The inaugural Silicon Luxembourg Founders’ Survey sheds light on the economic contributions of the startup ecosystem as well as its strategies for attracting and maintaining talent.
Here we highlight some of the key takeaways. Scroll to the end of the article to view the full survey report.
Employment & recruitment
Almost half of startups (48%) which responded already have more than 10 employees, which suggests that the startup ecosystem is growing employment in Luxembourg. It vindicates the economic strategy to invest in startups and their ecosystem. Since 9 out of 10 startups are not expected to make it, it is surprising that so many have successfully managed to scale.
More than half of respondents said they were planning to recruit in the coming year, which suggests startups continue to grow. Of the roles startups were hiring for, slightly more than a quarter were technology engineering and a further quarter in sales. More than half of the roles would be created in Luxembourg.
Cross-border expansion
A quarter (24%) were present in one country, while three quarters have taken their ventures international. Going to a second country is the easy step, but a third country adds more complexity. Almost 60% are present in three or more countries, which shows they have an active internationalisation strategy and that they are growth oriented.
Two thirds of respondents plan to launch operations abroad in the next 12 months, suggesting they are expanding internationally. 86% are happy to be in Luxembourg, to remain and grow their startup there.
Employment & flexibility
For more than half of respondents, it took over 3 months to recruit a staff member from outside of the EU. For two founders, it took 6 months, showing that the long waits are a challenge and create additional burden for startups.
For one in five respondents, running a startup is a full-time job, while for almost 60% of founders, it is more than a full-time job, taking up more than 50 hours per week of their time.
More than half of startups offer part-time work for employees, with just 50% of respondents saying that no-one in their team worked part-time. One explanation for the phenomenon could be small team sizes related to lack of maturity.
Remote working was common among startups, half of which were fully remote. This trend is at odds with corporate employers in Luxembourg which, two years into the pandemic have begun to incite staff back to the office for an average of four days per week (any data for this?). This is a logical step for cross-border workers subject to fiscal and social restrictions on working from home. But less logical when applied to resident workers in Luxembourg.
The survey suggests a greater degree of flexibility on the part of startups. Knowing that millennial workers value flexibility before money when it comes to work, the finding suggests that startups are considerably more attractive to talent from this generation.
Diversity
The mix of nationalities within teams was relatively low with 70% counting one to five nationalities. A closer inspection suggests that this is a result of the small sizes of the teams. Indeed, the average team size of the smallest cohort was 6.1 FTEs.
Three out of ten respondents said they had women in 20-40% of management or board roles. As a context, in October 2021 women represented 30.6% of board members of listed companies and 8.5% of board chairs. While in 2021 women accounted for 35% of managers in the EU, according to eurostat. In Luxembourg, just 22% of board members are women and, according to eurostat, in 2020, 27% of management roles were occupied by women.
Staff perks
Among the benefits that startups offer staff, the most common were flexibility, meal vouchers and capital participation/stock options, each cited by 21.8% of respondents, respectively. The latter is striking, considering the fact that there currently exists no tax incentive for investing in Luxembourg startups. The Luxembourg Startups Association is currently lobbying for a tax incentive system for capital participation that would encourage greater angel investment in Luxembourg startups.
Work spaces
More than half of respondents were working on their own ie. from home or a privately-rented office space. Of that group, the average number of FTEs was 7.2, compared to 20 for startups working out of incubators or coworking spaces. Team sizes for both cohorts ranged from 1 person to 21 for teams working in their own offices and 1 to 105 for teams in coworking/incubator spaces. This trend was surprising as one might have expected more large teams to opt for their own office or home office, given the fact that incubators become less cost efficient, the larger the team.
Product R&D & pivots
Just under half of respondents spent more than 2 years on R&D before launching their first product, with one respondent having dedicated 6 years to the process. This is possibly related to the R&D subsidies offered at the University of Luxembourg. What is more, we can say that 72% of startups polled have true R&D, defined as spending money on innovation.
Exactly half of respondents had pivoted one or more times since the launch of their startup, suggesting that it is a common response for startups to find their market fit. There was no discernible trend correlation between the age of the startup and the number of times it had pivoted.
Funding
Four out of 10 of the startups are bootstrapped or funded through loans and subsidies. While, for a third, it took two or more years to raise funding. From this we can assume that it remains a challenge to raise money in Luxembourg.
The majority of respondents raised funds every 18 months to two years, which is consistent with the convention of startups in a growth phase.
More than half had not received any kind of subsidy or non-dilutive capital. Of those that had received a subsidy, the majority were 3-6 years old suggesting that subsidies come as startups reach maturity.
Founder commitment
A third of respondents said that they have no plans to make an exit, suggesting the majority are committed to growing their company.
Half of respondents found it hard to open a bank account in Luxembourg, a high proportion suggesting a common pain point for founders. Meanwhile, 62% struggled with bureaucracy in Luxembourg.
Challenges and ecosystem gaps
Among the challenges founders cited, the most common was recruitment of skilled workers. This reflects a Europe-wide problem. A recent survey conducted in France found that for 58% of startups polled, the most difficult profiles to recruit were for developers and programmers. The European continent currently counts 9 million ICT specialists, a number the EU wants to grow to 20 million by 2030 to close the gap on digital skill supply and demand.
The second biggest challenge was access to capital, a frustration that was echoed in the final question: “What is missing from the Luxembourg startup ecosystem?” While Luxembourg is home to a number of VC and PE funding sources, compared to France, little of it reaches the local startup ecosystem.
The two are consistent with challenges of early stage startups, which are yet to find a market fit and require funds and talent to reach that point.
About the survey
The inaugural Silicon Luxembourg Founders’ Survey shed light on the activities and backgrounds of some of the startups active in Luxembourg.
Altogether, 37 founders completed various parts of the survey, which was conducted online from September-October 2022.
