Luxembourg’s Special Limited Partnership (SLP), also known as SCSp, offers venture capital (VC) firms a powerful vehicle to attract investors into high-growth generative AI startups. This structure combines tax efficiency, regulatory flexibility, and rapid deployment—critical factors for VC firms targeting fast-evolving AI markets. We share how the SLP bridges the needs of investors, VC managers, and AI startups:
Tax and Structural Advantages for VC Investors
The SLP’s tax-transparent status ensures no corporate income tax, wealth tax, or VAT at the partnership level in Luxembourg. This allows investors to benefit from:
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Pass-through taxation: Profits/losses flow directly to investors, avoiding double taxation.
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Global investor appeal: Non-resident investors are taxed only in their home jurisdictions, aligning with cross-border VC strategies.
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No minimum capital requirements, reducing upfront barriers for fund formation.
For generative AI startups, which raised $56 billion globally in 2024, the SLP’s agility lets VCs quickly pool capital from high-net-worth individuals, family offices, and institutional investors. The structure also supports confidentiality—limited partners’ identities remain undisclosed, appealing to discreet investors.
Meeting AI Startups’ Scaling Needs
Generative AI startups require rapid funding cycles to stay competitive. The SLP’s streamlined setup (≈4 weeks) allows VCs to deploy capital faster than traditional funds. Key advantages include:
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Flexible governance: VCs can tailor partnership agreements to match startups’ milestones (e.g., milestone-based funding releases).
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Diverse investment strategies: SLPs can hold assets ranging from equity in early-stage AI developers to debt instruments for mature AI platforms.
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Unregulated status: Unless assets under management exceed €100M, SLPs avoid AIFMD compliance costs, preserving capital for startups.
Median AI startup valuations in 2024 highlight urgent funding needs:
| Funding Stage | Median Valuation | Deal Size |
|---|---|---|
| Seed | $12.0M | $3M |
| Series A | $34.0M | $13M |
| Series B | $342.0M | $30M |
The SLP’s scalability lets VCs structure parallel funds for different risk tiers—e.g., high-risk bets on AI model developers versus lower-risk AI application builders.
Luxembourg’s Ecosystem for AI Innovation
Luxembourg enhances the SLP’s appeal through:
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Government-backed R&D partnerships: Collaborations like the LIST-Expon Capital alliance provide startups access to cutting-edge AI research and public co-funding.
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EU funding alignment: Programs like the Large AI Grand Challenge offer grants and supercomputing access, which SLPs can leverage to boost portfolio startups.
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Brexit-driven jurisdictional shift: Post-Brexit, Luxembourg has emerged as a preferred EU hub for tech investors, offering political stability and English-friendly legal frameworks.
Case Study: Structuring an SLP for Generative AI
A VC firm targeting generative AI could:
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Establish an SLP with a Luxembourg-based GP and global LPs.
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Allocate capital across stages:
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Pre-seed: $500k tickets for AI infrastructure startups.
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Series B: $30M+ for scaling AI-as-a-service platforms.
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Leverage tax transparency to optimize returns for LPs in high-tax regions.
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Partner with LIST or similar institutes for R&D credits and talent pipelines.
The Luxembourg SLP provides VCs with a low-friction, tax-optimized conduit to channel capital into generative AI. By combining regulatory simplicity with Luxembourg’s innovation ecosystem, VC firms can attract global investors while empowering AI startups to scale efficiently. As generative AI funding continues to break records, the SLP’s blend of speed, flexibility, and confidentiality positions it as a cornerstone for next-gen tech investment.
Damalion supports startups of various sectors to raise funds (from pre-seed to series A, B, C). To set up your Luxembourg special limited company, please contact your Damalion expert now.
