“Luxembourg wants to build a community of entrepreneurs that has the ambition to develop innovative solutions to current challenges, and so lay the groundwork for future scaleups,” said economy minister (DP) during his introductory speech to Expon Capital’s second annual Digital Tech Fund event on 25 January. And “the Digital Tech Fund has an important impact on the local ecosystem” by boosting employment and attracting talent to Luxembourg.
The fund--whose portfolio includes companies like Cascade, Passbolt, Videobot, Accelex, Next Gate Tech, Marketleap, Salonkee, Wizata and Hydrosat--invests in digital companies that are based in Luxembourg or have “substantial” activities in the grand duchy across a wide range of sectors, such as cybersecurity, digital health, fintech, big data, digital learning or new space.
So how do players in Luxembourg see the state of entrepreneurship and how can the country further support startups in becoming scaleups?
Need to “connect the dots” better
Luxembourg is “very good” in seed class support, but there is a real need for “scaling support,” said , CEO of Luxinnovation, during a panel discussion on the topic. “So we’re working on that now.” As a country, Luxembourg has a “tremendous potential to be a real testbed for startups,” she added. Startups need a “real market” in which they can develop products and services “that they can test according to the needs of big players” like corporates and public institutions.
“What I think we should work better at doing is bringing startups in touch with the big players, to really make those connections better as a country,” said Baillie. “That’s where I think Luxembourg has a real card to play, because if we an bring startups here and develop startups here, that are able to get access to all these key players.” Everything is “so close” to each other in Luxembourg--“we have the proximity, we know each other, we just have to connect those dots better.”
For , president of the Fedil business federation, startups and larger, more established companies often have different ways of working. “But I think collaboration could be very interesting,” she noted, and in both directions: startups bring in “fresh ideas, disruptive technology and agility,” while startups could discover new methods of working.
Ways to improve
It’s “great to see all these initiatives” that have been developed over the last 10 years, noted , head of the House of Entrepreneurship, but “we need to communicate more,” create synergies and work together more. It’s also important to further develop the entrepreneurial mindset and culture in Luxembourg, and find ways to retain companies, Damgé added. It’s not enough to just bring startups to the country--they need to stay here as well.
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But there are many obstacles that need to be addressed, she continued, including the administrative and regulatory overload faced by startups, making processes--like opening bank accounts--simpler and improving digitalisation. Damgé also suggested considering incentives for private investments, tax incentives or offering stock options as ways to attract young people and retain them.
Luxinnovation’s Baillie also mentioned the government’s “From seed to scale” roadmap, presented in June 2023, which aims to help develop the country’s startup ecosystem. With a “keystone team” made up of a “mix of actors,” such as startup founders, VC firms, institutional actors and incubators, the pilot programme provides support to startups who have a potential to scale up.
The first , announced in December 2023, are Circu Li-ion, Arspectra and Leko Labs. They’ll benefit from tailored support in terms of fundraising, team development, improved visibility and relevant training.
Salonkee’s success story and what lies ahead
Salonkee, a Luxembourg company supported by Expon’s Digital Tech Fund, can be considered a success story. It’s not just an online reservation system for beauty and hair salons, but an operating system that includes banking, payment and expense management tools, supply, orders and stock management, as well as ways to boost visibility online and manage customer reviews, as CEO explained during the panel.
It’s accelerating its presence in all the countries in which it is established, said Michels, with year-on-year growth of 90% in Belgium, 130% in Switzerland and 300% in Germany. It’s also present in the Netherlands and plans to tackle the Austrian and Italian markets next. In Luxembourg, Salonkee has nearly 70% of market share and continues to grow.
The firm plans to expand by linking bank accounts to their system, allowing users to better manage expenses and digitalise payments; adding a loan calculator that will allow salons to calculate and get a loan through Salonkee partners, which would then get paid back as a percentage of daily revenue; allowing users to easily set up and update their own websites; and integrating supply management systems so that products can be ordered based on booked appointments.
So how “easy” was it ?
Luxembourg has its advantages and disadvantages, Michels replied. It’s a small market, which means it’s usually not big enough to stay and raise a or B round and companies have to go abroad to get funding. “You go to Europe, and you tell European investors, ‘I’m the best company, you have to invest in me, rather than all the French or German [companies] around me. And that’s a very challenging pitch to get right. You’re generally smaller, slightly slower because of the complexity--and then you want to pitch that they should invest in you, and not in your competitors.”
“And so I think that having series A funding in Luxembourg will also help, because it will give startups more time to catch up to maybe bigger players in other countries.” Then once you get to the series B stage--it’s still not easy--“but then things even out, you have proven yourself.” Salonkee in 2021 raised €6.2m in series A funding and €28m in 2023 in a series B funding round.
Takeaways
Moderator , managing partner and co-founder at Expon Capital, summed up the panel: “We need an attractive, competitive country. We need to simplify a lot of things. We also need to continue working on the culture. We need to continue our efforts to encourage startup creation and support it if we want to see champions emerge. We’re at around 500 right now, but we need to get to a critical size of 1000.”
This will have an impact on the country’s overall economy, but “we need a local solution for financing and supporting scaleups.” And to get there, it “will take a big push from all of us.”