The Global Entrepreneurship Monitor (pdf), published on 1 February 2019, reported that in 2017 9.3% of the Luxembourg population were engaged in an early-stage entrepreneurial activity, above the 8.3% EU average.

The average startup has one owner and employs a maximum of 5 employees. The report found that a third of all startups provided business services and half were classified as “innovative”. This startup ecosystem is being driven by Luxembourg’s infrastructure and governmental policy, the report said.

It explains that government initiatives which support and raise the profile of startups such as nyuko, Fit4Entrepreneurship and Fit4Start, have helped boost interest in entrepreneurial careers among 13% of the country’s population.

However, barriers remain. Of those polled, more than half of respondents said they felt they had the requisite skills to found a company but were afraid to fail, compared with an average of 37% across Europe.

Finance

The report does not further probe these fears but based on anecdotal feedback from the startup community, it is closely linked with the high cost of living in Luxembourg, which in many cases increases costs and lowers the competitivity of a service or product compared to neighbouring countries.

Early-stage funding could help reduce this hurdle but, as the report highlights, “Many start-ups fail to attract adequate financing because of the difficulty of assessing the quality of new business ideas,” the report said, explaining the problem was particularly acute for SMEs.

The report further found that SMEs pay 46% more in interest on loans than large firms. “Lack of funding (loans or equity) can prevent productive investments and slow business start-ups in Luxembourg. The overwhelming majority of entrepreneurs need external funding,” the author wrote.

Among the workable solutions entrepreneurs in Luxembourg have cited are seeking funds from non-conventional sources, such as family and friends. The report found that 7% of respondents had provided funds for a new business started by someone else.

Primary and secondary school courses

Another weakness identified by the report was the low level of entrepreneurial education in primary and secondary schools in Luxembourg. Just over a fifth of respondents said they had receive courses on starting a business at secondary school. “Experts perceive that the primary and secondary education system is not sufficiently encouraging and supportive of the undertaking of personal initiatives,” the report concluded.