Interview: Luxemburger Wort
Luxemburger Wort: How has the start-up scene in Luxembourg developed since you first took office as Minister of Economy in 2012?
Étienne Schneider: Over the past few years, Luxembourg’s startup ecosystem has grown significantly. The Grand-Duchy has become the investment hub for many start-ups and innovative companies that wish to access the different national markets in Europe. Activities range from FinTech to R&D, eco-innovation technologies, health technologies, as well as automotive and space technologies. Since 2004, the Luxembourg government is developing those key sectors intensively to diversify our economy.
Since June last year, there has been an increase of 25 percent of start-ups according to Silicon Luxembourg's Start-Up Map showing the geographical distribution of new business around the Grand-Duchy. To name just a few, well known start-up enterprises having received the support of the Ministry of the Economy in different fields are Digicash, Trendiction, MAPS System or Idetect. As stated by the latest IMD annual world competitiveness ranking, Luxembourg is actually ranked as the most competitive country in the EU. Successful start-ups have grown out of Luxembourg in the past. I would like to mention a company like Skype that was created in the Grand-Duchy and is today a global player in the telco business.
Luxemburger Wort: What makes Luxembourg an attractive place for start-ups?
Étienne Schneider: Luxembourg is deeply committed to offering start-ups a real ecosystem to prosper. Public and private incubators for innovative start-ups provide the appropriate support and advice to new projects facilitating their development and growth. They offer accommodation, consulting services, 3D printing to realise fast prototyping and networking events to local and international technology startups. The Ministry of the Economy has supported the creation of incubators for innovative start-ups like the Technoport which expanded its capacity recently with a new building in Foetz, or the House of BioHealth building in Esch-sur-Alzette, adjacent to the Cité des Sciences. Luxinnovation, our national agency for the promotion of innovation and research, is strongly supporting this dynamism by managing the cluster initiatives and offering a wide range of integrated and tailor-made services to entrepreneurs with innovative projects across all sectors.
Over the past years, the Government has created a legal framework to support development and innovation by formally approving for instance the legislation paving the way for the so-called "1-euro company". The simplified private limited liability company is designed to enable entrepreneurs to establish corporate structures without the heavy capital requirements applicable to existing company types.
The Ministry of Economy has also been strongly supporting innovative start-ups for a number of years now through our RDI aid schemes and especially the Young Innovative Enterprise grant. During the years 2010 to 2014, this aid co-financed, along private investors, the funding needs of 33 high potential young innovative enterprises, with an average grant of some 660,000 euros per company. This considerable aid supported the development of successful start-ups in many, different fields.
Luxemburger Wort: Suggestions by entrepreneurs we've interviewed to boost the start-up sector have included tax and social charges breaks, lower wages, fewer bureaucratic hurdles, more opportunities for funding and more international partners. What is at the top of your list of priorities?
Étienne Schneider: Overcoming the financing challenge, especially in the early stage of development, has been identified for innovative start-ups as one of the major challenges to attract companies to Luxembourg and build a strong ecosystem. Therefore, the Ministry of the Economy has decided to launch some key projects to improve the financing ecosystem in Luxembourg, in particular in the expanding ICT sector that benefits already from first-class infrastructure and networks.
First, we are going to create a new state aid program tailored for ICT companies in collaboration with Luxinnovation to help young projects and teams of entrepreneurs developing a first prototype of their product to present to investors. This programme will take the form of a competition, which will run a couple of times a year, to select the most promising projects. The selected teams of entrepreneurs will then be coached in Lean start-up methodology over four months and hosted in a local incubator, such as Technoport, to help their company develop. It is planned that a first pilot project of this new program will start in October 2015.
A second project that we are currently working on is the set-up of a 20-million-euro seed fund which will be financed by public and private investors. The seed fund will promote long-term innovation and improve the existing ICT start-up ecosystem in Luxembourg, by providing equity financing to early stage start-up companies active in the field of ICT. The seed fund will also aim to work together with public research institutions, such as the University of Luxembourg, to facilitate the transfer of new ICT technologies into successful spin-off companies.
Last but not least, Luxembourg’s public-law banking institution SNCI and the European Investment Fund EIF has already set up the Luxembourg Future Fund. This 150 million euros fund to which SNCI contributes 120 million euros and EIF 30 million euros, will be deployed over a five year period and will focus on innovative European SMEs. The fund aims to stimulate the diversification and sustainable development of the Luxembourg economy by attracting foreign entrepreneurs and early to late stage innovative businesses into Luxembourg.
Luxemburger Wort: ICT and FinTech have been identified as key growth sectors for the economy. What role do start-ups play in this area? What about other businesses – for example in art and design or gastronomy?
Étienne Schneider: Our aid schemes that target in particular innovative start-ups are open to all sectors of activity, to all types and sizes of business with high growth potential, during their development phase. The ICT sector generates clearly the greatest number of start-ups. Over 50 percent of the contacts of the Technoport SA and of Luxinnovation for example are ICT projects. In recent years, Luxembourg has been very successful in developing a dynamic FinTech sector. A growing number of companies from around the world, in particular start-ups, are opening offices in Luxembourg to develop and market their product range. The further development of the FinTech sector in Luxembourg is promising: the Luxembourg market, including all financial players, is located in the heart of the EU’s single market that allows the covering of other national markets.
Luxemburger Wort: Where do you see the start-up scene going over the next five years?
Étienne Schneider: The steel and oil crises in the 1970s and the 2008 financial crisis have highlighted the vulnerability of the Luxembourg economy that is dependent on one sector of activity. We need to further strengthen the economic diversification that we started a decade ago.
Stimulating the creation of start-ups and encouraging entrepreneurs with innovative business ideas in all sectors is therefore crucial for Luxembourg. We continue our efforts to improve our legal framework like we did recently by adopting the legislation in the area of electronic archiving within the context of "Digital Lëtzebuerg". We will further facilitate start-up creation and expansion and their access to financing. By the end of the month, we want to get the preliminary draft for a new RDI law approved by the government. These new aid schemes will further increase the tools available to support innovative start-ups in line with the new EU directives.