Malta’s First Crowdfunding Platform

Whether community, cultural, entrepreneurial or otherwise, has become a valuable platform that connects projects and ideas with much-needed finances through crowdfunding.

ZAAR – Malta’s first crowdfunding platform is an online platform founded on the premise that big ideas can go far, and helps projects to get off the ground thanks to the financial support of backers who believe that their concept is worth funding.

The platform – which was launched in December 2015 – was founded as a partnership between the Malta Business Bureau and the University of Malta, which, together, set up the Foundation for the Promotion of Entrepreneurial Initiatives. ZAAR was the result and, today, it is a popular reward-based platform that has attracted a substantial number of projects.

“In a nutshell, ZAAR provides an alternative means of financing for those with business ideas or projects in mind,” explains Matthew Caruana, who manages the platform. “It helps to fill the gap between own funds and other traditional means of finance, as in the case of banks. It also helps to get the idea off the ground so that, if successful, it may become more bankable or attract angel investors in the future. We believe it helps to encourage entrepreneurship and supports people to get their projects off the ground.”

Although still in its own fledging stages, ZAAR already has a solid reputation. Of the 32 projects that have crowdfunded through its platform, 63% have been successful and over €90,000 in funds has already been raised. “Growth in 2017 has also been exponential, with a substantial increase in the number of funds raised since the start of the year and a large boost in the number of people supporting projects,” continues Mr Caruana.

Of course this brings us back to the question of: what exactly is crowdfunding? It may be something you have heard of or even followed, but you may not have used it or experienced clients that have fundraised through it.

“In essence, crowdfunding is all about getting the ‘crowd’ to provide funding, that is, getting small contributions from a large number of people.” explains Mr Caruana.

“While in the past it would have been difficult to achieve this, the internet and social media has made it easy to take ideas out there to the public and discover the ones that interest them. When they see something they like, they can then support it by giving it their financial backing and helping to make it a reality.”

With this in mind, there are many types of crowdfunding, namely donation-based, rewards-based, equity-based and lending-based. ZAAR operates a rewards-based platform, which means that backers are given rewards to thank them for their support. “This could take all sorts of forms. For instance, musicians have rewarded backers with a copy of their album or a signed t-shirt, while arts projects have given out early-bird tickets to their next event. Others have even provided specific rewards for corporate backers – such as an in-office stand-up comedy routine for colleagues”.

Budding businesses can also use ZAAR and crowdfunding. It has proved itself as an excellent platform for start-ups and new ventures to launch themselves on, while existing businesses could also trial new ventures or increase their exposure through the launch of special-edition merchandise, pre-sales, one-off products or customisable ideas.

“Although the prime benefits of crowdfunding revolve around it being a cheaper form of raising capital, the positive paybacks don’t stop at funding,” Mr Caruana goes on to say. “There’s a lot to be gained from the exposure that the project or product can get in advance of its actual launch, which helps to determine whether the public like the idea of it or not. This provides valuable validation about how, potentially, the project could develop in the ‘real world’ once it had finished its crowdfunding phase. This also helps to reduce risks by establishing demand before you invest in it more heavily, and provides evidence of demand that can be used to attract other sources of funding.”

There are also clear benefits for those that choose to use ZAAR – a wholly local platform – over international alternatives. Firstly, ZAAR is focused on giving each project local exposure, which takes it right to the hearts and minds of the backers who could potentially help fund the project. In addition, those joining ZAAR also benefit from personalised advisory and support services, which include everything from tips on how to hone their project idea, to advice on how to reach out to the local media and boost public relations exposure.

“The fact that it is local also helps to bring ideas and investors together, which is something we previously lacked in Malta,” Mr Caruana says. “We hope that ZAAR will become a much-needed marketplace for investors and entrepreneurs, and that it can form the base of the angel community in Malta, which we believe is essential. In the meantime, this lack has meant that potential talent has left our island for other jurisdictions because opportunities were limited. The Maltese business community definitely needs specialised, local support.”

Now, ZAAR is looking at the future of crowdfunding in Malta and is working to introduce different models to the economy; possibilities include equity and loan based models. This will give entrepreneurs with non-bankable ideas, another source of pre-seed and seed financing, again helping to fill the gap between the use of one’s own funds and funds that can be attracted from investors or banks. “We see this as very complementary to other sources of financing,” says Mr Caruana.

In November 2016, the Malta Financial Services Authority (MFSA) issued a discussion paper about the feasibility of introducing legislation that would allow for equity-based crowdfunding. ZAAR was heavily involved, and also organised a workshop in conjunction with the MFSA to enable stakeholders to give their input on the possibility of this development. Feedback was overwhelmingly positive and it was clear that those present were of the opinion that Malta needs other crowdfunding options.

“This will lead us to the future of what crowdfunding can provide budding Maltese businesses with, in the years to come and beyond.”

Discussions on the paper have closed and the MFSA is now reviewing the feedback. “We hope that discussions will proceed to the next level within the next couple of months,” says Mr Caruana.

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