As a leading financial centre, Luxembourg is home to a wide range of international heavyweights that deal with the global financial markets. More and more venture capitalists and business angels are also finding attractive investment opportunities in the local start-up sector. “We see a constantly increasing interest among investors to be connected with Luxembourg start-ups,” says Stefan Berend, Head of Start-up Acceleration at national innovation agency Luxinnovation.

Several networks bring together investors, including the Luxembourg Private Equity & Venture Capital Association (LPEA) and the Luxembourg Business Angel Network (LBAN). Belgian angel network BeAngels has also recently opened a chapter in Luxembourg in order to offer Luxembourg start-ups the possibility of additional financing.

Business angels: Investing smart money

Romain Hoffmann, Luxembourg Business Angels Network, speaks about investing in start-upsFounded a decade ago, LBAN is experiencing a considerable increase in both its membership and its deal flow. “Lately, our membership has grown by 20% per year and we now count around 100 members,” says LBAN director and Head of Investment Romain Hoffmann. “In 2021, we invested €8.3 million in start-ups. Over half the sum went to early-stage Luxembourg companies. We invested between €200,000 and €700,000 in each company – quite considerable amounts as companies generally need €0.5 million – 1.5 million at the seed stage. Our average member invests three times as much as the EU average.”

Our average member invests three times as much as the EU average.

LBAN members invest what Mr Hoffmann calls “smart money”. “Many of our members have set up their own companies and have extensive management experience. Now, they want to invest and help others. We interact with the founders, advise them and help them reach the next stage. The personal relationships are really important.”

The boost in the deal flow is facilitated by LBAN’s investment committee that scouts and prepares deals and offers them to investors. Another factor is obviously the growth of the Luxembourg start-up community. “The quality of the deal flow is amazing, and our investors – who are from 17 different nationalities – say that they never saw the level we have in Luxembourg elsewhere,” comments Mr Hoffmann, who has himself invested in 15 start-ups. “One difference that I have noticed is that start-ups in bigger countries mostly concentrate on their national markets and only go international after several years. In Luxembourg, you have to go abroad almost from the beginning, which is why Luxembourg start-ups are so successful on the European market.”

The right focus

Private investment goes hand in hand with public support initiatives. “Luxembourg is doing the right thing in supporting start-ups in their pre-seed and seed stages, as these are the most critical ones,” Mr Hoffmann points out. He highlights the importance of the Fit 4 Start acceleration programme. “It provides pre-seed funding of up to €150,000 to 35 start-ups each year, which is quite considerable, and coaching that helps participants learn how to approach investors and make their business models sustainable.” Fintech start-ups can also benefit from the Catapult: Kickstarter acceleration programme.

This is equity-free funding, which allows founders to stay longer in control of their companies.

Another key instrument is the Young Innovative Enterprise subsidy, where the government matches investments in promising start-ups with up to €800,000. “This is equity-free funding, which allows founders to stay longer in control of their companies.” LBAN business angels are also increasingly co-investing with the public-private Digital Tech Fund. For later-stage start-ups, the Luxembourg Future Fund provides support together with VCs.

Luxinnovation helps companies prepare requests for funding from the Ministry of the Economy and facilitates contacts between start-ups and investors. “We always invite LBAN members to be part of the Fit 4 Start jury, which provides a natural contact with start-ups,” says Mr Berend. And Mr Hoffmann responds with enthusiasm. “There has never been a better time to invest here in Luxembourg.”

Photo: © Luxinnovation / Luc Deflorenne