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Business
Why Gibraltar needs a venture capital culture
By Eran Shay, Managing Director, Benefit Business Solutions Ltd
The successes of technology start-ups such as Uber, Airbnb and Revolut have inspired governments around the globe to support the development of national start-up ecosystems. The incentives are clear: young innovative enterprises are major drivers of economic and employment growth. Furthermore, start-ups may develop disruptive products and business models that provide the economy with a competitive edge in new technologies. Successful start-up ecosystems do not only depend on the research infrastructure and an entrepreneurship culture but also on the availability of sufficient financing.
Indeed, the HiTech sector presents many growth opportunities for Gibraltar. Realising the compelling advantages that Gibraltar offers to HiTech start-ups, Benefit Business Solutions has already announced it will be launching the first technology Accelerator program in the
history of Gibraltar- the Rocket Accelerator- which will be offered to up to 10 cherry-picked start-ups. But attracting start-ups to Gibraltar doesn’t go without its challenges and one of the key challenges is the lack of a local venture -capital culture.
Traditional financing channels for small and medium-size enterprises (SMEs) such as bank loans fail to provide start-ups with sufficient financial resources. From a bank’s perspective a start-up is an opaque and risky investment. It usually has little collateral, its business model lacks a proof of concept and failure is quite likely. The income from interest cannot compensate the riskiness of such an investment. Therefore, start-ups need investors that can profit from the potentially large return on investment if the start-up grows into a successful company. Venture capital (VC) funds and other private equity investors have specialised in this high-risk high return
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