2020 Barometer of Digital and Tech Startups in Wallonia

The AdN brings you the 3rd Digital Wallonia barometer of digital and tech startups in Wallonia. Still very much focused on B2B, startups continue to grow and are increasingly focused on advanced technologies such as Artificial Intelligence, the Internet of Things and AR/VR. They have so far withstood the impact of the COVID crisis quite well.

Download the complete 2020 Digital Wallonia Startups Barometer PDF (in French).

At the time of writing, the Digital Wallonia platform includes 432 Digital and Tech startups. So the ecosystem continues to grow.

Of these startups, 74% focus on digital technology, while 26% are regarded as “tech” startups, i.e. they use digital technology extensively and it is fully integrated into their business.

With 40% of the ecosystem within its boundaries, Walloon Brabant remains the Walloon province with the most startups, ahead of the provinces of Liège and Hainaut, each of which accounts for 24%. The provinces of Namur and Luxembourg follow with 11% and 3% respectively.  This is a significant increase for Namur (7% in 2018).

As part of this barometer, the AdN also looked at the distribution of startups still operating by the year in which they were set up. After a peak in 2016, when almost 70 startups were launched, the figure leveled off at around 40 between 2017 and 2019. The figures for 2020 show a slowdown, but it is too early to draw conclusions from this, about the effects of the health crisis for example, as there may be a slight delay in identifying new startups. A more comprehensive analysis will be available at the end of 2021.

The proportion of digital and tech startups aimed exclusively at the end customer (B2C) is still very low (16%). 68% of startups focus on B2B, with 16% embracing both B2B and B2C.

Walloon startups continue to target the same economic sectors, but their intensity is growing. For example, 17% of startups say that they are targeting the healthcare sector, compared to 12% in 2018. In addition, 10% are targeting the pharmaceutical industry. Although these figures should not be aggregated, as one startup may be targeting more than one sector, they clearly demonstrate the importance of the health sector, both for startups and, more generally, for the Walloon economy.

Industry (16% of startups) is the second biggest focus for startups, followed equally by sectors such as logistics, government bodies, aviation and electronics.

Based on the directory available on the Digital Wallonia platform, the distribution of startups by products and services shows that the software sector is still dominant. There has been an increase in services.

Perhaps the most interesting development is that of “advanced” products and services. At the moment, 43% of Walloon startups are working with these technologies, which shows a growing focus on innovation. As a comparison, for Wallonia’s digital sector as a whole, this percentage barely exceeds 20%. It also demonstrates a strong connection with the digital research ecosystem.

Among these advanced technologies, there are 3 that really stand out, both in terms of absolute value and in terms of growth since 2018:

• artificial intelligence (44% of startups involved in advanced technologies),
• the Internet of things (38%),
• augmented and/or virtual reality (18%).

Although the percentages are still below 10%, technologies such as Blockchain, digital twins, robotics and drones are also on the rise.

In addition to the technologies that startups are marketing in the form of products or services, the Agence du Numérique is also interested in the technologies they are using within the context of their activities.

Here too, artificial intelligence is in a very strong position. 48% say that they use it, rising to 57% when asked to think about the prospects for 2021. The Internet of Things, AR/VR and robotics are some of the other technologies that will be used extensively by startups as part of their business in 2020. It is worth noting the arrival of HPC (High Performance Computing) in third place (14%) in 2021, as one of the technologies that startups are keen to use in 2021. HPC is an area of excellence when it comes to digital research in Wallonia.

More than half of all startups have entered into at least one partnership as part of their business, usually with another company (38%), a university (27%) or a research centre (22%). These numbers remain fairly stable compared to 2018. This is without a doubt an area that could be improved. The small size of startups remains a disadvantage here, as forging partnerships, particularly in research, often requires dedicated human and financial resources.

The vast majority of startup owners have a Master’s degree (67%) or a PhD (11%) in business, science or IT, and 32% had already set up a business in the past.

In terms of age, although 25-29 and 30-34 year-olds dominate, it is worth noting that a third of CEOs were over 40 when they created their startup. Creating a startup is also a team effort. Under 20% were set up by one person alone.

One of the recurring problems that is worth highlighting again is the low proportion of women. If we look at all “startup creators”, only 16% were women. Looking at everyone involved in a startup, 26% had at least one woman on their original team.

As far as jobs are concerned, it is obviously difficult to get hold of the official figures. To provide a best estimate of the jobs generated by startups, the AdN has used brackets (0, 1 to 4, 5 to 9 etc. up to 50 and over). Survey respondents put their startup into one of these different brackets, distinguishing between FTEs (Full Time Equivalent) on Payroll and off Payroll.

Extrapolating these figures to all startups, this gives us :

• a low estimate: 4,950, i.e. 2,800 FTEs on Payroll and 1,150 off Payroll.
• a high estimate: 6,475, or 4,100 and 2,375. For this high estimate, the figure of 50 was also assigned to startups with a much higher number of employees.

In 2018, the same calculation resulted in an estimated average of 3,500-4,000 FTEs.

These figures show the positive trend when it comes to jobs, and so the important role that the startup ecosystem now plays in the Walloon economy. This observation is backed up by future prospects. In fact, 73% of startups plan to recruit new staff in 2021, with 23% believing that their workforce will remain at a steady level.

Using the same methodology of brackets (1 to 4, 5 to 9 etc.), the employment outlook for 2021 looks like this:

• low estimate: 1,050 FTEs,
• high estimate: 2,000 FTEs.

Lastly, when it comes to the kinds of recruits employed by startups, “computer scientists” (developers, programmers, etc.) continue to constitute the majority (62%).

However, it is worth noting that in 2021, “business and commercial” backgrounds will be the most popular with startups (44%). This figure definitely demonstrates a kind of “momentum” for many startups keen to move on from essentially focusing on developing their products and services towards developing their economic activity.

The 2018 barometer had highlighted one of the major weaknesses demonstrated by Wallonia’s startups : the fact that their turnover was too low. Indeed, 66% of them reported an annual turnover of under 100,000 Euros (including startups that are not yet generating a turnover, in particular because they are still in the pre-development phase of their business).

Although the situation is still far from ideal, the 2020 results seem to show a positive trend, as this percentage is now 53%. Another positive development is that the percentage of startups reporting an annual turnover of €1 million has risen from 4% to 13%.

There is obviously a question mark over the impact of the health crisis on the business being done by startups. In this respect, the situation is fairly positive. However, it must be tempered by the fact that, for those startups that have suffered negative effects, those effects have been proportionately greater than the positive effects experienced by the startups that say that their business has grown during the crisis.

It is therefore worth highlighting the fact that :

• 28% of startups have not seen any impact on their business,
• 17% have seen their business grow,
• 53% have said that their business has slowed down.

At this stage, reports of businesses going under are anecdotal.

60% of Walloon startups generate the majority of their turnover outside Wallonia and 33% outside Belgium.

France, the USA and the Netherlands are the top three countries to which our startups are most likely to export. If we add Brussels and Flanders, these are the top 5 countries and regions with which Walloon startups work the most.

As a general rule, startups are looking for funding. The survey shows that :

• over half of startups have taken out bank loans,
• two-thirds have already raised funds, either from the 3Fs (family, friends & fools) and/or from public and private investors.

4 out of 10 startups have raised more than half a million Euros, in one or more rounds of fund-raising. Almost a third of them have raised under 200,000 Euros.

70% of startups have already applied for financial support from Wallonia. The “chèques-entreprises” (business cheques) scheme is also very popular. Almost half of all startups have used them. Research funding programmes and the CxO programme (a programme making it easier to hire a highly qualified manager to take on the role of CEO, CTO, COO, CSO, etc.) have been embraced by 27% and 21% of startups respectively.

Many other subsidies have also been applied for among the (perhaps too?) broad range of funding options available.

When it comes to the main reasons for the investments, digitising a new version of products already available on the market is the top priority for more than 70% of startups. This is followed by the need to invest in new product development, whether for the same client sectors or to tackle new markets.

Digitising strategies and information exchanges come further down the list, in 5th and 6th position respectively in the survey results (with 15 and 13% of respondents).

This third edition of the barometer of Walloon digital and tech startups put together by the Agence du Numérique is based on two sources:

• a quantitative analysis of data relating to the 432 digital and tech startups listed on the Digital Wallonia platform by the AdN at the end of 2020.
• a quantitative survey conducted by the AdN in October and November 2020. One hundred startups responded.

When it talks about startups, the study is referring to “young companies” in the digital or tech sectors that have had a marketed product or a new business model for under 10 years (with some exceptions), aiming to achieve significant growth or offering a “scalable” business model.

As with previous barometers, it is worth pointing out that startups are by nature more “volatile” than “traditional” companies, particularly due to:

• their youth,
• the fact that a startup may be operating without yet being incorporated as an independent company,
• how hard it is to identify newly created startups, unless they are set up within the framework of one of the business incubation, support or funding schemes running in Wallonia,
• the proportion that disappear or are abandoned.

The purpose of this barometer is to offer an overview of the startup ecosystem in Wallonia. The study’s main aim is to understand the profile of the entrepreneurs, their employees, the technologies they use, the volume of business they generate, the funding to which they have access and their international ambition.

It is also a tool that can help define what policies and measures need to be introduced to promote the development and growth of startups in Wallonia.