SNCI and EIF Launch Luxembourg Future Fund 2 (LFF 2)

• LFF 2 succeeds LFF 1 with additional firepower of up to €200 million.
• LFF 2 will support investments to further stimulate the diversification and sustainable development of the Luxembourg economy.
• It will have a broader scope including hybrid debt-equity investments in addition to venture capital.

On Friday 17 March 2023, the Ministry of Finance, Ministry of the Economy, Société Nationale de Crédit et d’Investissement (SNCI) and the European Investment Fund (EIF) officially launched the Luxembourg Future Fund 2 (LFF 2).

LFF 2 is the successor initiative to the existing Luxembourg Future Fund (LFF 1), which had reached the end of its active investment period.

The launch of LFF 2 highlights the successful cooperation between SNCI and the EIF, with the aim of stimulating the diversification and sustainable development of the Luxembourg economy via funding activities. With €200 million in total financing commitments split between SNCI (up to €160 million) and the EIF (up to €40 million), LFF 2 provides additional firepower in support of innovative projects in Luxembourg.

During the press conference, Minister of Finance Yuriko Backes highlighted: “With the launch of the LFF 2, we will pursue a unique partnership that is built on the EIF’s deep expertise of managing public policy focused investment initiatives and the SNCI’s as well as the Ministries’ knowledge of the Luxembourg economy. This complementarity helps focus investments in innovative technologies that will generate a sustainable and positive impact in key sectors like finance and climate technologies, thus contributing to the further diversification of our economy.”

Like LFF 1, LFF 2 will target a risk-adjusted financial return while simultaneously stimulating the diversification and sustainable development of the Luxembourg economy with investments across a range of sectors including climate technologies, fintech, cybersecurity, energy resilience, life science and medical technologies, as well as new space technologies.

Luxembourg Minister of the Economy Franz Fayot said: “From a public policy perspective, LFF 2 will provide an important tool in driving forward the diversification of the Luxembourg economy and the development of its strategic sectors by cooperating with the private sector in pursuit of sustainable innovation here in Luxembourg.”

In line with the existing LFF 1 initiative, investments under LFF 2 will continue to take place in the form of fund commitments and/or co-investments. However, the investment scope has been broadened compared to LFF 1 and will now:

• Include investment funds and businesses already established in Luxembourg, thereby allowing these entities to expand local operations further.
• Target more mature innovative businesses by providing hybrid debt-equity investments. These less dilutive investment instruments may appeal to companies unwilling to give up further equity stakes. Thus, the addition of hybrid debt-equity investments will allow LFF 2 to invest in companies at different stages of development.
• As such, investments will also be considered for more mature companies facing a complex and uncertain market environments, including businesses currently exposed to changes in digitalisation, supply chain disruptions or companies transitioning to a low-carbon business model.

SNCI President Vincent Thurmes stated: “By taking further advantage of the ecosystem dynamics initiated by LFF 1, LFF 2 and its stakeholders will continue to develop Luxembourg’s sustainable and resilient economy of tomorrow.”

“We’re pleased to partner again with SNCI and take advantage of the EIF’s experience for the second generation of the LFF initiative,” said EIF Chief Executive Marjut Falkstedt. “Broadening the scope to include hybrid debt-equity investments in addition to venture capital will help address the financing needs of innovative companies that can bring value to Luxembourg and strategic sectors of the European economy.”

Background information

About the EIF:

The European Investment Fund (EIF) is part of the European Investment Bank Group (EIB Group). Its central mission is to support Europe’s micro, small and medium-sized businesses (SMEs) by helping them to access finance. The EIF designs and develops venture and growth capital, guarantees and microfinance instruments, which specifically target this market segment. In this role, the EIF fosters EU objectives in support of innovation, research and development, entrepreneurship, growth, and employment. For more information, please visit www.eif.org.

About the Luxembourg Future Fund (LFF 1)

LFF 1 is an equity investment mandate, amounting to €150 million in aggregate commitment volumes between SNCI (€120 million) and the EIF (€30 million). LFF 1 operates under an umbrella structure with dedicated compartments for venture capital fund investments and co-investments in companies alongside investment funds. It was launched in 2015 and its active investment period ended in the fourth quarter of 2022. As such, no new funding or co-investments will be conducted under LFF 1 and LFF 2 will serve as the successor initiative.

As of 31 December 2022, the LFF 1 portfolio included the below venture capital fund commitments:

• Fabric Ventures Fund 2021: Venture capital fund investing in decentralised network technologies including blockchain-enabled infrastructure.
• GP Bullhound Fund V: Venture capital fund investing across a range of innovative technology sectors.
• Middlegame Ventures Fund I: Venture capital fund investing in financial technology-related ventures.
• Paladin European Cyber Fund: Venture capital fund investing mainly in cybersecurity technologies.

The LFF 1 portfolio also included the following co-investments alongside the investment funds indicated.[1]

• CrossLend GmbH (with Lakestar II LP Fund) in the fintech sector.
• Cyberhedge Europe Sarl (with Paladin European Cyber Fund) in the cybersecurity sector.
• Pagantis (with Prime Ventures IV Fund) in the fintech sector.
• LendInvest Limited (with GP Bullhound Fund IV) in the fintech sector.
• SolarisBank AG (with Lakestar II LP Fund) in the fintech sector.
• Spire Global Inc. (with RRE Leaders) in the new space sector.
• ICEYE (with OTB Fund) in the new space sector.
• NorthStar (with Telesystem) in the new space sector.
• ClearSpace (with OTB Fund 2) in the new space sector.

Through its investment activities and the strong support of key players in the Luxembourg innovation ecosystem, LFF 1 has established itself as a catalyst for international startups and investment funds willing to establish their presence in the country. LFF 2 is now continuing this activity, thereby further strengthening the national economy.

About SNCI:

The Société Nationale de Crédit et d’Investissement (SNCI) is a public-law banking institution specialised in the medium and long-term financing of Luxembourg-based companies. SNCI’s financing instruments cover investments in fixed assets, innovations and exports. SNCI also grants startup/transmission loans to newly incorporated or inherited small and medium-sized enterprises (SMEs). It may also finance the investments of Luxembourg companies abroad. SNCI may take equity positions, either directly or through affiliated financing companies. For more information, please visit www.snci.lu.

Additional information regarding the LFF 1 co-investment companies:

Spire Global is a software as a service (SaaS) company providing data analytics services with the data collected from space (low-Earth orbit). The company collects data via its constellation of nanosatellites and offers data products to, for instance, maritime, weather and aviation customers. The company opened its European headquarters in Luxembourg, with part of its management in the country.

NorthStar offers a commercial service to monitor space, via a constellation of satellites with dedicated optical sensors. With a secure and expanded data-driven 3-D catalogue of the space environment, NorthStar’s information services enable safe navigation in space. The company has already opened an office in Luxembourg and actively engages with other LFF portfolio companies.

ClearSpace was founded out of the realisation that in-orbit servicing and space debris removal are vital services for the future of space explorations. In 2019, ClearSpace was selected by the European Space Agency to lead the first mission to remove debris from orbit by 2025. The company is planning to open an office in Luxembourg (timing of which to be confirmed).

ICEYE is a microsatellite manufacturer, founded as a spin-off from Aalto University in Finland. The company tries to address challenges (such as reliability, timeliness and access) associated with the use of Earth observation data. In December 2021, the company opened an office in Luxembourg.

Cyberhedge is a financial services firm specialising in managing technology risk. The company has developed predictive models that provide an accurate calculation of cyber risks’ impact on enterprise value. The cloud-based service is intended to assess potential cyber risks that affect a company's financial health and shareholder value. The company has its European headquarters in Luxembourg and has created several high-skilled jobs in the country.

Pagantis (formerly known as Digital Origin) is a financial technology company founded in 2011. Pagantis created a scalable technology platform to provide automated, friction-free consumer finance for e-commerce transactions in Europe. In early 2020, the company established an office in Luxembourg with employment of local directors.

LendInvest is an online marketplace for property finance. The marketplace provides property investors and developers with bridging, buy to let and development loans, while also providing investors with ways to invest in secured property loans. LendInvest has established an initial Luxembourg-domiciled fund and is looking to raise a new Luxembourg-based fund.

SolarisBank is a technology company founded in 2016, with a banking licence in Germany, offering a digital banking platform to third parties (such as digital service providers and online merchants). The company has concluded a strategic partnership with CrossLend, leading to a number of synergies for both entities.

CrossLend operates a loan origination and securitisation platform that brings together borrowers and investors in the alternative consumer finance/peer-to-peer lending sector.

Press contacts:

EIB Group/EIF: Sabine Parisse (s.parisse@eib.org)

EIF (equity investments, mandate management): Joel Wajsberg (J.Wajsberg@eif.org)

SNCI: Eva Kremer (Email: Eva.Kremer@snci.lu)

Ministry of Finance: Max Dörner (Max.Doerner@fi.etat.lu) Chiara Luciani (Chiara.Luciani@fi.etat.lu)

Ministry of the Economy: Paul Zenners (Paul.Zenners@eco.etat.lu)