European Silicon Valley In The Making – OpEd

Despite its small population, Luxembourg hosts over 500 tech startups, a testament to its unique appeal, that lies in quick response times from various authorities, as well as an international focus thanks to the significant expatriate community from 170 different nationalities. This astounding statistic presents both challenges and opportunities in the European startup landscape.

Daniil Kirikov, a managing partner at the Luxembourg-based Orbita Venture Studio offers an insightful perspective on the country’s burgeoning startup ecosystem and its promising trajectory towards becoming a European equivalent of Silicon Valley in the near future.

Many people associate the term “startup” with cities like San Francisco, London, or Berlin. Why Luxembourg?

The state strongly emphasizes attracting both labor resources – this is the place where highly qualified employees can obtain a residence permit in the EU the fastest — and business projects. Luxembourg’s openness to international businesses and professionals has made it the most attractive country for talent for two consecutive years. For these purposes, there are numerous ecosystem support and development programs.

There is a slight adjustment when it comes to languages. Luxembourgish, French, and German are the official languages, and all formal communication with authorities is conducted in them. At the same time, even though English is not the official language, in 90% of cases, you can communicate in English and receive a response in the same language without any issues. It’s just a small cultural nuance that might be less familiar to traditional startup entrepreneurs.

Furthermore, Luxembourg as a whole is oriented towards finance, unlike many other EU countries. The financial sector represents roughly 26% of Luxembourg’s value-added GDP, and nearly a third of jobs in the country are linked to this industry.

Overall, Luxembourg offers a unique blend of favorable legal and economic conditions. We’ve noticed an unusual dynamic here, where the demand exceeds the supply. If your business operations are sound and you manage your company well and wisely, there’s a high chance of success. 

The startup sector development in Luxembourg and what obstacles are present in this area

From the outside, it may appear that Luxembourg’s startup ecosystem is still in its early stages of development, but over the past few years, it has come a long way. Currently, there is a substantial amount of government support, manifested through various grants, the establishment of incubators, and the funding of scientific research. 

Among the initiatives is the House of Startups, launched by the Luxembourg Chamber of Commerce, which accommodates up to 200 startups and provides essential IT infrastructure and working facilities. The House of Entrepreneurship offers a single point of contact to support project owners who are confronted with questions on any aspect of business life. And accelerators like Fit 4 Start offer grant programs and organize networking events. 

The system’s youthfulness lies in the entrepreneurs themselves, as the culture of lean startup management and investors is just starting to integrate. This is why there are so many different educational and expert programs. However, a qualified project can still excellently distinguish itself in the local market.

There are a myriad of complex and conservative issues that persist, though, including opening bank accounts for companies or the overall maintenance process. There are no local technological solutions, and many large international ones are inaccessible. Many service consultants think conservatively and are frightened by basic venture mechanisms. They don’t know how to work properly with startup statutes.

How is this issue being addressed?

Several parallel blocks are trying to resolve these issues.

The state is making an effort to collect these problems and solve them through legislation. There were recent elections where a lot of these topics were discussed. Additionally, there are a number of organizations connected with the state but trying to be closer to the business community, such as the Chamber of Commerce or Luxinnovation, a national innovation agency. They speak the same language as businesses, aggregate information, and promote solutions within the government.

Then, there’s the business path. Businesses are addressing these issues in several ways. Either they unite into various associations, including a recently launched Luxembourg Startups Association, of which there are several working on lobbying the interests of startups. Or they create their own solutions that simplify processes. For example, a portal was recently launched that brings together the entire venture ecosystem of Luxembourg.

Orbita Venture Studio is actively contributing to this growth. With projects like LuxToday, they aim to create comprehensive guides addressing key business-related topics in Luxembourg by summer’s end. Additionally, they are working on an innovative initiative designed to manage companies through a mobile app, reducing paperwork significantly.

Naturally, this progression isn’t achieved in isolation. The invaluable support and collaborative dialogue with local incubators, such as the Luxembourg City incubator under the leadership of Bastien Berg, have been instrumental in their advancements.

Resilience and success in the face of general market downturns

Several projects have already attracted substantial funds for development and scaling. For example, Salonkee raised €28 million in June 2023 to unravel Europe’s salon management software market. And Hydrosat announced $20 million in new funding in May to support the development of its satellites and analytics to measure climate impact. A large cluster is working on deep tech technologies, especially in the space segment.

Several leading institutional funds, such as Mangrove Capital or Expon Capital, also contribute to the growth of the ecosystem and invest in local companies. There is a block of early-stage projects with financing up to €10 million, such as Emailtree.ai, kodehyve, Fiveoffices, Greenworlder, and many others. 

Actually, the achievements could be enumerated quite extensively. A recent showcase at VivaTech in Paris from a delegation from Luxembourg underscored this point effectively. The Luxembourg pavilion stood out impressively, notably for its meticulous planning and the maturity level of its projects.

On the path to becoming the European Silicon Valley

Thanks to its location, its focus on technology, and its business atmosphere, Luxembourg could quickly outpace its larger neighbors and become not just a fintech hub, but a significant economic and technological cluster, similar to Delaware or Silicon Valley in the USA.