Despite its small population, Luxembourg is home to more than 500 tech startups, which is a testament to its unique appeal, which lies in the quick response times from different authorities, as well as its international orientation thanks to Luxembourg’s large expat community. 170 different nationalities. This astonishing statistic presents both challenges and opportunities in the European startup landscape.
Daniil Kirikov, Managing Partner of Luxembourg-based Orbita Venture Studio, offers an insightful perspective on the country’s burgeoning startup ecosystem and its promising trajectory to becoming a European equivalent of Silicon Valley in the near future.
Many people associate the term “startup” with cities like San Francisco, London or Berlin. Why Luxembourg?
The state places a strong emphasis on attracting both labor resources – this is where highly qualified employees can most quickly obtain a residence permit in the EU – and projects. ‘business. The opening of Luxembourg to international companies and professionals has made it the most attractive country for talents for two consecutive years. For these purposes, there are numerous ecosystem support and development programs.
There is a slight adjustment regarding languages. Luxembourgish, French and German are the official languages and all formal communications with authorities take place in these languages. At the same time, even if English is not the official language, in 90% of cases you can communicate in English and receive a response in the same language without any problems. This is simply a small cultural nuance that may be less familiar to traditional startup entrepreneurs.
Additionally, Luxembourg as a whole is financially oriented, unlike many other EU countries. The financial sector represents around 26% of Luxembourg’s GDP in value added, and almost a third of the country’s jobs are linked to this industry.
Overall, Luxembourg offers a unique blend of favorable legal and economic conditions. We have noticed an unusual dynamic here, where demand exceeds supply. If your business operations are healthy and you manage your business properly and wisely, your chances of success are high.
The development of the startup sector in Luxembourg and what are the obstacles present in this area
From the outside, it may seem that the Luxembourg startup ecosystem is still in its early stages of development, but over the past few years it has come a long way. Currently, there is significant government support, which manifests itself in various subsidies, the creation of incubators and funding of scientific research.
Among the initiatives is the House of Startups, launched by the Luxembourg Chamber of Commerce, which hosts up to 200 startups and provides essential IT infrastructure and working facilities. The House of Entrepreneurship offers a single point of contact to support project leaders faced with questions on all aspects of business life. And accelerators like Fit 4 Start offer grant programs and host networking events.
The youth of the system lies in the entrepreneurs themselves, as the culture of Lean Startup management and investors is just beginning to take hold. This is why there are so many different educational and expert programs. However, a qualified project can still stand out perfectly in the local market.
There are, however, a myriad of complex and conservative issues, including opening business bank accounts or the overall maintenance process. There are no local technology solutions and many large international solutions are inaccessible. Many service consultants think conservatively and are afraid of the basic mechanics of risk. They don’t know how to work correctly with startup statutes.
How is this problem addressed?
Several parallel blocks attempt to solve these problems.
The state is working to bring these issues together and resolve them through legislation. There have been recent elections where many of these topics have been discussed. There are also a number of organizations linked to the state but which try to get closer to the business world, such as the Chamber of Commerce or Luxinnovation, a national innovation agency. They speak the same language as businesses, aggregate information and promote solutions within government.
Then there is the commercial route. Companies are approaching these issues in several ways. Or they group together into various associations, including the recently created Luxembourg Startups Association, several of which work on lobbying in favor of the interests of startups. Or they create their own solutions that simplify processes. For example, a portal was recently launched that brings together Luxembourg’s entire venture capital ecosystem.
Orbita Venture Studio actively contributes to this growth. With projects like LuxToday, they aim to create comprehensive guides covering key topics related to business in Luxembourg by the end of the summer. Additionally, they are working on an innovative initiative designed to manage businesses through a mobile app, significantly reducing paperwork.
Naturally, this progression does not occur in isolation. The invaluable support and collaborative dialogue with local incubators, such as the Luxembourg City Incubator under the leadership of Bastien Berg, has been instrumental in their progress.
Resilience and success in the face of general market downturns
Several projects have already attracted substantial funds for their development and scale-up. For example, Salonkee raised €28 million in June 2023 to dismantle the European salon management software market. And Hydrosat announced $20 million in new funding in May to support the development of its satellites and analytics to measure climate impact. A large cluster is working on deep tech technologies, particularly in the space segment.
Several leading institutional funds, such as Mangrove Capital or Expon Capital, also contribute to the growth of the ecosystem and invest in local companies. There is a block of early-stage projects with funding of up to €10 million, such as Emailtree.ai, kodehyve, Fiveoffices, Greenworlder and many others.
In fact, the achievements could be listed in some detail. A recent presentation at VivaTech in Paris from a Luxembourg delegation effectively highlighted this point. The Luxembourg pavilion stood out in particular for its careful planning and the level of maturity of its projects.
On the way to becoming the European Silicon Valley
Thanks to its geographical location, its technological orientation and its business atmosphere, Luxembourg could quickly overtake its larger neighbors and become not only a fintech hub, but also an important economic and technological cluster, like Delaware or Silicon Valley in the United States.