Rocking the Fintech World

#6 CAPITAL 2H 2015 The magazine of the Luxembourg Private Equity & Venture Capital Association

Paymill, Spotcap, Zencap ROCKING THE FINTECH WORLD

Finance Minister Pierre Gramegna: “We believe in a level playing field”

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LIS_Alfi_210x297_1114_1.indd 1 04.12.14 15:13 CAPITAL #6 I 3 CONTENT

5. Editorial by Jérôme Wittamer and Paul Junck 7. Interview with Finance Minister Pierre Gramegna: “We believe in a level playing field” 10. How is the Luxembourg Presidency impacting business? 11. The future is now 13. Towers of strength and prosperity 14. EIF: a major player in the European Private Debt market 16. Turnaround with angel wings THE MAGAZINE OF THE LUXEMBOURG PRIVATE EQUITY & VENTURE CAPITAL ASSOCIATION 18. Cover Story: Rocket Internet, Rocking the FinTech world Contributors: Paul Junck, Jérome Wittamer, Luís Galveias, Anja Grenner, Pierre Gramegna, Jean-Yves Hergott, Mark Henkel, Michel Feider, 22. Why Spain is the hot spot for PE Carmen Von Nell-Breuning, Matthias Knecht, Toby Triebel, Nicolas Fermaud, Florent Trouiller, and VC investments Roberto Vitón, Antoine Clasen, Jean-Philippe Burcklen, Alexandre Prost-Gargoz, 23. Regulatory and Tax, how Luxembourg Georges Bock, Jane Wilkinson allows US managers to kill two birds Conception & coordination: 360Crossmedia Artistic Director: Franck Widling with one stone Cover photo: © RCKT 26. A new gateway to farming: Crossroads Disclaimer : To the fullest extent permissible under applicable law, LPEA does not accept any of diversity responsibility or liability of any kind, with respect to the accuracy or completeness of the information and data from this documentation. The information and data 30. Bernard Massard and the world provided in this documentation are for general information purposes. It is not investment advice nor of sparkling wines can it take account of your own particular circumstances. If you require any advice, you should contact a financial or other professional adviser. No 33. About LPEA material in this documentation is an offer or solicitation to buy or sell any professional services, financial products or investments. 34. Event’s Calendar 4 I CAPITAL #6 REBRANDING

LPEA’S NEW LOOK

n our previous issue, on the occasion clature of the association but changes its of the celebration of LPEA’s 5th anni- format to a more straight forward letter- versary, the association’s President ing. At the same time we introduce a I Jérôme Wittamer highlighted the pro- pictogram which in its red and pink tones gress already achieved by LPEA “from reflects the youth and audacity of a an idea to a reference”. His words young association as much as the risk- emerged from LPEA’s strategy exercise taking attitude of the sector. While at first which reflected the members’ views on the square pictogram may resemble an the association and produced guide- arrow focusing on the unity of LPEA, if lines for the coming years. you look more closely you will notice dif- With the future in mind and a broad new ferent building blocks that represent the chapter ahead of us, LPEA decided to stakeholders of the association and the convey a new branding which ultimately different services we can find in better reflects the association’s constitu- Luxembourg’s private equity and ven- ency and goals which we now present to ture capital “tool box”. you. The rebranding is the result of a half- As from September 2015, LPEA is rep- year-long development accomplished resented by a new logo and a new set of by LPEA’s Promotion Committee and colours and graphical tools. The Executive Committee with the expertise rebranding keeps “LPEA” as the nomen- of the communication agency Mediation. CAPITAL #6 I 5 EDITORIAL

DEAR PRIVATE EQUITY PROFESSIONALS,

n this 6th edition of Capital V we bring you the views of three entrepreneurs from a sector that is pointed out by many as the way forward I to Luxembourg: Fintech. Given the need for diversification the country faces, Fintech is seen by many end result of Luxembourg’s many useful features: very high-speed internet, secured data centres and a unique Financial sector’s know how. Are we ready for the shift in mindset that this will imply? Will the more traditional practices welcome this new world? If we want to continue to be a leader in finance, the answer must be “yes”. LPEA is also changing! Along with the celebration of our 5th anniversary, we are rolling out a new logo that represents our positioning and Luxembourg’s PE/VC toolbox. Enjoy the reading. Cordially,

Jérôme Wittamer, Chairman Paul Junck, Managing Director

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Finance Minister Pierre Gramegna “WE BELIEVE IN A LEVEL PLAYING FIELD”

PIERRE GRAMEGNA SAYS What is the state of the national budget following the VAT rate LUXEMBOURG IS ON THE WAY BACK changes? TO A BALANCED BUDGET, WANTS Overall the situation is satisfactory. The effects of the ‘future package’ A LEVEL PLAYING FIELD ON TAX, (“Zukunfspak”) measures start to be felt, as the IMF has just confirmed in its AND IS A PERFECT TEST BED FOR recent report. We are on track to return FINANCIAL TECHNOLOGY. to a balanced budget for the central government by 2018, while maintaining one of the highest levels of investment in Europe – it will grow by 15% this year to nearly €2bn. And the growth trend is not restricted to investment; overall 8 I CAPITAL #6 INTERVIEW

state expenditure will increase by planned tax reform. Successive an average of 4% a year between 2014 Luxembourg governments have mani- and 2018. As regards VAT, rate adjust- fested their commitment to fair tax comments were necessary to compensate in petition between the countries because part for the expected loss of revenue it’s the only way of preventing a negative from VAT on e-commerce, which is esti- spiral of continuing and excessive mated at around €700m for the current increases in tax rates. As part of this year. However, let’s not forget there commitment, Luxembourg is actively hasn’t been any across-the-board involved in the OECD-sponsored initia- increase. The 3% rate on food and other tive on base erosion and profit shifting, basic necessities as well as books, med- which seeks to establish common rules icine and cultural events still applies, that would implement a level playing and our rates remain the lowest in field on a worldwide basis. Europe. However, I should stress that the tax regime has only ever been one element Why has Luxembourg been among many that attract businesses to singled out for criticism of its tax Luxembourg. Other factors, including rulings? political and economic stability, long- I think this is no longer the case. At first term planning, high-quality infrastruc- we were subject to scathing media accu- ture, a flexible and responsive sations based on documents stolen from administrative system, a legal framework a Luxembourg company. If the theft had that responds to the requirements of the taken place somewhere else, it would economy, the availability of a skilled mul- have been another country in the firing tilingual workforce and the country’s line. We needed to make a big effort to ideal geographical location are just as explain that tax rulings are not unique to important. Luxembourg – they are a well-established practice in most countries. Now How important for Luxembourg the European Commission is looking at is the confirmation of its AAA how tax rulings are established in all EU credit rating? member states, while the OECD is work- The AAA rating is a guarantee of stabil- ing on a proposed global legal frame- ity, a seal of approval shared with very work for business taxation. Luxembourg few countries around the world, and thus is actively contributing to these efforts a significant competitive advantage. The because we believe in a level playing AAA rating highlights the strength of our field where the same rules apply to eve- public finances and investor confidence ryone. Meanwhile, Luxembourg’s pro- in Luxembourg’s economy, and prom- gress on fiscal transparency, an area in ises the creation of new jobs in the years which we have been subject to attacks, to come. is widely recognised by our partners, even if old stereotypes die hard, espe- What added value does cially for certain media. All we can do is Luxembourg offer Fintech continue our efforts to restore the coun- companies such as Amazon, try’s positive brand image. Rakuten, PayPal, Alibaba and eBay? How will Luxembourg position I have made the development of the itself in the new European and financial technology sector one of my international tax environment? priorities. It already accounts for 150 Luxembourg isn’t, and has never been, companies and more than 10,000 jobs a tax haven – in 2013 the government’s in Luxembourg, and its growth potential tax take was 39.3% of GDP – but we is enormous. Luxembourg benefits from have always maintained a competitive an infrastructure that few if any of its tax framework to attract companies and competitors can match. Companies can enable them to grow. Upholding and find here some of the most efficient data indeed improving the competitiveness of centres in the world, a well calibrated our businesses is a prime aim of our legal framework, and a real ecosystem CAPITAL #6 I 9

“Luxembourg isn’t, and has never been, a tax haven, but we have always offered companies a competitive tax framework.”

Pierre Gramegna, Finance Minister

at their disposal including specialist service providers, a network of nearby research centres, incubators and financing. In addition, our established financial industry offers an ideal research and development environment with hundreds of potential clients.

Could Fintech companies become competition for the traditional financial sector? It’s interesting to see e-commerce specialists such as Rakuten obtaining a banking licence and launching activities, but I see them complementing rather than competing with established players. Traditional financial institutions cannot ignore the digital revolution and will have to adapt, and Fintech providers have an important role to play in helping our financial industry to diversify its offerings.

Article published in Duke 05 in September 2015

MORE INFORMATION www.myofficialstory.com/pierregramegna www.mf.public.lu ©360Crossmedia/M.M. 10 I CAPITAL #6 EUROPEAN UNION

HOW IS THE LUXEMBOURG PRESIDENCY IMPACTING BUSINESS?

uring the second semester of 2015, Luxembourg took over the Presidency of the Council of Dthe European Union from Latvia . Despite not being a legislating institution, the European Council plays a critical role in Europe by setting the policy agenda and by adopting “conclusions” which identify issues of concern and actions to take. It is therefore worthwhile to highlight the policies that Luxembourg has put on the agenda for such a critical period for the EU. Amid a slow recovery from an economic ©DR crisis, the rise of euro-scepticism and the more recent challenge of thousands of the European Investment Bank and the growth of €119 billion (on average €500 illegal migrants, it is no surprise that European Investment Fund. per household) and is therefore per- Luxembourg aims at focusing its man- Capital Markets Union (CMU) ceived as a “free” growth package for date on bringing back the citizens – and The CMU, an important element in the Europe. TTIP will make it easier to invest their voice, to the core of the European Investment Plan, aims at creating deeper across de Atlantic and overall will impact project. and more integrated capital markets. businesses at the competition level The initiative is intended to reduce the through lower custom duties and less Given the inherent subject of Capital V – fragmentation in financial markets, diver- restrictions on standards and regula- private equity and venture capital, we sify financing sources, strengthen cross tions. While the discussions around the have highlighted below the main areas border capital flows and improve access TTIP are expected to intensify in the sec- where Europe and its Council Presidency to finance for businesses, particularly ond semester, the Luxembourg presi- will be working towards a stronger SMEs. This is to be achieved by remov- dency plays an important role in the economy: ing barriers to cross border investment, sensitive debate of the Investor-state European Investment Plan simplifying access to public markets and dispute settlement (ISDS) and in the The so-called “Juncker Plan” is set to improving risk capital, notably for SMEs. implementation of further transparency invest €315 billion during a period of 3 Overall, the European Commission to the negotiations. years starting in 2015. The initiative tar- expects to make markets work more gets the real economy and aims at creat- effectively, linking investors to those who In addition to the policies above, the ing an investment friendly environment. need funding more efficient and less Luxembourg Presidency of the European The plan seeks to overcome current mar- costly, both within Member States and Council has already made clear its com- ket failures by addressing market gaps cross-border. mitment to focus on policies against and mobilising private investment The Transatlantic Trade and fraud and tax evasion in the context of towards innovation and risk finance for Investment Partnership (TTIP) the developments led by the OECD and SMEs. Investors, notably private equity The free trade agreement currently the G20. Such policies will contribute to players, are invited to join project co- under negotiation is estimated to impact greater transparency and establishing a financing, on a risk-sharing basis with the European economy with an annual level playing field for all. CAPITAL #6 I 11 NEWS THE FUTURE IS NOW LAUNCH OF THE NEW LUXEMBOURG FUTURE FUND

After an initial announcement in 2012, work of VC funds across Europe is settle in Luxembourg (eg. open an office, the Luxembourg Future Fund (LFF) expected to be a major source of deal develop a research centre) or to sign long was finally launched on 20 April 2015. flow for the LFF. term partnerships with key actors of the The €150 million fund, designed to invest The international approach of the fund is Luxembourg innovation ecosystem. in businesses intended to shape the well aligned with EIF’s privileged pan- future of Luxembourg, is subscribed by European overview. With circa 250 funds In addition to the inflow of new funds SNCI - Societé Nationale de Crédit et under management and a team of some to SMEs, the local venture capital d’Investissement contributing €120m and 30 investment professionals most of industry may well also benefit from by the EIF - European Investment Fund whom are based in Luxembourg, EIF is t he LFF. Usually claiming a limited local acting as Advisor bringing in the remain- certainly in a good position to recom- deal flow, the programme will foster the ing €30m. mend the programme to all those looking development of new business activities in The fund, targeted towards innovative for a welcoming spot, e.g. in the ICT and Luxembourg and bring over new fast- SMEs from early to growth stages in Cleantech domains. growing companies which may well turn domains such as ICT and Cleantech, is into desirable investment opportunities. composed of three different sub-funds One of the specificities of the LFF is The LFF is initially designed to be which will (1) co-invest with other VC that it cannot invest in companies deployed during the next 5 years and is funds, (2) co-invest with business angels already established in Luxembourg. foreseen to be renewed if shown to be and family offices and (3) fund other funds The goal of the fund is to bring interna- successful as experienced by the EIF in financing the envisaged target group. tional spillover to Luxembourg by invest- other countries. First investments are ©DR EIF’s experience with an extensive net- ing in businesses which aim to either expected before the year-end. ©DR law is our art

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95 experts in Private Equity CAPITAL #6 I 13 DEAL TOWERS OF STRENGTH AND PROSPERITY

IHS - TOWERS OF STRENGTH, MAY CERTAINLY BE ONE OF THE MOST VISIBLE INVESTMENTS OF LUXEMBOURG PRIVATE EQUITY IN AFRICA. AT LEAST IF WE CONSIDER THE COMPANY IS RESHAPING THE LANDSCAPE BY BUILDING AND MANAGING TELECOMMUNICATION TOWERS ACROSS THE CONTINENT.

urrently operating in Nigeria, Sofina Private Equity and Luxempart, 71% cell phone penetration rate and Ivory Coast, Cameroon, both LPEA members, to invest alongside rapid modernization of mobile internet Zambia and Rwanda, IHS pro- it in IHS. services. An opportunity that is now C vides shared towers to the IHS’s business is in the core of the long- being explored by Luxembourg, the growing mobile communications busi- term trends that make Africa a strong country which first sent communication ness in Africa, servicing major operators growth region for telecom infrastructure: into space and is now building telecom- such as MTN, Orange or Etisalat. Growth economic and demographic growth, munication towers in Africa. has been fast. Since its inception 15 years ago, the company built over 25,000 towers (most in Nigeria), hired 1,000 engineers and has brought US$5bn of investment into the continent. In 2014, IHS’s turnover reached US$315m with an Ebitda of about US$100m. The number of towers built by the company has continued to grow in 2014 to support the increasing need of infrastructure in Africa. Those investments have been financed by a US$2bn capital increase, the largest funding raised by an African company since 2010. The round was led by Wendel - represented in Luxembourg by Winvest Conseil, LPEA member, alongside IHS’s shareholders, who are major financial institutions active in economic development and top-tier private equity companies. Among these are Emerging Capital Partners, the leader in private equity in Africa, IFC, part of the World Bank group and Investec. In addition, Wendel brought together four US and European family investors, including ©DR 14 I CAPITAL #6 INTERVIEW

EIF: A MAJOR PLAYER IN THE EUROPEAN PRIVATE DEBT MARKET INTERVIEW WITH JEAN-PHILIPPE BURCKLEN, HEAD OF EQUITY FUND INVESTMENTS

he European Investment Fund gramme even if it is extremely important logy companies when injection of equity (EIF) is Europe’s main provider of and will have a major impact on and fur- is not strictly financially required. risk financing for small and ther improve the access to finance of Tmedium sized enterprise (SMEs) SMEs. It seems however that EIF’s and Mid-Caps. EIF delivers sources of Private Debt activity has funding including equity, debt and First, EIF’s guarantee and securitisation intensified over the last 5 or 6 microfinance via financial intermediar- activity has been crucial for the debt years: ies. EIF’s shareholders are the European market and has indirectly helped sup- Yes, for the reasons given above and Investment Bank (EIB), the European porting hundreds of thousands of particularly since 2009 when we Commission (EC) and public and private European companies. launched the MFG programme , as an financial institutions. This combination of In parallel, on the equity side, EIF, argu- answer to the financial crisis of 2008, public and private shareholding gives ably the biggest fund-of-Venture Capital which clearly evidenced the undercapi- EIF a dual focus: to support EU policy funds in Europe started developing a talisation of the European SMEs and the objectives, while acting as a market-ori- significant role in supporting European need for significant equity and quasi- ented institution that delivers appropri- growth capital funds from 2003. equity injections. ate return on capital. Alongside the traditional instruments of This programme helped a number of the growth capital Private Equity indus- mezzanine players affected by the sig- We met Jean-Philippe Burcklen who has try, the need for different instruments nificant reduction of the volumes of deals been Head of Equity Fund Investments expanding the support to SMEs and sponsored by an equity fund to refocus at EIF since September 2000. Burcklen Mid-Caps soon emerge. Specifically I and re-orientate their strategy towards oversees the lower mid-market activity am referring to those companies or more sponsor-less transactions. The and is responsible for investments and groups owned by shareholders that are programme attracted in 2011-2012 the portfolio in private equity, mezzanine not willing, for various reasons, to lose interest of the German government that and debt funds including co-investments their influence or control, or not ready to was at the time seeking solutions to in companies, a new activity at EIF. welcome a significant external share- address the forthcoming wall of maturity holder, or managers willing to take (or of the mezzanine platforms loans that Burcklen and his team were instrumental strengthen) their control. Hybrid debt/ was expected in 2014-2017. in the creation in 2009 of the €1bn (dou- equity instruments proved to be an ideal We have thus been active in the private bled in 2013) Mezzanine Facility for response to this market need. However, (junior) debt market for six years now Growth (MFG) programme funded by th even if deriving from the traditional con- and have backed more than 45 fund EIB. Additionally in 2015, they have been vertible bonds often implemented by PE managers with commitments exceeding mandated to manage a new programme players, these products were also requir- €1.6bn. funded by the EIB that focuses on investing strong “credit expertise” as they tar- This shows that EIF is constantly analys- ments in senior loan funds with a view to geted investee companies with ing the need of its underlying markets, address the credit needs of SMEs and mid-to-low growth rate and limited always trying to anticipate these needs, Mid-Caps in Europe. default affordable. For the EIB Group and then in close cooperation with our (EIF and the EIB), these products were stakeholders (mainly the EIB and the EC) We know EIF’s involvement in also representing an interesting alterna- to help design and deploy new pro- supporting SMEs by investing into tive way of deploying less equity for the grammes and mandates. Private Equity funds. Could you same impact, while keeping pure equity explain why EIF is now turning to only for where strictly necessary. In addi- The further development in 2015 of our the Private Debt market? tion another market need emerged for Private Debt strategy with a new pro- Private Debt is not something new for EIF “technology mezzanine” or “venture gramme funded by the EIB and designed and we cannot limit our action in the debt” also perceived as a very effective for funds distributing primarily senior Private Debt market to this new pro- funding source for high growth techno- debt to SMEs and Mid-Caps is another CAPITAL #6 I 15

example of our constant evolution. our products (equity and debt). The Beyond the difference in risk (from junior development of a functioning EU eco- debt to senior debt) this new programme system for SMEs and Mid-Caps seeking also allows us to work differently, asso- access to finance in VC and PE is one of ciating our guarantee & securitisation the pillars of our action, targeting the team for high granularity (diversified) stimulation of the activity of VC/PE firms strategies and our PE team for low gran- and extending the reach of financial ularity (selective) strategies. instruments to companies currently left We are currently finalising our first deals, without adequate access to finance. which have been approved by our Board When we decide on a new investment, it of Directors and should be signed dur- always has to be measured (beyond its ing the coming weeks. expected performance) in terms of added So, this “senior debt funds” strategy value summarised by three criteria: mar- appears to be more of an evolution, ket need, structuring input and catalytic rather than a revolution, building on the impact. With its growing activity in Private convergence of our PE and guarantee Debt, EIF directly contributes to the businesses. We have identified 50 to 60 Capital Market Union with additional and general partners (GPs) providing debt more diversified funding mobilised, with funds to SMEs in Europe with interesting an accelerated dissemination of best- deal flows. We want to make sure that market-practice, with new operations SMEs and Mid-Caps have access to under senior loan funds and the involve- loan facilities that are not always easy to ment of non-bank lenders. Simultaneously access through banks. Credit institu- EIF modulates its action on the various EU Jean-Philippe Burcklen, Head of Equity Fund tions are still very active in financing countries overweighting those countries Investments. good risks and large corporations but where the access to finance for SMEs ©DR seem to have less appetite for the low and Mid-Caps is more difficult. end of the mid-market. Are there any specific differences EIF does not have as such a between the two asset classes Finally, we know that EIF is a banking licence, is it an issue in terms of expected returns, European institution embracing per se? risk management, investment the whole European market. But EIF does not distribute credit directly, follow-up? based in Luxembourg, you have but acts as a Limited Partner (LP) in a Clearly expected returns in Private maybe some thoughts on how fund managed by a GP. As LP, EIF does Equity and Private Debt are not in the Luxembourg is performing on not need a banking licence. The situation same range. Private Debt returns are the debt fund market. What is different for GPs when it comes to loan expected (gross IRR) in the 5-6% range comment would you have on distribution. Depending on the jurisdic- without equity kicker and reaching their current position? tion, this activity can be subject to all 8-10% with equity kicker. Two obvious There is still a lot of progress to be made kinds of regulatory requirements even in consequences of such levels of return to improve the fund infrastructure in some cases having banking license or are the difficulty to properly address the Europe. Access for new GPs for example working in collaboration with banks. The “alignment of interest between LPs and is a key issue, so working around an differences in local regulatory environ- GP” which is a key dogma in Private easy toolbox is crucial. Luxembourg has ments have generated different Equity, and the sensitivity of the global developed a number of good scalable approaches (e.g. secondary acquisition performance to a non performing invest- tools for the investment community. I was in France, SPVs in Luxembourg, ment is very high and a debt fund man- recently surprised to see an English Minibonds in Italy, etc). ager cannot afford to record too many Limited Partnership managed by a defaults. In such a context we have to Luxembourg GP, notably because the How should this move to the adjust our due diligence process and procedure to obtain the passport was Private Debt market be read with insist more on topics such as the selec- quicker in Luxembourg! the Capital Market Union tion process, track record, credit skill set initiative? and motivation of the investment team, Interview by Alexandre Prost- For EIF, the harmonisation of the legal without forgetting some Private Equity Gargoz, Co-chair of LPEA’s and regulatory frameworks across expertise in case the fund benefits from Promotion Committee and Partner Europe is key for an efficient roll-out of some equity kicker as well. of Deloitte. 16 I CAPITAL #6 INTERVIEW TURNAROUND WITH ANGEL WINGS INTERVIEW WITH JEAN-YVES HERGOTT, BUSINESS ANGEL AND ENTREPRENEUR, WHO HAS RECENTLY LED THE DEAL TO INVEST IN THE PROMISING FRENCH-BASED OPTICAL METROLOGY COMPANY TECHNOLOGIES.

ergott is one of the active angel investors in Luxembourg and a well-known name within the local H entrepreneurial community. After a career in R&D and having co-founded several businesses including Luxscan Technologies and the seed and startup focused fund Chameleon Invest, Hergott is now bringing some fresh air - and funds, to formaly R&D focussed company VISUOL. LPEA spoke with Hergott about the new investment but also about the overall angel investment landscape in Luxembourg.

How large and active is the business angel community in Luxembourg and who is the typical business angel we can find With 50.000 professionals theless concerned that many may be pre- today? working in the financial industry, vented from joining due to a possible Despite being always a very informal mar- is there room to find more conflict of interests with their day job. ket with no clear figures, I can tell you that business angels in Luxembourg? at LBAN, the Luxembourg Business We know that there are many more busi- Where are Luxembourg business Angels Network, today we have approxi- ness angels in Luxembourg and certainly angels investing today? mately 30 members, most of whom are many coming from the financial sector. At Business angels in Luxembourg invest quite active investors. It’s a diverse com- this stage, and given the direction our mostly in the Greater Region and in the munity in which I identify two major types association seeks to take, we would like to web sector but we see many also inter- of participants. One group of entrepre- encourage the participation of those pro- ested in impact investing, healthcare/ bio- neurs who have succeeded - mostly dur- fessionals who can certainly bring an technology, industry and even retail ing the late 90’s and another group higher level of professionalism to our prac- business. While usually business angels characterized by high-level executive pro- tices and surely bring in “executive” exper- aim for global and scalable businesses file where we will find former and current tise that can help startups deal with growth (and therefore IT, web or fintech), our drive CFOs, CEOs and other professionals with challenges such as internationalisation, is also to impact the region hence to invest strong management experience. recruitment and governance.I am never- mostly in the great region and “down to CAPITAL #6 I 17

“We all invest with an eye on successful exits but having fun is still our first reward, especially by creating value and sharing know-how.”

Jean-Yves Hergott

One of your recent investments

©360Crossmedia/S.M. with other Luxembourg business angels, was in Visuol Technologies, a 20-years old earth” businesses, in more traditional sec- angels today. This is something we lose French business. Are business tors. Actually, besides investing in start- against other countries which have cre- angels tracking far more than ups, we also see many investors targeting ated adequate regimes for angel invest- young startups? Tell us more the “succession” stage, re-launching ments knowing the specificities - high risk about this investment. established businesses with a need for & high economic impact, and is something Visuol was indeed created in 1994 under new business models or other critical we need to continue working on with the the name Techlab which sold material for improvements that can shuffle up the authorities. labs specially for the steel industry. In 2007 game. This is much in line with the regional the company split to have VISUOL focus- focus of our investments. Luxembourg, What is your experience with sing on its current business field, the devel- being a small country in size, has limited Luxembourg based Venture opment and sale of quality surfaces control deal flow so the Greater Region (bordering Capital/ Private Equity investors? systems for the industry. Last year myself, regions of Belgium, Germany and France), We keep close contact with early stage with four other business angels of LBAN accessible in a short drive, is where many VCs although recognising we live in dif- and three others from France looked closer of us feel most comfortable to invest. ferent leagues. As I mentioned before, into this company, and invested early 2015 angels are more local while VCs, espe- in this optical measurement business to do Is angel investment in cially those based in Luxembourg, are something that can be very appealing for Luxembourg taking any direct or naturally global and many also special- experienced business angels and entre- indirect advantage of the ised in certain sectors. This means we are preneurs. It consists iof “starting up” the country’s leading financial not seeking the same kind of deals and company or, in other words, accelerating centre? would be hard pressed to find a local VC the business via investment, injection of Luxembourg has multiple tax efficient fitting the sector or the stage of develop- know-how and better governance. In investment structures. However this only ment we’re looking for. This leads us to Visuol, as in other decades-long busi- applies to more “committed” investors who most often look for VCs abroad which are nesses, we need to refine and refocus mar- are those actually setting up these holding more aligned with the business needs. I kets and business which brings a big structures. If you are an individual doing must recognise there’s still a gap that we challenge but also immense passion to investments without such structures you should try to overcome on having redraw the company from scratch. In pri- expose yourself to being taxed on your Luxembourg early stage VCs funds more vate equity words, we’re doing a turnaround income tax as Luxembourg doesn’t have aligned with the region businesses’ of the business, not with millions of Euros, any kind of special regime for business needs. but with angels wings. 18 I CAPITAL #6 COVER STORY

Rocket Internet ROCKING THE FINTECH WORLD

FINTECH IS OUT TO REVOLUTIONIZE AND FinTech is ramifying into every corner of the financial industry. RESHAPE THE FINANCIAL SERVICES INDUSTRY. Is FinTech complementing or taking the place of the LPEA HAD THE OPPORTUNITY TO INTERVIEW THE traditional banking industry? FOUNDERS AND CEOS OF THREE FINTECH START- Paymill: The FinTech sector won’t completely replace the traditional banking UPS, NAMELY PAYMILL, SPOTCAP AND ZENCAP. industry. But it will make them rethink EACH OF THEM IS A COMPANY OF ROCKET their current models, since they will start to struggle if they don’t keep up with their INTERNET, THE GLOBAL INCUBATOR digital competitors in terms of flexibility. Spotcap: There was a time when banks HEADQUARTERED IN BERLIN, WHICH EXPANDED used lobbying to slow down fintech. ITS OPERATIONS TO LUXEMBOURG LAST YEAR. Now, the trend leans towards cooperation. We have seen banks partnering with fintech companies, setting up venture funds to fund fintech companies, creating startup programs to incubate fintech companies, acquiring fintech companies and creating subsidiaries. Zencap: To my mind, one thing is certain: The FinTech revolution will take the old world of banking by storm. And how will banks respond? My assumption: We will see some sort of Amazon phenom- CAPITAL #6 I 19

“The FinTech revolution will take the old world of banking by storm.”

Matthias Knecht ©DR enon for the financial sector, offering a banks have been stuck in complex wider range of products within the next restructuring processes which they fail five years. to manage well. Fundamental shift cannot be triggered from the inside. You Are major established players of need people who think about financial the financial industry able to services from a different angle, who rec- create disruptive change within ognize that innovative technology and their organization? Or can Big Data are crucial to drive disruptive fundamental change only be change. triggered by the outside, e.g. by start-up companies? The FinTech sector is much Spotcap: It’s certainly possible but only lighter regulated than the very few will succeed. Disruptive change banking industry. Looking at ©RCKT needs a certain mindset and environ- tendencies such as the Bitcoin ment. Fintech startups have the great regulation - what is your opinion FOUNDER AND CEO MARK HENKEL ABOUT PAYMILL advantage of flexible structures and agil- on the potential impact of an ity. We don’t need representative prime increased regulation to the “Paymill is providing the technical infrastructure to process online offices and countless employees to FinTech industry? payments on websites and mobile serve our clients. Paymill: Indeed, the more participants applications for small and medium Zencap: Paul Volcker, the former chair- and the more complex processes enterprises in Europe - and that man of the Federal Reserve, said in become - the more rules and regulations more easy than traditional anger over the financial crisis: ‘The only need to be set up. Service providers and providers. The Paymill API makes it useful banking innovation was the inven- customers will benefit from it. What’s easy to manage transactions in one tion of the ATM.’ We completely agree important for the FinTech sector are place.” with this statement. For a long time, helpful guidelines and a common 20 I CAPITAL #6 COVER STORY

sense on several topics like EU regulations. But we hope those remain flexible or at least suitable to the digital environment. Spotcap: In the end regulatory requirements will deter dishonest financial service providers from entering the market. This will be an advantage for us and other reliable financial service providers. If authorities enforced regulation, we would strongly lobby for it.

What are the exit route(s) of preference for FinTech companies? Spotcap: I don’t believe in the existence of one preferred exit route. There’s always a whole spectrum of exit opportunities. Paymill: To my mind, it would be coope- tition: the innovative ideas of start-ups combined with experience, workforce and resources of incumbent players. It all depends on the size of the company. Once the company has achieved a certain level of growth IPOs are also an option for FinTechs once the market has matured.

Luxembourg strives to become a a melting pot of different cultures and a leading hub for FinTech great place to live. We benefit from the companies. As an entrepreneur - diversity of our employees every day, what are the Top 3 picks that and Berlin attracts an incredible inflow of could make you decide where to highly talented people from around the set up your next venture? world. Zencap: In order to set up a FinTech Paymill: Important is the access to peo- venture, you need to consider the regu- ple and resources, similar to what we latory environment of a country. The see in London or Munich. Living costs competitive landscape is also an impor- also play a critical role. That’s where tant criterion. For example, although Berlin has few peers in Europe, offering

©RCKT other online lending platforms have a mixture of infrastructure as well as an launched before us, Zencap was the first attractive cost of living. Last but not least FOUNDER AND CEO one only focusing on SMEs in Germany. is the regulatory environment in the DR. MATTHIAS KNECHT Another factor is rather an emotional fac- country. Luxembourg is regarded as one ABOUT ZENCAP tor than a hard fact. We decided to set of the most business-friendly countries “Zencap is a peer to peer lending up Zencap in Berlin because the city is in the world. platform which provides a direct connection between small business borrowers and lenders. It takes Zencap only 48 hours from loan “Luxembourg is regarded as one application to credit decision. A small business owner can apply of the most business-friendly from anywhere without even leaving his or her office. It’s like a bank countries in the world.” branch in your living room.” Mark Henkel CAPITAL #6 I 21 ©RCKT ©RCKT

If you had three wishes for free - which ones would be yours as a FinTech entrepreneur?

Spotcap: On top of the list is my wish and ©RCKT ambition to change the antiquated image of the financial industry. At Spotcap part ©RCKT FOUNDER AND CEO TOBY of our mission is to show that the financial TRIEBEL ABOUT SPOTCAP sector can keep up with times and rein- wish. Keeping with this open-minded “Spotcap is an online lending vent itself. My second wish would be for theme, I’d wish for the incumbent players platform for micro, small and the faster acceptance of fintech compa- to be both approachable and acceptive medium sized enterprises which has developed a dynamic decision nies by traditional lending institutions. of the FinTech industry. process assessing real-time Technological progress will continue to Zencap: For now, I could settle with only business performance to grant short transform the financial sector. I’m certain one wish: We are on our way to transform term credit lines. Where banks look that collaboration between fintech com- one of the last resorts in the global econ- at historical financials going back panies and traditional financial institu- omy that has not been disrupted by inno- five years, Spotcap is more focused tions will give this transformation an vative challengers yet. Banking won’t on real time performance over the additional boost and be mutually benefi- look the same 10 years from now. To last 12 months. Consequently we can offer very competitive lending cial for both parties. Finally - and this is change an industry that is as old, as products, which are extremely fast tech-related - I would love to have an API powerful, and that has turned as far to acquire.” that is publicly available to third party pro- away from its customers as the banking viders. This way we could reach even industry, we need the best and brightest more clients and provide our financing to shape this change. I hope we can Interview conducted by Michel Feider, solutions wherever they are needed. attract even more top talents to the partner private equity, and Carmen Paymill: I’d start with open-minded reg- FinTech industry that share our vision von Nell-Breuning, senior manager ulatory. Of course that requires open- and convince strong partners to help us business development private equity, minded politicians, so that’s my second drive this change. EY Luxembourg, on behalf of LPEA. 22 I CAPITAL #6 COUNTRY

WHY SPAIN IS THE HOT SPOT FOR PE AND VC INVESTMENTS

INTRODUCTION growth in 2014-15 is the ongoing regenera- VC funds as well as other players such as 2014 was the turnaround year in which tion of the exit market, either via Trade Sales business angels, accelerators-incubators Private Equity and Venture Capital finally or via IPOs, thereby freeing capital that can and other sources like crowd-funding plat- picked up again. While the PE market had again be invested in new funds. Figures forms are boosting the VC industry in been growing constantly for over a dec- were already encouraging in 2014 but the Spain. 14 VC funds were active in 2014, an ade, the years following the banking crisis first semester 2015 has beaten the record amazingly high number, compared to 5 on brought a major set-back which can be with €1.8 billion exited through 141 deals. average over the past years. Spanish start- claimed to be over now. The first 6 months ups are on the radar of national and inter- of 2013 showed even worse figures com- PRIVATE DEBT FUNDS national VC funds. Here again, Fond-ICO pared to 2012 in terms of volume of total PE While macroeconomic conditions continue Global provided financing to private VC investments, number and volume of deals. to show significant improvements and give funds in 2014 so those could close their But since the second half of 2013 both exit hope for further growth over the next sev- fundraising and start investing. Overall, this and investment environment have consid- eral years, reforms in the banking sector lead to an increase by 26% in 2014 in avail- erably improved. over the past few years have forced banks able capital to VC-backed firms though to shut down or merge - the number of less deals, in total numbers, were closed. PRIVATE EQUITY FUNDS financial institutions decreased from 50 in A shift towards late-stage VC was also For example, the number of PE invest- 2009 to 14 in 2012. This consolidation and recorded, at the detriment of start-ups and ments in Q1 2014 were already twice as the deleveraging process has led to less other early-stage investments. Interesting high as in Q1 2013. Fundraising also product coverage and diminished lending as well that almost 8% of all financing improved during that year; in total, 2014 to local businesses. But the sector restruc- received by Spanish PE and VC houses saw €4,800 million being raised. A driving turation process also leads to a number of was provided by US investors, a figure force in particular was the public-sector opportunistic situations to acquire loans reached in 2006 for the last time. fund of fund Fond-ICO Global, which and assets from forced sellers. Therefore, started to share out its €450 million to a still more than in other countries, private FUND VEHICLES number of funds such as Corpfin, Diana, debt funds have found their niche to While the largest funds in the country are Espiga, Magnum, Oquendo, PAI, finance growth or restructuration of the still domiciled abroad, there is a move from Portobello, Suma and Trilantic. This par- SME market in particular. Also, at least in off-shore jurisdictions to on-shore and a ticularity of the Spanish market not only the near future, there remains significant clear tendency towards Spanish registered fueled the PE and VC industry in 2014 but scope for private debt funds to provide funds. The market, especially institutional is expected to continue to do so in 2015. A financing and other specialized credit international investors, are not yet used to mirror of the opportunities available are the solutions – at the same time servicing the Spanish AIF Managers (“AIFM”), but there €3 billion being invested, a figure similar to SME market and injecting much needed is an increasing number of Spanish Risk the years before the banking crisis. The liquidity. Some believe that the Iberian Capital Companies (“Sociedades de invested capital stands for a plus of 45% market currently constitutes the most com- Capital-Riesgo” or “SCR”) managed by via 580 transactions, compared to 2013 pelling jurisdiction in Europe for SME local AIFMs. The move from off-shore to data. The first half of 2015 saw lower fig- credit investing. These conditions are on-shore is triggered by a) compliance/ ures with €726m invested, a decrease by underpinned by specific structural adjust- regulatory requirements that make off- 41% compared to the same period in 2014. ments and a massive overhaul of the finan- shore vehicles more difficult and 2) tax However, this is simply due to the lack of cial sector, creating a distinctive measures such as BEPS on an interna- any megadeal in the first 6 months. 70% of opportunity for specialized credit invest- tional basis and, locally, changes in the the invested capital in 2015 went into LBOs ments in the region. Spanish tax treatment under which the and expansion capital, in line with Spanish conditions for the SCR are regulated and PE tradition. Interesting detail is the origin THE VENTURE CAPITAL MARKET advantageous for local structures: as a of the funds invested: 52% come from inter- Not only private debt but also the venture general rule, capital gains derived from national investors, proof of the confidence capital market is attracting investors - transfer of shares in portfolio companies and attractiveness of the Spanish market. although Spain has traditionally been a PE are 99% tax-exempted. Further support comes from Ardian, market investing in buy-outs and lever- Cinven and EQT opening local offices. aged firms. Since 2014 again, public insti- By Anja Grenner, Private Equity & Real Another important factor for PE and VC tutions that provide credits, international Estate Leader at SGG S.A. CAPITAL #6 I 23 REGULATORY ©LG REGULATORY AND TAX, HOW LUXEMBOURG ALLOWS U.S. MANAGERS TO KILL TWO BIRDS WITH ONE STONE

U.S. MANAGERS TAPPING OR INVESTING INTO USE OF LUXEMBOURG MARKET PARTICIPANTS FOR AIFMD EUROPEAN MARKETS HAVE LONG BEEN USED TO PURPOSES During phase 1 of the AIFMD, only EEA- LUXEMBOURG. IN THE CONTEXT OF THE authorised Alternative Investment Fund IMPLEMENTATION OF THE ALTERNATIVE Managers (AIFMs) marketing EEA- based Alternative Investment Funds INVESTMENT FUND MANAGERS DIRECTIVE (THE (AIFs) have the ability to market those AIFM DIRECTIVE) IN 2013 AND THE PROGRESS IN funds across the EEA on the basis of a European passport. THE BASE EROSION AND PROFIT SHIFTING (BEPS) Non EEA managers – such as US managers – are left to rely on a few options OECD INITIATIVE, LUXEMBOURG OFFERS THE such as: only relying on reverse solicita- POSSIBILITY TO SOLVE TWO ISSUES IN ONE STRIKE. tion (which is hardly a strategy), relying on private placement rules (for as 24 I CAPITAL #6 REGULATORY

long as they exist) or setting-up shop in the EEA (or upgrading their current presence) to obtain an AIFM licence. Obtaining and maintaining an AIFM licence requires a high level of compliance and substance: adequate human capital, technical systems, organiza- tional policies and share capital are required. Anti-abuse provisions also prohibit the AIFM from delegating the performance of investment management functions (that is, risk management and portfolio management) to an extent that exceeds by a substantial margin the investment management functions per- formed by the AIFM itself. Based on more than 25 years of experience in the UCITS world, Luxembourg market participants have developed further alternatives for US managers: the use of platforms and renting of AIFMs. Platforms and “rent an AIFM” solutions are conceptually similar; as in both instances the US manager will partner with an established structure so as to allow him to have an EEA-based AIF with an EEA-based AIFM hence accessing the passport. PE market participants tend to favour the “rent an AIFM” solution over the platform. Numerous Luxembourg-based AIFMs – a number of which are LPEA members – are now assisting US managers to comply with AIFMD regulatory requirements to access the passport. Control related concerns of the US manager are typically dealt with by (i) having an appropriate framework agreement in place with the Luxembourg AIFM, (ii) the ability of the AIF – which remains ulti- LPEA roadshow in New York City held on June 2nd 2015. mately controlled by the US manager – to terminate the AIFM appointment and appoint another AIFM and (iii) a put-in ships in major Anglo-Saxon jurisdictions. managing the partnership without incur- favour of the US manager over any The legislator added further benefits: (a) ring unlimited liability. According to mar- equity interest which the Luxembourg the extent to which there is a separate ket participants, those are very helpful AIFM would have in the AIF. legal existence (or not) – indeed additional features. Luxembourg has a common limited part- Further changes are ahead, with the LUXEMBOURG PARTNERSHIP nership (société en commandite simple Luxembourg legislator currently working In view of the AIF, the Luxembourg leg- - SCS) which has a legal personality and on the introduction of a new Restricted islator took the opportunity of the imple- a special limited partnership (société en Investment Fund regime. The proposed mentation of the AIFMD into Luxembourg commandite spéciale - SCSp) which regime would add a further type of fund, law to completely revamp the does not have legal personality and (b) not regulated by the CSSF provided that Luxembourg partnership regime. the management of the Partnership – it is managed by an authorised EEA- Now, Luxembourg Limited Partnerships Luxembourg introduced express safe based AIFM, with a legal regime close to are organised, operated and capitalised harbour provisions for LP involvement that of the Specialized Investment Fund in much the same manner as partner- and the possibility to have managers (SIF). The current proposal contem- CAPITAL #6 I 25

“The importance of economic substance for holding companies can only be heightened.”

tain actions of the BEPS action plan. As an illustration, action five aims notably at aligning taxation with the substance of transactions. Similarly, the BEPS action plan identified treaty shopping as one of the main issues and action six proposes to amend the OECD Model Tax Convention to include, amongst others, strong limitation-on-benefits provisions and general anti-abuse rules. The importance of economic substance for holding companies can only be heightened.

CONCLUSION Ultimately, the substance requirements imposed from a regulatory perspective are very beneficial for tax purposes, and indeed tax and regulatory requirements are converging. Accessing an AIFM in Luxembourg (with a Luxembourg AIF) allows US managers to avail themselves of the AIFMD marketing passport. At the same time, the fact

©LG that certain core functions cannot be delegated by the AIFM, such that the plates a tax which could follow that of the The Parent Subsidiary Directive2 has AIFM would need to have appropriate SIF or the specialised company in risk recently been amended to introduce a staff and infrastructure to be able to per- capital (SICAR) for PE strategies. general anti-avoidance rule (GAAR) form these functions itself, significantly which has to be implemented into decreases the likelihood that foreign tax USE OF LUXEMBOURG domestic law before 1.1.2016. The GAAR authorities might successfully challenge INTERMEDIARY INVESTMENT targets (series of) arrangements which the substance throughout the holding VEHICLES AND BEPS meet both the main purposes test and and financing structure beneath the fund US managers who do not operate a fund the lack of economic reality test. Existing level. platform in Luxembourg are generally holding structures which could be familiar with Luxembourg’s corporate deemed to have insufficient economic Nicolas Fermaud and Florent and tax framework for holding and substance could be impacted. Trouiller are counsels in Allen financing companies. Substance for Substance will also become crucial in & Overy. Nicolas Fermaud is the such companies is becoming a key topic light of the OECD’s project on BEPS and Head of the US-Luxembourg Desk in the current tax environment. has been specifically addressed in cer- in New York 26 I CAPITAL #6 SECTOR

Luxembourg´s financial centre A NEW GATEWAY TO FARMING

WITH PRIVATE AND INSTITUTIONAL INVESTORS AROUND THE GLOBE INVESTING IN AGRICULTURAL REAL ASSETS TO IMPROVE DIVERSIFICATION AND RETURNS, LUXEMBOURG´S TRACK RECORD IN ALTERNATIVE INVESTMENTS IS ATTRACTING FARMLAND MANAGERS FROM EUROPE AND BEYOND.

THE APPEAL OF AGRICULTURAL Institutional and private investors alike are REAL ASSETS increasingly allocating capital to the agri- In the aftermath of the 2008 financial crisis, cultural asset class. For family offices, as investors faced the challenge to rethink their portfolios have usually a long-term agriculture asset class – from listed equi- their investment portfolios. The low interest outlook, they can be best positioned in ties and commodities, through private rate environment that has persisted since terms of pursuing trends that are likely to equity and trade finance, to farmland and then across the developed world has persist for the next ten years or even forestry. added pressure as investors face the longer. And besides the economic bene- One of the managers attracted by the prospect of continued low returns and fits to their portfolio, some family offices Luxembourg´s offering in real estate increased volatility in financial markets. In find that the agricultural sector offers them investment vehicles is Blue Harvest S.A., these circumstances, investors are mov- the possibility to address socially respon- a Geneva-based wealth management ing towards alternative investments that sible or impact investments: they can gen- company founded in 2009 by Jens stand between risky equities and overval- erate attractive economic returns and at Ohnemus. Mr Ohnemus, a Danish native ued bonds; and agricultural real assets the same time, they can do something with agricultural background and with a like farmland can fit very well. positive. large trajectory in banking and wealth Agricultural real assets are linked with the management, decided to invest in the land long-term theme of resource scarcity and SEEDING THE FUTURE OF he knows best. The company will soon besides their positive correlation to infla- FARMING FROM LUXEMBOURG launch the Blue Harvest Danish Farmland tion, they can provide a strong cash yield TO EUROPE AND BEYOND Fund SCSp, seeking to raise capital for the and offer low correlation to traditional Luxembourg is well known as the leading acquisition and sustainable operation of assets. Managers and investors seem to European domicile for vehicles investing in agricultural farms in Denmark, with a focus agree on the prospects of this asset class: international real estate; now the growing on crop and animal production. Mr. As of June 2015, there are almost 280 interest in farming assets can further Ohnemus explains that “the fund is a first funds investing exclusively on this space strengthen the country´s innovative role in for Denmark and plans to build a portfolio - up from 54 funds in 2005 - and with total real estate. There are already several of sustainable producing farms across the AuM over US$50 billion, according to funds domiciliated in the country that country, providing investors an opportu- funds tracked by Valoral Advisors. cover the full spectrum of the food and nity to invest in real, tangible assets that CAPITAL #6 I 27

“Institutional and private investors alike are increasingly allocating capital to the agricultural asset class.” ©VA offer a diversified source of income and As Mr. Ohnemus says, “Today, Denmark is play a key role in channeling resources to capital appreciation”. The Fund will be a top choice for farmland investments in invest responsibly in producing increasing structured as a “Société en commandite Europe”. Whether investors go for devel- supplies of food for a growing population. spéciale” (“SCSp”) in Luxembourg, com- oped farms in Europe or for more exotic parable with the Anglo-Saxon Limited farms in South America or Sub-Saharan By Roberto Vitón, founding partner Partnership. The corporate flexibility and Africa, Luxembourg finance industry can of Valoral Advisors tax transparency that this structure provides were among the main attributes that attracted the attention of Blue Havest´s NUMBER OF FUNDS SPECIALIZED IN FOOD & AGRICULTURAL ASSETS management. BY TYPE OF ASSET - WORLDWIDE 300 277 277 267 THE DANISH HEDGE 255 250 233 51 51 The fund had a warm reception so far – Mr. 225 51 50 Ohnemus comments that “Denmark is an 192 44 32 32 200 42 28 26 agricultural nation, with more than 60% of 161 22 37 20 48 48 its territory devoted to agriculture”. The 51 150 131 50 32 16 country is a net exporter of food, a global 52 49 15 38 30 58 58 leader in animal welfare and with best in 87 47 52 100 33 14 40 44 35 class environmental protection policies. 54 19 24 10 28 And with its AAA rating, a strong econ- 50 9 12 22 8 15 82 85 88 88 2 66 71 74 10 53 omy, a stable parliamentary democracy 41 25 31 and ranked first in Europe in ease of doing 0 business, the country scores very high in ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 13 14 1H‘15 the context of agricultural investments. Farmland Private equity Listed equities Venture capital Others 28 I CAPITAL #6 LUXEMBOURG

CROSSROADS OF DIVERSITY THERE ARE SO MANY SLOGANS WE COULD USE TO BRING OUT LUXEMBOURG’S CHIEF ATTRACTIONS. WHETHER IT BE “OASIS OF WEALTH”, “CROSSROADS OF DIVERSITY”, OR JUST “A LITTLE POCKET OF LOVELINESS”.

he latter aims to translate “klein pocket-sized country has ‘Duracel’-like the country in its entirety. It has to be aber fein” – a German expression potential and a proven track record for transversal, as relevant for tourism as it – which in the context of nation being first in class – be it for Europe, steel, is for finance and industry. And it has to Tbranding speaks volumes about satellites or finance. resonate with everyone, Luxembourg the booster effect coming out of this tiny residents as much as Luxembourg yet vibrant country. Little Luxembourg is IMPORTANCE OF BEING nationals – no easy task. capable of doing big things – like Apple FOCUSED Sadly, the results of the recent referen- did, once upon a time, from a garage. It Yet the sheer number of positive attrib- dum go against building a coherent mes- seems that size is not a “sine qua none” utes is not a good thing for branding. sage any time soon. What it revealed is a for becoming big; many cutting–edge The challenge is to get “the” message, country with several faces, each looking companies start small nowadays. Our which captures the spirit and essence of in different directions mimicking Janus, CAPITAL #6 I 29

“Luxembourg has its roots in history, boldly stating a desire to remain independent.”

Luxembourg has its roots in history, of the Council of the EU, our small country boldly stating a desire to remain inde- is once more at the apex of the political pendent. In the present context, how- and economic scene, trying to solve the ever, this motto takes on different Greek puzzle together with other EU undertones. Could it subtly hint at resist- members and at the same time welcom- ance to change? ing with a grateful, muted nod, the confir- The gap between how Luxembourg is mation that hard work has paid off with perceived by the outside business world another triple A rating granted. and its actual way of working is a further The bridge is a symbol for the nation stumbling block to a coherent message. which has built its reputation on being a Politicians aspire to close the existing reliable yet accessible partner. A compel- perception gap and show Luxembourg ling story built around connections, mak- as a dynamic place to be. Luxembourg ing things happen and staying unique. has a hardworking international commu- Could this be the key to successful nation nity working like cogs in unison. With the branding? current political momentum, it can grow Nation Branding is not a simple advertis- to be a place where talents flourish, ing campaign – it aims to extract juices ideas spark and then go live. So how about what the Grand Duchy of best to express this to the outside world? Luxembourg is best at, add innovative the god of beginning and transitions. elements and create a beautiful waterfall Residents find it easy to rattle off a seem- BRIDGING THE GAPS – MIND of emotional stories and compelling ingly endless list of strong points, prais- THE GAP images with a meaningful tagline around ing a country where they are respected In our country of hills and valleys, bridges them. and feel at home. Native Luxembourgers, play an important role. Luxembourg This is a story that the private equity sec- however, are slightly more reticent and excelled in the past by bridging commu- tor could pick up on, by adding its unique have relatively low self-esteem when it nities and nations. It is, after all, the birth- twist and making the most of what we’ve comes to creativity, open-mindedness place of the European Union and the got already. and entrepreneurship. “Mir wëlle bleiwe country that put “Schengen” in the agree- wat mir sinn” or “”We want to remain ment to have open borders in Europe. By Georges Bock, Managing what we are”: the national motto of Today, with the Luxembourg presidency Partner of KPMG Luxembourg 30 I CAPITAL #6 LIFESTYLE BERNARD MASSARD AND THE WORLD OF SPARKLING WINES

“We always conduct a very strict policy on the quality of our products.”

Bernard-Massard is Luxembourg’s first sparkling wine but also one of the country’s finest still wine producers through its three estates, Bernard-Massard, Clos des Rochers and Chateau de Schengen. Founded in 1921 by a Luxembourgish cellar master, Jean Bernard, who learnt his skills in Champagne before returning to his home country, the company is still family run and owned by the Clasen family. Today, Bernard-Massard is one of Luxembourg’s most renowned wineries and certainly the main exporter of Luxembourg wine with a presence in over 20 countries around the world. CAPITAL #6 I 31

run a company just because you are the boss’s son… You have to earn your space and since I joined the company in 2011, this is what I strive for every day. What do I bring to the company? Well, that I prefer others to answer. But what I would like to bring is my creativity, my enthusiasm for wine – obvi- ously that is important in a company like ours – sharing it with people. On the other hand, I tend to be quite stiff when it comes to numbers and crunching them once in a while is very important in my opinion.

“We have the luck to be What do you think makes a wine a good wine? in a field producing a A good wine, independently of where it comes from and what its price is, is a bal- product that is meant for anced wine. Harmony between fruitiness, alcohol, structure and acidity are impor- sharing good moments.” tant to me. For the rest, there is a big part of subjectivity. Antoine Clasen

©BM What do you like most of your job? Variety. In my job, there is no day like the What do you think is the key strong brand through distinctive quality, other, sometimes for worse, often for bet- factor of Bernard-Massard’s a coherent design for recognition and ter. We have the luck to be in a field pro-

©BM success story? marketing activity for awareness. ducing a product that is meant for sharing I think there are two major factors that good moments. And that allows you to allowed us to build our brand over the You have recently stepped into meet a lot people from a lot of different years, qualitative consistency and being your family´s business. Was that horizons. It starts with the vineyard, it ends at the right time in the right place. We an easy process? To your mind, with the final customer in Luxembourg and always conduct a very strict policy on the which core capabilities do you around the world that often share a same quality of our products, from the vine to bring to Bernard Massard? passion for wine. It’s quite easy to get up the bottle and invest a lot of time and Joining a family business is a challenge as in the morning, trust me. funds to be up-to-date in growing and such, as you are stepping into an existing production processes. Also, especially structure with your views and ideas but Interview conducted by Carmen von for our sparkling wines, branding is a key have to face the legitimacy question Nell-Breuning, senior manager private factor because more than the appellation, towards the employees, the clientele, the equity business development, EY we have decided to invest for creating a shareholders. What gives you the right to Luxembourg, on behalf of LPEA. 32 I CAPITAL #6 LIFESTYLE

Luxembourg – the other facets of the country WINEGROWING IN LUXEMBOURG

Luxembourg may be a small more and more replacing country but it is not only the the “table wine” grape financial industry that has variety Rivaner. These are created its own brand and complemented by Riesling reputation worldwide but (12%) and Elbling (7.5%), the also the wine industry. famous grape already When you visit the 26km cultivated by the Romans in along the Moselle river that the Moselle valley more than Luxembourg shares with 2000 years ago, and a Germany, you will discover number of more exotic

numerous wineries grapes like Gewürztraminer ©BM producing excellent wines and Chardonnay (also a and cremants in a vineyard Pinot grape). Winegrowing is still done by orientation of the vineyard, a area that covers 1,287 The main producers of hand by the Privatwënzer – minimum slope angle, hectares only. Cremants, wines in Luxembourg are note that only 9 out of the defoliation, a maximum yield representing an astonishing its cooperatives which 375 wine growers own and per acre, the vinification 15% of the entire wine nowadays market their cultivate more than 15 process and its marketing. production, are the wines successfully under the hectares - and these usually Once they have undergone oenological flagship of single label of Domaines around their own estates. a severe organoleptical Luxembourg which Vinsmoselle, encompassing The cooperatives, however, exam by an independent represents the country at the traditional wineries purchase grapes from all jury, they can finally market any event. But at the same of Greiveldange, around Luxembourg, so they these wines. As with all other time Luxembourg represents Grevenmacher, cannot only blend wines Luxembourg wines and 15 grape varieties to be Remerschen, Stadtbredimus from different soils and cremants, around 2/3 of all discovered by wine lovers. and Wellenstein as well as climates but can also exports end up in Belgium… Sandwiched between the POLL-FABAIRE Crémant produce wines from specific Last but not least, Germany and France, Development Centre in prestigious lots and terroirs. Luxembourg’s oenotourism Luxembourg has Wormeldange. A propos terroir wines: has been developing developed its own wine With more than 300 Luxembourg was at the strongly over the past years: style. On its limestone, winemakers they produce forefront when creating apart from annual events Keuper and clay marl soils it some 60% of all the quality label “Charta such as the open-door week- is the pinot grape varieties Luxembourg wines, while 50 Schengen”. Being the ends where all wineries are that turn out best, which is private wine growers, synonym for a borderless open to the public, its wine reflected in the main represented by its European Union, village events, guided tours varieties grown: apart from association “Privatwënzer”, winegrowers on the German, through the vinyards along the most common one, the successfully elaborate and Luxembourg and French the Moselle, wine-tastings, Rivaner or Mueller-Thurgau, market their own wines. The Moselle may elaborate their the Riesling ralleys, and a hybrid bred in the Swiss association and its best wines to become a many more invite wine canton of Thurgau in the oenologists have assisted “Charta Schengen wine”. amateurs and lovers to 1880 by Mr. Mueller, based the private growers in From Luxembourg, discover Luxembourg’s on Riesling and Madelaine boosting both quality and 4 wineries elaborate these wineries and vineyards. Royal (26%), which has been marketing to place their label wines, from France constantly decreasing in wines not only with the local there are 2 and 1 from By Anja Grenner grown quantity, the pinot gastronomy, commerce and Germany. These The author is member of varieties Auxerrois, Pinot end consumers but also with winegrowers commit to the LPEA at SGG S.A. and Gris, Blanc and Noir (51% all international wine importers respecting rigorous runs an own wine business together) are the most and restaurants throughout restrictions in the production in Luxembourg as a widely represented and are Europe. process, such as the certified sommelier. ©BM EXECUTIVE COMMITTEE Leader Committee Technical DUSEMON GILLES become aplayer! become actually you where is LPEA equity, private for choice of location your is Luxembourg If basis. aregular on opportunities networking and meetings working organises and information exchange and discuss to members its for platform interactive and adynamic provides LPEA operate in. PE regulation providing a flexible, secure, jurisdiction to predictable and multi-lingual international of forefront the at today is and regime tax astable of disposes Luxembourg borders. countryís the beyond industry the promotes actively and framework investment the of development and discussion the in role aleading plays LPEA over 120 members, With Luxembourg. in professionals capital venture and equity private of body representative the is (LPEA) Association Capital Venture and Equity Private Luxembourg The LPEA ABOUT President WITTAMER JÉRÔME Legal Committee: Committee: Promotion Tax Committee: LEADERS TECHNICAL COMMITTEE Market Intelligence & Training Committee: Accounting & Valuation Committee: Secretary MISCHO PATRICK President Honorary SCHMITZ HANS-JÜRGEN Marianne Spanos, Patrick Mischo Patrick Spanos, Marianne Marie Amet-Hermes, Xavier LeSourne Xavier Amet-Hermes, Marie Stéphanie Delperdange, Alexandre Prost-Gargoz Chairman Vice- BRERO EMANUELA Member CLAUZEL ANTOINE LPEA IN BRIEF IN LPEA David Harrison, Yves Courtois Harrison, David Maarten Verjans Maarten Chairman Vice- COEKELBERGS OLIVIER Member LANZ CHRISTOPH CAPITAL Director Managing PAUL JUNCK #6 I33 34 I CAPITAL #6 EVENT’S CALENDAR

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