Is Luxembourg good for start-ups?

Luxembourg is a small country in the central part of Europe, which in recent years has been gaining a reputation as a state with a great potential for the development of financial technologies, IT, crypto industry, and other start-up projects.

Luxembourg is a small country in the central part of Europe, which in recent years has been gaining a reputation as a state with a great potential for the development of financial technologies, IT, crypto industry, and other start-up projects.

If you are looking for a platform to register a start-up in Europe, Luxembourg may be a good option. Read on to find out more about the features that make Luxembourg a great place for start-ups. Can we call this country the “new Silicon Valley” in Europe?

What you need to know about Luxembourg’s startup ecosystem?

The Grand Duchy of Luxembourg is a country characterized by the following features:

• open economy;
• a diverse and multinational skilled workforce;
• a well-developed digital infrastructure, actively supported by the government.

These features have allowed the country to create favorable conditions for developing a special startup ecosystem.

It is important to note that more than 500 startups in this country have already demonstrated rapid development. Therefore, many executives and innovators prefer to launch their project here. Luxembourg has built a global reputation as a trusted startup hub with impressive capabilities, robust data streams, reliable cybersecurity systems and large-scale digitization. The country is also regarded as a promising launching pad for entering the entire European Union market.

The jurisdiction has a strong and diversified startup ecosystem, as well as a full range of support programs for projects at different stages of development. During the COVID-19 crisis, Luxembourg start-ups demonstrated high agility and the ability to adapt quickly to new and sometimes unfavorable conditions.

The country offers numerous programs aimed at attracting start-ups. Luxembourg can be a perfect testing market platform for developing different concepts and exploring new products or services. The country’s renowned commercial and political neutrality contributes to making it great for first-class international business.

The state has long had a reputation as an international business center with strong financial and banking sectors. The Duchy is also renowned for its rich entrepreneurial environment, which is generously encouraged by special government initiatives and corporate collaborations. 

More info on the subject here: Is Luxembourg the richest European country?.

State support of the startup ecosystem

One of the most important features of the startup ecosystem in Luxembourg is the comprehensive support of the state. Not all countries can boast such a high level of government involvement in developing innovations and business.

There are a number of government-backed initiatives in the Grand Duchy of Luxembourg aimed at strengthening the startup ecosystem. Startups are an important driving force behind the development of the country’s economy. They create jobs and stimulate innovation, which, in turn, plays a key role in maintaining the competitive power of the country on the world market. 

That is why the Luxembourg government is actively involved in the development of a startup ecosystem, a favorable business environment that promotes the emergence of innovative companies. Over the past few years, dozens of startups, accelerators, incubators, co-working spaces and technological forums have appeared in the country. Startup Luxembourg is probably the most significant project launched with the assistance of the authorities. It is a special public initiative, supported by the Ministry of Economy, created in order to form, support, and promote a startup ecosystem. 

Startup Luxembourg has its own web site, where you can find information on the following aspects:

• the advantages this jurisdiction is ready to offer to innovative and high-tech companies;
• all the various elements of the startup ecosystem (incubators, accelerators, co-working spaces, business incubators, innovation centers and institutions, and many more);
• key news regarding the development of innovations in the country;
• a catalog of all the existing Luxembourg start-ups.

The mission of the Ministry of Economy is to support the development of Luxembourg’s startup ecosystem by providing public assistance for research, development and innovation projects run by private companies. It is also responsible for launching a national development strategy for this area.

In 1984, the government established Luxembourg’s national innovation agency, Luxinnovation. It offers various services to companies and government entities aimed at promoting innovation, thereby supporting the government’s economic development goals. The agency also makes sure that Luxembourg continues to attract international investment, companies, and professionals.

Luxinnovation Agency represents the Economic Interest Group (EIG) that has been joining forces since 1998 and includes the following parties:

• Ministry of Economy;
• Ministry of Higher Education and Research;
• Luxembourg Chamber of Commerce;
• Chambre des Metiers;
• FEDIL – diversified business federation.

Start-up support programs in Luxembourg

In addition to its numerous hosting options, Luxembourg also offers a wide range of support services for young entrepreneurs. A number of specialized programs support the development of the startup ecosystem. For example, the Chamber of Commerce’s Startup House offers various incubators, and Luxinnovation’s Fit 4 Start acceleration program helps tech startups scale up. In addition, there are several other major programs to support start-up projects.

Fit 4 Start

Fit 4 Start is the leading accelerator program for innovative technologies and start-ups offered by the national innovation agency, Luxinnovation. The project was launched in 2015 in accordance with the Luxembourg strategy development of the Ministry of Economy and thanks to the advanced digitization and technological development of the country.

Fit 4 Start covers three areas:

• information and communication technologies (ICT);
• space exploration;
• medical technologies.

According to the records, the organizers have already received more than 1,800 applications for participating in the program, and 78 startups have completed the program. 

Fit 4 Start attracts companies that regard Luxembourg not only as their main market, but also as a testing ground for entering larger national and international markets, including the EU. For this reason, both companies from Luxembourg and businesses from other EU countries participate in the program.

Another advantage of launching a startup in Luxembourg and participating in this program is that, under Fit 4 Start, the Ministry of Economy provides equity-free project financing of up to 150,000 Euros. 

If you need more detailed information about the peculiarities of doing business in Luxembourg, or if you are interested in looking into the country’s economic and legal climate, you can read more on this topic here.

House of Startups

The House of Startups (HoST) program was launched in 2017 by the Chamber of Commerce of Luxembourg. HoST promotes and supports the startup ecosystem and helps businesses with their innovation needs. In particular, HoST matches start-ups to the most suitable programs or incubators on their campus or within the Luxembourg general startup ecosystem. 

HoST creates open innovation projects and connects start-ups with established companies through special events or the Luxembourg Open Innovation Club. HoST also organizes seminars, meetings, and conferences to promote entrepreneurship and innovation. In order to help its players reach the international level, HoST launched the EU-Tribe initiative, which brings together accelerators and incubators from Luxembourg, Belgium, Germany and France. 

For a startup to be eligible for this program, its product must: 

• correspond to the market needs;
• be technology-oriented;
• have the potential to scale.

Luxembourg House of Financial Technology

Luxembourg House of Financial Technology (LHoFT) is a non-profit organization that focuses on the digital transformation of Luxembourg and the development of its financial services. The members of the LHoFT board of directors include the Minister of Finance of the Duchy, CEOs and managing directors of leading financial institutions, as well as representatives of large technological companies. 

Although LHoFT does not offer a traditional incubator program, it provides individual support to each of the partner companies. Offering fintech incubators, collaboration, and business consultations, LHoFT connects various members of the wider fintech ecosystem, including: 

• financial institutions;
• IT companies;
• investors;
• academic and research institutions; and
• regulatory and government bodies.

Luxembourg-City Incubator

Luxembourg-City Incubator a program launched in 2017 by the Luxembourg Chamber of Commerce. It is one of the largest incubators for start-ups working in any industry. However, the main focus of the program is placed on projects that work in the following fields: 

• trade;
• construction;
• tourism;
• logistics;
• educational technologies;
• healthcare;
• environmental protection.

The Luxembourg-City Incubator program developed on a case-by-case basis focuses on the needs of each individual start-up. Companies can participate in a series of meetings to evaluate their business priorities, monitor progress, and receive support in their day-to-day operations.

In its first three years of operation, Luxembourg-City Incubator provided support to 14 start-ups that won the Fit 4 Start acceleration program.

Other popular start-up support programs in Luxembourg include:

• Tomorrow Street Innovation Centre;
• WIDE;
• Technoport;
• Paul Wurth InCub;
• nyuko;
• Le Village by CA Luxembourg.

Why register a start-up in Luxembourg?

Luxembourg has long been recognized as one of the world’s important financial leaders. Now it is also becoming the center of fintech and big data business, and the government of the country is actively facilitating this process.

The Grand Duchy offers many opportunities for digital projects created by international corporations, small and medium-sized businesses, and start-ups. Major companies, such as Amazon, PayPal, and Rakuten have already chosen Luxembourg as their European headquarters.

Following are the main advantages of registering a company and launching a startup in Luxembourg includes the points:

• strategically advantageous geographic location of the jurisdiction;
• membership in the EU and the opportunity to enter European markets;
• one of the highest standards of living in the world;
• well-developed and open economy;
• the highest per capita GDP in the world in a number of parameters;
• highly reliable banking sector;
• a large number of venture capitalists;
• the opportunity to register a company in Luxembourg for non-residents;
• the chance to participate in the numerous government programs that support start-ups;
• strong and actively developing startup ecosystem;
• multinational and highly skilled workforce;
• a favorable tax climate and the possibility of getting some tax incentives under certain conditions;
• a well-developed infrastructure;
• a strong legal, regulatory, and tax regime;
• Luxembourg being recognized as one of the most innovative countries in the EU.

The following information may also interest you: Corporate benefits and taxes in Luxembourg.

In 2019, the Cisco Digital Readiness Index gave Luxembourg number one in its ranking. The jurisdiction has been recognized as the most attractive environment for start-ups due to its flexibility and willingness to stimulate innovation.

In general, Luxembourg is a good place for business, especially in the financial and technological sectors. In addition, the government offers a range of incentives for placing businesses within the country, including tax breaks and access to financing on beneficial terms.

How to start a company in Luxembourg

If you intend to launch a start-up project in Luxembourg, you will need to choose the appropriate legal form and register a company. The main types of commercial organizations in the Duchy are as follows:

• a Joint-Stock Company (Societe Anonyme or SA);
• an LLC (SARL);
• a cooperative company (sociétés cooperatives or SCOP);
• a partnership;
• an LP (sociétés en commandite paractions); 
• an LLP (sociétés en commandite simple).

SA registration in Luxembourg

Public companies are one of the most common types of commercial organizations in Luxembourg. Large corporations often use this type of enterprise, because the company can be listed on the stock exchange and offer its shares to the public in order to raise funding.

SA can be opened by one or more persons (corporate shareholders are also allowed). The liability of the shareholders is limited to the amount of their contribution to the capital of the company. The amount of the authorized capital is 30,000 euros, and 25% of it must be paid at the time of registration.

SARL registration in Luxembourg

The majority of businesses in the Grand Duchy are registered as private limited companies. A SARL must have between 2 and 100 shareholders. If the number of shareholders exceeds 100, then the company needs to change its legal form.

There can be one shareholder at the time of registration, since the law allows one shareholder to own all the shares. The law allows creating companies of this type for any kind of business, except insurance and investment activities. Registration requires a minimum capital of 12,000 Euros.

If the number of shareholders exceeds 60, SARL must hold a general shareholders meeting at least once a year. The shareholders’ liability is limited to the size of their contribution.

SCOP registration in Luxembourg

Cooperatives in Luxembourg are commercial companies. SCOP has a variable capital structure and a variable number of partners. This means that the size of the company’s capital and the number of its partners are not fixed; they can be changing constantly. The owners of the shares are not allowed to transfer their shares to third parties.

A minimum of two people is required to set up a cooperative company. The maximum number of persons is not limited. Partners can be both individuals and legal entities. The law does not regulate the minimum or maximum amount of the authorized capital. 

Creating a partnership

Partnerships are commercial companies, in which the partners are equally personally liable for all the obligations of the firm. SENC registration requires at least two partners, and legal entities can act as partners. The partnership is created by drawing up a private act. It is terminated after the expiration of the period specified in such an agreement.

Starting an SCA

A limited liability partnership has the features of both a partnership and an SA because it provides for regulated liability of the members, and ownership shares are freely transferable.

A minimum of two partners are required to start an SCA. In this case, one partner is a full partner (bears unlimited liability for the activities of the enterprise and conducts management activities), and the other is a partner with limited liability.

The formation of an SCA requires a minimum share capital contribution of 30,000 Euros and a notarized memorandum of association. The duration of the SCA is determined by its charter.

Registering a SCS in Luxembourg

A limited liability partnership is also a commercial company that requires at least two partners to form. Both legal entities and individuals can participate in a limited partnership. The SCS is created by drawing up a partnership agreement. There are no minimum capital requirements in Luxembourg to form a limited partnership.

The first step towards registration is to check that the desired company name is in the Luxembourg Trade and Companies Register (RCS). After confirming the name of the enterprise, the next step is to draw up the constituent documents, including the memorandum of association, powers of attorney and declaration of the beneficial owner.

The legal entity must also have a registered office in Luxembourg. You will need to open a bank account for the company and go through the business licensing process if running your business requires a license in the country.

Conclusion

Luxembourg is quickly gaining a reputation as a startup-friendly country and is becoming Europe’s so-called “new Silicon Valley”. The original Silicon Valley is, of course, the name of the famous southern San Francisco Bay Area in California, where all the world’s tech giants such as Google and Facebook have their bases. However, the analogy here is quite clear.

Luxembourg, located in the heart of the European continent, boasts a stable economic, political, and social environment suitable for growing loping start-ups. One of the most important factors in the development of innovation is the encouragement and support from the country’s government and the special programs it offers for start-up companies.