New EU Rules Set to Put Luxembourg at Centre of Europe’s VC Boom

In recent years, we’ve seen a real push to expand Europe’s venture capital ecosystem, driven by policymakers’ desire to scale venture investment, strengthen cross-border capital flows and build a more competitive environment for innovative companies. Written by Lara Forte, Partner at Mourant and Jan Dobrzensky, Partner at Mourant

Against this backdrop, the European Commission’s review of key regulations, including the planned 2026 update to the European venture capital funds (EuVECA) regulation (345/2013), will test whether Europe can finally limit the structural friction that has held its VC market back.

If these reforms are as ambitious and practical as expected, they could reshape how and where European venture funds are structured and distributed. For Luxembourg, this represents a timely opportunity to consolidate and expand the role it already plays in Europe’s fund landscape.

A maturing market
European venture capital has developed significantly over the past decade, supported by a growing technology base and an expanding pool of institutional investors. However, the ecosystem remains fragmented. Startups tend to emerge in Europe’s largest economies, including Germany, France, Italy, Spain, Poland and the Nordic countries – and scaling those businesses beyond national borders remains challenging.

The issue has never been a lack of innovation or capital, but the absence of a structure that can effectively support companies and managers at a European level. Unlike the United States, Europe’s VC market operates across multiple legal systems, regulatory regimes and tax frameworks. Fundraising, governance and portfolio management are therefore more complex, particularly for smaller and emerging managers looking to build pan-European strategies.

This is where regulatory review matters. The Commission’s 2025 to 2026 reform process aims to improve fundraising conditions, widen eligibility under EuVECA, reduce barriers for smaller managers and strengthen cross-border investment pathways. If successful, greater harmonisation should enhance investor confidence and make it easier for managers to structure and distribute funds across the EU.

Why the EuVECA review matters
EuVECA was designed to give qualifying venture capital managers a passport to market funds across the EU. In practice, uptake has been uneven. Regulatory complexity, compliance burdens and structural limitations have ultimately limited its commercial appeal.

The current review presents an opportunity to modernise the framework, but it also carries risk. Proposals focus on broadening the scope of eligible managers and investors, streamlining compliance obligations and improving the commercial usability of the regime. If these changes are implemented effectively, this could lower the cost of entry for managers and make European-wide fundraising more accessible. If regulations fall short, fragmentation could persist and Europe’s scale up capital will continue to look elsewhere. 

Luxembourg’s evolving role
Luxembourg’s fund ecosystem is well established and widely regarded as world-class, particularly in private equity and alternative assets. As venture capital continues to mature as an asset class, this global funds hub is increasingly well placed to play a larger role in supporting VC activity.

Luxembourg’s strong track record in private equity and alternatives has built deep legal, administrative and operational expertise. These are all capabilities that are highly relevant and transferable to the evolving needs of venture capital.

European VC deals often involve complex shareholder arrangements, regulatory considerations and cross-border holding structures. Luxembourg’s flexible and always evolving legal toolbox, combined with regulatory stability and internationally focused service providers, is well-suited to supporting these nuances.

Very recently, two major evolutions have reshaped the practicality of the Luxembourg legal system. Continued legal developments now make it possible to incorporate a company without the need to open a bank account prior to its incorporation, facilitating the swift execution of transactions. In parallel, Luxembourg has introduced a favourable tax regime for VC‑related investors, including a new tax credit for individuals who invest in qualifying innovative start‑ups. Together, these measures significantly strengthen Luxembourg’s attractiveness for early‑stage venture ecosystems.

 As VC strategies become more sophisticated, so will the demand for robust governance and regulatory oversight, putting Luxembourg in a prime position to support these startups as they scale 

Learning from the UK
The UK remains one of Europe’s most mature venture capital ecosystems, built on policy continuity, regulatory clarity and strong fund management infrastructure. While the EU can’t replicate this model directly, the upcoming reforms offer a chance to combine similar strengths with the benefits of a harmonised European framework.

Notably, Luxembourg can act as a connective platform within that framework. It offers managers access to EU passporting and regulatory certainty and access to some of the most prominent investors, while remaining closely linked to the economies where startups are created and scaled. This is not about competition between jurisdictions, but about creating structures that allow European venture capital to collaborate more cohesively.

Looking ahead
The review of EuVECA comes at a time when Europe’s venture capital market is both expanding and professionalising. The outcome will make a difference. 

Europe’s largest economies, from Germany to France, will continue to be where most startups are founded, driven by scale, talent and deep domestic markets. But as those businesses grow and look beyond their home markets, they need a stable, well-connected base from which to scale across Europe. 

This is where Luxembourg can play a defining role. By acting as a trusted EU hub and strengthening its links with other European ecosystems, Luxembourg has the opportunity to support the next generation of startups as they transition from local success stories into truly European businesses.

As this evolution continues, it’s essential for local service providers, legislators and relevant authorities to apply a genuine principle of proportionality. Adjusting regulatory expectations and associated costs to reflect the realities faced by smaller managers and emerging players will be crucial. Only by doing this can the financial centre remain a home not only for global giants, but also for small and mid-sized managers, whose diversity and healthy competition ultimately strengthen the quality and resilience of the overall ecosystem.

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