The start-up ecosystem in Luxembourg has expanded rapidly over the past years, and now includes some 350 dynamic young companies in various sectors. Many of them are impacted by the economic slow-down fostered by the measures taken to limit the propagation of the coronavirus. Making sure that the start-up community remains in good shape has become a national priority.

The government is well aware of how the current situation impacts start-ups.

“The government is well aware of how the current situation impacts start-ups,” ensures Frédéric Becker, Advisor for financial technology at the Ministry of the Economy. “We have had a massive number of contacts with entrepreneurs over the last three weeks. Measures to support them are already in place, and additional ones are being developed as we speak.”

Economic stabilisation programme

Start-ups can benefit from a range of measures included in the economic stabilisation programme launched by the Luxembourg government on 25 March and considerably expanded since. They include, among many others, non-repayable emergency grants to micro companies and the self-employed, state guarantees for bank loans, the deferment of tax-related payments and social security contributions, and short-term employment support where the state covers 80% of salary costs for staff in companies whose activity has been temporarily interrupted by law. Mr Becker also draws attention to the capital grant advance of up to €500,000 that is available for all companies, including early-stage start-ups, to help them cover operational costs. “The advance requires no guarantees and offers a flexible reimbursement model,” he underlines.

As the country relies heavily on cross-border workers, agreements have been made with the Belgian, French and German authorities to temporarily wave the maximum number of days cross-border commuters can work remotely without being taxed in their country of origin. Visas and residence permits of third-country nationals (i.e. non-EU citizens) that are reaching their expiration date remain valid during the crisis.

The government is not alone in having reacted to the crisis. Several banks offer reimbursement moratoria for existing loans, for example, and incubators such as Technoport and the House of Startups have waived a month of rent to help their tenants.

Start-up nation: new opportunities

Start-ups can also benefit from specific measures. The Ministry of the Economy offers subsidies to R&D-intensive young innovative enterprises that develop innovative products, services or processes. As part of the stabilisation programme, the proportion of co-funding has been increased from 50% to 70%. “Previously, the aid was mainly used for large projects requiring co-funding of close to the maximum amount of €800,000. However, much smaller projects will now also be considered, and the ministry has put substantial resources in place to be able to process new grant applications quickly,” Mr Becker explains.

The ministry has put substantial resources in place to be able to process new grant applications quickly.

The ministry, in collaboration with Luxinnovation, also launched a call for projects entitled “Startups VS COVID-19” on 9 April 2020. Targeting young innovative enterprises that have a legal entity and operational activities in Luxembourg, the call focuses on the development of technology-based innovative products and services intended to limit, or even overcome, the economic, health and societal effects of the crisis linked to the COVID-19 pandemic. “Financial support of up to €150,000 will be offered to up to 20 selected projects,” says Stefan Berend, Head of Start-up Acceleration at Luxinnovation. “Solutions should be developed and put on the market within a period of 6 months.”

R&D and innovation: the key

The “Startups VS COVID-19” call is not the only initiative aimed at combatting the pandemic through R&D and innovation. The Ministry of the Economy can provide co-funding of up to 80% of costs for industrial research and experimental development projects as well as investment projects implemented by companies to produce or develop medical devices or hospital and medical equipment. Financial support is also available for SMEs that reorient their production chain to manufacture protective masks or produce hydroalcoholic gel, for example.

Keeping start-ups informed and answering their questions regarding the various aid measures is essential. Luxinnovation and the ministry have launched a series of webinars for start-ups. The first ones, which took place on 8 April and 15 April, were a resounding success with hundreds of participants. “The next webinars will cover updates on support measures and additional questions that we did not have the time to answer immediately,” says Mr Berend.