Innovative businesses in Luxembourg will be able to unlock non-equity funding opportunities after the government announced a successor to the Luxembourg Future Fund.
The €200M pot, funded to the tune of €160M by the SNCI, a public-law banking institution, and €40M from the European Investment Fund, will continue to make fund commitments and co-investments but with a broader scope.
LFF2 will include investment funds and businesses already established in Luxembourg and it will target more mature innovative businesses “facing complex and uncertain market environments” by providing hybrid debt-equity investments. According to a statement from the Luxembourg government: “These less dilutive investment instruments may appeal to companies unwilling to give up further equity stakes. Thus, the addition of hybrid debt-equity investments will allow LFF 2 to invest into companies at different stages of development.”
The first LFF, amounting to €150M (€120M from SNCI and €30M from the EIF), launched in 2015 under an umbrella structured with dedicated compartments for venture capital fund investments and co-investments into companies alongside investment funds. Its investment period ended in Q4 of 2022.
The new project was announced by finance minister Yuriko Backes on Friday, 17 March. Backes noted that the project leverages the EIF’s expertise in managing public policy focused investment initiatives and SNCI’s knowledge of the Luxembourg economy. She said: “This complementarity helps focus investments in innovative technologies that will generate a sustainable and positive impact in key sectors like finance and climate technologies, thus contributing to the further diversification of our economy.”
The instrument, which is part of the government’s economic diversification strategy, invests across sectors including climate technologies, fintech, cybersecurity, energy resilience, life science and medical technologies, as well as new space technologies.
The LFF 1 portfolio included VC fund commitments with Fabric Ventures Fund 2021; GP Bullhound Fund V; Middlegame Ventures Fund I; Paladin European Cyber Fund.
The LFF 1 portfolio included co-investments in fintech CrossLend GmbH (with Lakestar II LP Fund); Cyberhedge Europe Sarl (with Paladin European Cyber Fund): fintech Pagantis (with Prime Ventures IV Fund); fintech LendInvest Limited (with GP Bullhound Fund IV); fintech SolarisBank AG (with Lakestar II LP Fund); spacetech Spire Global Inc. (with RRE Leaders); spacetech ICEYE (with OTB Fund); spacetech NorthStar (with Telesystem); spacetech ClearSpace (with OTB Fund 2).