Can Luxembourg become Europe’s hottest startup scene?

With Luxembourg launching its House of Startups early next year and potentially hosting Google’s data centre, the country is bound to become the beating heart of Europe’s startup scene. We examined what makes Luxembourg a hotspot for entrepreneurs and why the country needs them to spur growth.

What makes Luxembourg an attractive place for startup firms?

Starting a business is a lot to know and do. Indeed, there are many moving parts. Balancing the financial needs of hiring people, building a brand, and launching a business are challenging. That’s when Luxembourg and its ecosystem fostering entrepreneurship come in. Historically, the country’s political stability, responsiveness to regulation and robust legal framework have always been positive arguments to investors. On top of that, both public and private sectors have joined forces to create initiatives dedicated to entrepreneurship (i.e. chambers, aid schemes, incubators and clusters). Also, the country has transformed its former industrial cities, i.e. Esch-sur-Alzette and Differdange, into innovation labs.

Incubators are flourishing

Public and private incubators for startups provide work space, support services, networking opportunities and training. This is all the more important when you realise that incubated businesses have on average a 90% survival rate. So, Luxembourg developed many incubators, including the House of Entrepreneurship, the House of Fintech, the House of Training, the Technoport, or the House of BioHealth. In addition, Luxinnovation, the national agency for the promotion of innovation and research, supervises clusters. It also offers integrated and tailor-made services to entrepreneurs with innovative projects across all industries.

Venture Capital is on the rise

Venture capital may finance companies in all stages of business, even startups in their infancy. In reality, the venture capital market is sluggish. Only com­plex government programmes can support the financing of startups which often lack capital. In this wave, Luxembourg has come up with responses, including Luxembourg Business Angel Network, Expon Capital’s Digital Tech Fund and Luxembourg Future Fund.

The legal framework is robust

Luxembourg has created a legal framework to support entrepreneurship introducing recently the simplified limited liability company (société à responsabilité limitée simplifiée), with a minimum share capital of just €1. So far, nearly 200 companies holding this status, i.e. “S.à.r.l.-S”, have already been set up.

Spurring national growth

Over the last ten years, Luxembourg has seen the number of newly created companies grow steadily from 2,400 in 2003 to 3,500 in 2014.

Developing a thriving startup scene is a smart way for the country to spur business development. According to the US National Business Incubation Association, 84% of the incubated companies move on to conduct business in the region where the incubator was located. This may bring great news to Luxembourg, willing to diversify its economy. In a post-Brexit world, Luxembourg could be Europe’s hottest startup scene.

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