Luxembourg’s startup ecosystem is in the middle of its activation phase. A new survey from Startup Genome shows what needs to be done to grow 25%.
The most comprehensive survey on the Luxembourg startup ecosystem, which was published without fanfare in December 2022, distills data and insights from 66 startup founders and ecosystem leaders.
It forecasts that the ecosystem of 521 startups currently operating in Luxembourg could grow by around 25% as the ecosystem enters a globalisation phase if Luxembourg succeeds in filling three priorities.
Strengthening local connections between founders, investors and experts;
Attracting talent through schemes such as stock options, fast-track visas and engaging public research institutions;
and assisting startups as they scale through late-stage finance tools, targeted programmes and skills building.
Gaps in Local Connectedness
The report lamented the poor connectivity between founders, investors and experts compared to the phase average.
“It can be argued that in the early days of a startup, the startup community serves as the “team” for the founder on the steep ladder of growth,” the report author wrote.
The report recommended forming a communications strategy through the use of startup portals and media, to support information sharing in the ecosystem, forge network connections and help founders. Job portals, event calendars, and online matchmaking can also play a role.
Talent
The report acknowledged founders’ difficulties in attracting skilled workers on the budgets they have. It cited as exacerbating factors perceptions on cost of living, competition with larger corporations, gaps in understanding of the usage of equity-based compensation schemes, a limited local pool of technical talent, and challenges for hiring from outside of the European Union.
It wrote: “Respondents noted that engineers & developer employees and marketing & sales employees are the hardest to access locally.”
The report did not give any specific recommendations on how to address these gaps.
Scaling
With a ratio of 800 startups per 1 million people, the grand duchy has a high startup density. The report credited this phenomenon to the training, acceleration programmes and seed funding available to early-stage startups in Luxembourg. However, it identified gaps in the scaling up process “which is critical for driving economic impact from the startup ecosystem.”
It highlights the need to plug gaps in the funding stem “from as early as Series A” and beyond, gaps which it underlines are hindering scaleup production.
It wrote: “ A steep gap in the attrition funnel is observed at Series B and beyond, indicating key addressable gaps in scaling.”
Furthermore, it calls for a coordinated approach to attracting scaleups from outside of Luxembourg.
“Designing a portfolio of offerings for scaleups and communicating its value proposition through an aligned strategy will be critical in cementing Luxembourg’s positioning as a hub for scaleups,” the report said.
Ecosystem reflections
Patrick Kersten, president of the Luxembourg Startups Association, a federation pushing to improve the startup ecosystem in Luxembourg, said: “86% of companies are being created by foreigners. When they come to Luxembourg, they don’t really have the same network as natives or as they were in their home country.” To find a solution, he hoped that the government would not try to reinvent the wheel but rather leverage and better support existing platforms and mechanisms.
With regards to talent, he said: “20 out of 27 EU countries have an entrepreneur or startup visa. Having a startup visa should be a no-brainer.”
Silicon Luxembourg founder Charles-Louis Machuron was heartened to be acknowledged for connecting the startup ecosystem. He said: “One thing that is missing from many of the events which take place in Luxembourg is knowing the entrepreneur’s needs. You can have 100 events but unless you know the needs of the entrepreneur or investor, to connect them to the right person during the events, it’s not helpful.”
Luxembourg’s economy ministry indicated that the results of the study are currently being analysed. It told Silicon Luxembourg: “A consultation process with key stakeholders of the ecosystem is currently being carried out in order to elaborate a strategic roadmap for the further development of the Luxembourg start-up ecosystem.”
