Goodbye, Iceye. Cyberhedge has gone into administration. Pagantis has been wound up. Goodbye, Lendinvest and Crosslend. Teraki has also gone into administration; its assets were bought by Ottopia for more than they were worth. The €4.3m stake in Solaris was sold for €285. If , in “warrior” mode, manages to get the Spire craft back on track just before it crashes, the company will be the one to have the most measurable impact on the Luxembourg economy: 81.29 full-time equivalents (FTEs) by the end of 2023, before the economic downturn and the sale of certain business units – the accounts for 2024 and 2025 have not been filed with the Commercial Register. Plus 6.6 FTEs at Clearspace and one at Northstar. Lyten? It is unclear; the company is not up to date with its accounts and, on the face of it, its development work is taking place everywhere except in Luxembourg. Hydrosat – 15 jobs according to the latest figures – has seen its value halved.
Seen in this light, the early days of the “venture capitalist” state do not look particularly impressive, but there is no way of getting a better picture. €150m for the Luxembourg Future Fund 1 (LFF1), €200m for LFF2, which is currently being rolled out (with around €60m already deployed), and €270m for LFF3. That is more than half a billion euros of public money, with no accountability whatsoever to those footing the bill: the citizens.
However, as the press release issued on Friday 4 September points out, the data does exist: it is held by the National Credit and Investment Corporation (SNCI) and is concealed behind the phrase “objectives for the creation of local economic substance”; this data is not made public for reasons of commercial protection of entities currently in a race against time. Whilst the director of the SNCI, , says that the eligibility criteria for the programme are publicly available on the website, but nothing is revealed about the financial reality of these companies. That’s a different matter.
The “fund of funds” – the only way to achieve positive results
The minister for Finance, , is right when it comes to explaining the situation: if Europe wants to compete with the United States and prevent its brightest talents from succumbing to the allure of the US, Europeans will have to open the floodgates of funding – and not just drip-feed it. That may be so, but it is not the state’s role to gamble with its citizens’ money. And certainly not to lose it.
According to our own calculations, whilst the LFF1 has not quite reached the end of its ten-year existence, the rather negative track record of co-investments is masked by that of the “funds of funds” department, with the latter offsetting the losses of the former. This is certainly worth noting at a crucial juncture: when funds of funds outperform co-investments, it simply means that the investment choices have been less effective than those of the funds.
And this is why the third edition of Luxembourg Future will have a new (and third) structure: the programme will be able to invest in venture capital, private equity and private debt funds. It will target specialised or multi-sector funds focused on high-growth sectors that are essential to the country’s future, notably cybertech, deep-tech, fintech, healthtech, proptech, space-tech, green tech/cleantech and the transport sector, according to the press release. Gone are the days of rather risky co-investments.
How can we ensure that funds are channelled back into the local economy, as required by the legislation? To be honest, it’s not possible. And the two representatives of the European institutions, the vice-president of the European Investment Bank (EIB), , and the vice-president of the European Investment Fund (EIF), Merete Clausen, acknowledge this, explaining that helping European companies to remain in Europe also contributes to Luxembourg’s development. Indirectly. Not through taxes or jobs, but indirectly. Fair enough.
Luxembourg’s initiatives outside the equation
Why does the third edition return some of the control to the SNCI, which “takes a decisive step by participating directly in the investment process and investing in its own name”? Because its ten years’ experience has given it the maturity to operate on a par with its counterpart, replies Mr Roth. But in private, the EIF shrugs, explaining that, in any case, the two players were already closely linked, sharing due diligence and opinions before investing.
Among the long list of unanswered questions this Friday is the question of why no spin-off from the University of Luxembourg or any Luxembourgish company has ever been given the opportunity to secure investment through this scheme. This scheme complements, as the minister for the Economy pointed out, , the range of measures the government is implementing to support its businesses and diversify the economy.
Today, the only sector that has benefited from this approach to diversifying the economy is… the financial sector, which already accounts for 31% of Luxembourg’s GDP. It rakes in millions of euros in fees and charges for channelling this public money to businesses without having to answer to anyone, as the whole process is so diluted within the network of small financing streams. “Otherwise, nobody would take any action!” asserts one of the experts present at the press conference.