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Is Luxembourg A Good Place For Startups?

As part of the Rants series, Silicon Luxembourg interviewed Yannick Bontinckx (image), cofounder of Property Technology (PropTech) startup Ziggu.

What is your activity in Luxembourg?

Along with Vincent Van Impe, David De Winter and Pieter Gistelinck, I founded Ziggu, a PropTech company based in Luxembourg. From a bird’s eye view, we help homebuilders manage their projects and client communications on a single portal.

Homebuilders and property developers have a hard time managing all their projects and data in spreadsheets—there’s just too much room for human error. When they are serving a multitude of hasty homeowners with moving preferences and decisions, these errors only multiply.

Then they have to try to manage everything from an email account, which, let’s admit, isn’t very easy when you’ve got 100 variables within 100 client accounts.

“Ziggu ended up in Luxembourg by accident. Our entire team is Belgian by birth, and we had the dream of Ziggu while working in Ghent. The thing is, Belgium is pretty small, so the instinct to go international was almost immediate.”

Then I think most builders shiver if you mention the obligation to update each client about progress, so often they struggle to deliver high quality customer service. In a time where customers are used to great experiences in their personal life with services such as Deliveroo, Uber, bank applications and Spotify, this clearly needs to change.

So, that’s what we do. We solve all these problems with a single portal, bringing peace of mind and organization to homeowners and builders alike–all resulting in fewer construction mistakes, an increase in efficiency and above all: happier customers.

What advantages are there of being a startup in Luxembourg?

I need to put my comments into context by providing a little history.

Ziggu ended up in Luxembourg by accident. Our entire team is Belgian by birth, and we had the dream of Ziggu while working in Ghent. The thing is, Belgium is pretty small, so the instinct to go international was almost immediate.

In early stages of our development, we were looking at the BeNeLux region. We had thought about seed funding, where we could lose 15-20% of initial equity, but with our product and mindset that wasn’t really a viable starting point.

So we looked at government-funded programs.

It was actually on Silicon Luxembourg, Paperjam, and Luxinnovation that we saw advertisement for Fit4Start.

It’s a rare breed of funding options that provides coaching AND considerable funding for new startups.

In a sense, we came on blind faith!

In Australia, it was really easy to set up a business. It took a week to get the license after submitting the application. The bank account took one day.

Another good thing about Australia is the culture. People are open and straightforward with you. There’s less pressure to “get to know each other before you work together.” If the numbers read well, people collaborate.

And then there’s the problem that should have been obvious from the start: we needed visas to work there, which is not an easy obstacle to overcome when the focus is on your professional life.

“The ideal Luxembourgish startup scenario, in my mind goes something like Fit4Start, match-funding programs, subsidiary offerings, and then a seed round.”

In Belgium, if you do government-sponsored programs, that usually requires sharing a piece of equity and sometimes bringing on a government-selected individual to be integrated into the company—to “keep it on track.” In my opinion, that’s not a good thing at the beginning when many variables change radically and quickly.

So blind faith brought us, but only to a degree. We knew that there was a builders’ market in Luxembourg. The industry is expanding faster here as in Belgium!

Equity-free funding programs are great and prevalent in Luxembourg. Coaching is helpful, but if you’re honest, you need money to scale your project. With Fit4Start and numerous additional options, we were sold.

So we’re also applying to other programs. The ideal Luxembourgish startup scenario, in my mind goes something like Fit4Start, match-funding programs, subsidiary offerings, and then a seed round.

Another very valuable asset to Luxembourg is Luxinnovation. Almost all countries have groups of this nature, but Luxinnovation is a really high quality in my opinion.

“Probably the biggest asset of hubbing in Luxembourg is language. Linguistic talent makes you think differently.”

The location is also interesting. Though we’re Belgian by origin and thus pretty central in the European Union, Luxembourg is so even more. You have very easy access to different markets, and you’re close to a whole host of airports, which provides ease of movement.

The mindset is also a big deal. Because of Luxembourg’s size, you are FORCED to think outside of what we call in Ghent the “church square,” meaning the local area. You can’t stay local. You must think internationally!

Of course, probably the biggest asset of hubbing in Luxembourg is language. Linguistic talent makes you think differently. It changes a lot about your developmental ideas and pushes you to tap into other markets.

In France, Germany and other large markets, I believe people put too much emphasis on local markets. They’re thereby cognitively restricted from expansion from the get-go.

Beyond Luxembourgish, German, French and English, you have immigrant workers with skills in nearly every European language in Luxembourg. That makes your company’s linguistic expansion work pleasantly easy. In fact, it’s something we want to build up more in the future.

With language comes the next big plus: different nationalities and cultures. You have SUCH a blend, almost to the effect of living a true, balanced cultural lifestyle.

“On a more minute level, the meetup culture around startups is incredible. This is something that’s absolutely necessary for growth.”

Once you’re set on going international, the multicultural tones become invaluable. They help specify the nuances of different places that just aren’t available with research. At Technoport alone, we have made such incredible cultural and product development progress.

In other words, you can immediately inject local knowledge into your product! (The funny part is that Luxembourgers often don’t realize what an advantage this is.)

All things said, we have to mention that access to private capital is also available. LBAN, for example, is a big source. The business angel network is great, and venture capital is rising, which helps a lot for growing businesses.

On a more minute level, the meetup culture around startups is incredible. This is something that’s absolutely necessary for growth.

I find that the work-life balance is perfect. The city is designed in such a way that the greenery-concrete ratio is at an almost perfect balance. I lived in metropolitan cities around the world, but I just prefer this calmer environment.

“Luxembourg is a big unknown. For major companies like PayPal and Amazon, there’s a high level of job security involved in the decision. But for startups, not so much.”

What are the disadvantages?

One major downside is that the country is not perceived as “sexy.” Luxembourg has a reputation as a financial hub, but not so much a reputation for vibrant atmosphere. Yet, that is. So it’s harder to convince talent to make the move. The government already knows this—otherwise it wouldn’t be investing so much in startups and offering such a beneficial launching framework.

One time in Luxembourg we put out job postings and received great applicants through our network in Ghent. The thing is, the good ones weren’t ready to make the move—and that was just a small distance to Luxembourg.

The reason is that Luxembourg is a big unknown. For major companies like PayPal and Amazon, there’s a high level of job security involved in the decision. But for startups, not so much.

“In terms of timeframes… well, having set up in three different countries, I admit that it DID take longest to set up in Luxembourg, but the cost to set up is not “worse” than neighboring countries.”

I also think that because the scene is so young, there’s not yet any major success stories of startups building into enormous success. People are proud by nature, so they’ll go where the stories are. In Ghent, the major scene started about 10-15 years ago, and it has flourished since. I think we’re waiting on this in Luxembourg.

We also have to talk about coding talent available in Luxembourg. Most of the local talent we need has good experience in PHP, but we’re focusing on other, newer technologies like Ruby on Rails or Vue.js. Newer coding talent is just not quite present yet and hard to find. But if they are reading this, feel free to contact us!

Another issue is the cost of living. Yes, startups definitely receive good funding, but you also need to spend a lot on living expenses. That’s hard. We bootstrapped everything from the start and didn’t even pay ourselves until after the first year.

The funny part is that we live across the border where rent is cheaper, but it’s a big problem for bringing people to the country.

When you add normal company services like accounting and legal, these costs add up. The cost of doing business is just high. Again, this limits your ability to bring in talent.

Another limitation is cultural. It’s hard to get peoples’ honest opinions. Large corporations may not be as willing to go for work with smaller companies, even if they say they do. In short, Europeans are less direct than their Anglo-Saxon counterparts.

“In Luxembourg, you need a business license. In my opinion, that’s a good thing. Bankruptcies cost more to the economy than the burden of acquiring a license.”

In terms of timeframes… well, having set up in three different countries, I admit that it DID take longest to set up in Luxembourg, but the cost to set up is not “worse” than neighboring countries.

In Belgium, there is discussion of loosening regulations. Right now, you have to meet certain baseline qualifications and coursework before you’re even allowed to open a business. In addition, you must file a financial plan for three years, which helps the government review what went wrong in the case of a failure.

Also, business owners can be personally liable for failure.

In Luxembourg, you need a business license. In my opinion, that’s a good thing. Bankruptcies cost more to the economy than the burden of acquiring a license.

It also takes two weeks to open a bank account. So that’s another big difference. For us, the complete company setup procedure took well over a month’s time, but that did not make such a big difference. It’s a minor hurdle to take compared to other challenges you’re faced with every day.

Checks and balances are important. Almost anybody can set up a business in the Netherlands, and there are a lot of companies going bankrupt. The same goes for the United States, although that system is significantly different from the start and thus incomparable.

I’m all for efficiency, but it may not be such a bad thing that the process is a bit slower in Luxembourg. It also brings credibility to entrepreneurs, both financially and legally. It brings peace of mind to different actors who all ask themselves if potential business partners really have what it takes.

We’re into building sustainability, not lightening growth.

For us, the advantages outweigh the costs. For finding talent, we find a way to hire people to Luxembourg, whether by outsourcing or digging deep.

It’s hard to figure out why certain places become startup hotspots, but I truly believe that Luxembourg will figure it out. The focus on niche industries like space is a really BIG deal and will slowly show its merit.

“There are benefits and limitations to the Luxembourgish market, but the benefits outweigh the limits BY FAR.”

Any last thoughts?

Sure. The European mindset is a challenge and blessing. Being in the European Union makes things easier legally, but it’s still not a completely unified market. You need independent research on each country in order to succeed.

In Europe, it’s more about building relationships at a small scale. In the beginning it feels good to get stuff quickly in the USA or Australia, but that’s not necessarily good in the long-run.

In general, building a company takes longer, but it may be more sustainable. In other words, it’s a great proofing market.

The mentality change that needs to be pushed in Europe, however, is OPENNESS. Meetups really do play a role in this! The focus on service-minded industries really does play a role. Bad service is manageable in the US and Australia because you can choose to tip differently, but not in Europe!

This ideology of good service has become a crux of Ziggu—we want to facilitate that process for others. We will move towards this as things expand.

Then again, openness is also a generational thing, so maybe we will see differences going forward.

In sum, there are benefits and limitations to the Luxembourgish market, but in Ziggu’s eyes, the benefits outweigh the limits BY FAR.

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