ways of aggregating, curating and monetising content will continue to serve as a growing space for start-ups.

The internet of things, where every piece of hardware has the potential to become connected, is still a relatively new field with immense business potential. We can expect start-ups to continue coming up with novel applications in endless contexts such as logistics, manufacturing, automotive, insurance, and health, to mention but a few. Mobile phones, smart cars and smarter televisions will also be giving start-ups infinite openings.

Big data promises to be yet another opportunity for start-ups. Technology has enabled businesses to capture data from every aspect of their operations and environment. Data holds unprecedented business intelligence opportunities and this is becoming decisive in effective marketing and supply management. Many start-ups are tapping into the potential of big data by serving, what are most often, much bigger businesses, with the tools to extract, analyse and react effectively.

Can Malta compete in a globalised environment?

We need to be realistic and acknowledge that Malta is a very small place in the European and global contexts. The real question lies in how we can make ourselves economically relevant in an environment shaped by consolidations and disruptions. How can Malta secure relevance in a context where economic growth can be derived through innovation?

Still, being small has its advantages. Unlike bigger players, being small enables a country to be nimble and unique, making it more attractive, especially for disrupters. Hence, in our work we need to continuously monitor what is happening at the policy level, especially at EU level, where efforts towards completing the digital single market are taking place.

The digital single market will make it much easier to trade cross-border through digital means. We need to ensure that we make ourselves attractive to any start-up wanting to take advantage of such developments by making our regulatory regimes as business-friendly as possible. Therefore, we need to focus on those niche opportunities that will be arising in the coming months.

What role does the Malta Communications Authority play within this context?

The MCA has been responsible for advancing electronic communications for the past 14 years. The scenario has changed substantially to what it was back then. The underlying technology, business models, competition, and consumer demands have evolved beyond recognition. Rather than securing an electronic communications infrastructure for growth, we are now in a situation where electronic communications is only one of the main drivers of economic growth. Beyond securing a future-proof communications infrastructure, the MCA must now also ensure that Malta has all the elements in place so that the economy can leverage on the opportunities brought about by the developments in electronic communications.

The MCA has exerted a considerable effort in this regard. We have proactively been taking into account the start-up phenomena in the development of new policy, especially in the context of the digital single market. We are in constant contact with Maltese start-up incubators and experts in the field with a view to identifying opportunities and locating weaknesses. We are also partnering with various institutions in activities aimed at promoting entrepreneurship and training start-ups.

Start-ups and entrepreneurship policies are horizontal and touch the remits of various public entities. In this regard, we are engaging with the relevant entities to contribute to a more holistic understanding and national policy on start-ups.