Every nation wants to be a startup nation, and Luxembourg is no exception. Success requires bright ideas and large quantities of investment to bring these innovations to fruition.
Can the country’s new growth businesses and wealth management industry work more closely together? Can Luxembourg’s globally focused cross-border financial sector shift its sights to notice the potentially lucrative innovation that is happening on its doorstep?
Startup hubs and incubators have proliferated, and with it have come firms developing new, potentially life-changing ideas. Yet, many lack the financing needed to unlock different levels of innovation and bring products to market.
Allying the local wealth management industry with the startup sector is an ambition of the Luxembourg Private Equity and Venture Capital Association’s (LPEA) president, Rajaa Mekouar-Schneider. “In London, investors go there because they know they will meet entrepreneurs, venture capitalists, like-minded investors, intermediaries, banks, service providers,” she noted.
The result is a virtuous circle of innovative businesses attracting global investors and talented staff, which in turn generates more new bright ideas that attract more financial backing. Mekouar-Schneider would like to replicate this model in Luxembourg, although obviously on a smaller scale. LPEA estimates that there are around 80-100 family owned investment businesses in Luxembourg. These single family offices wield considerable financial power, managing portfolios from a few hundred million to several billion euros. Clearly a share of this type of cash could make a serious difference to the fortunes of any startup or growth company.
Most family offices manage the assets of people who live outside the grand duchy, but a good proportion of these clients are resident. The LPEA realised that there was sufficient interest to create a forum to facilitate networking inside and outside of Luxembourg. Thus, they founded a single family office section to their association to foster connections between these families and their representatives. It currently has 25 members, with 30 expected for the end of this year. This networking group mobilises and unifies the local scene, helps share best practice, and provides a focus for attracting international players.
A key part of this work is boosting awareness of local investment opportunities. “We are planning investor days, where families and their representatives will be invited to meet selected local entrepreneurs who can showcase their work,” said Mekouar-Schneider. If there is a meeting of minds and financial interests, investments could then be managed locally.
Investors could tap into the country’s extensive ecosystem of expertise in wealth management and corporate structuring. Luxembourg has a unique offering, as for some clients it is important that investments be channelled through an onshore jurisdiction in the EU’s eurozone. Although the country is compliant with international tax-information sharing rules, the culture of confidentiality remains a hallmark. Add to that the central location with multilingual servicing, and Luxembourg could have what it takes to establish a niche innovation-investment nexus.
Bringing together venture capital and wealth management is Mekouar-Schneider’s professional speciality. She is head of private equity for a Luxembourg-based single family office, which involves seeking investment projects from around the world for clients to consider. Having an innovation-private equity hub in Luxembourg could also help with this work, putting Luxembourg more on the map of European and global venture capitalists.