With fewer than 400,000 residents, Iceland receives more than its fair share of tourists – and venture capital. These are two good reasons to pay attention to what is happening in and out of this unique island nation.
“We need more pillars for our economy,” Áslaug Arna Sigurbjörnsdóttir, Iceland’s Minister of Higher Education, Science and Innovation, recently told TechCrunch during Icelandic Innovation Week in Reykjavík .
Some diversification is already underway and the country’s export earnings from intellectual property-driven industries are steadily increasing. But more than being its own pillar, Icelandic innovation is part of what already exists: startups are developing technologies to help the country make the most of its resources and economic activities – fishing and heavy industry are at the top of the list, but they also market to the local market. talent and culture.
However, it is difficult to infer trends from the meager data on the handful of startup deals concluded each year in Iceland. Here’s what you need to know about the types of startups that have taken root and are flourishing in the island nation:
It’s telling that medical technology company Kerecis, which uses fish skin for new dressings, hails from Iceland: innovation here often takes inspiration from unexpected places.
Products from the ocean have diversified into high-end cosmetics, as have foodtech, new materials, etc. Although it wasn’t obvious even to Icelanders that fish skin or seaweed could be reused in so many ways, growing support for the circular economy has brought the focus back to sustainability. This is what the startup accelerator managed by KLAK – Islandic Startups aims to achieve.
The past is a great source of inspiration for the country’s businesses. Especially when it comes to fintech, the sector has little to do with the country’s natural resources but rather its history. “I think the strength behind companies like (neobank) Indó lies in the lessons learned from the (2008) banking crisis. And it’s the same with Monerium,” said Gunnlaugur Jónsson, CEO of Reykjavik Fintech Cluster, an association that aims to support fintech companies in the country.
There are other lessons to be learned, according to Bjarni Gaukur Sigurdsson. His new company, Blikk, is working on an account-to-account payment platform, as an alternative to credit cards, to help reduce payment processing costs. It also has a security aspect, as it helps its customers no longer rely excessively on platforms that could be compromised.
But all this innovation would be in vain without support. Fortunately, entrepreneurs here have a good ecosystem to contribute to and learn from as they build.
In addition to venture capital and accelerators, startups in the country can obtain funding through programs like Horizon Europe, an attractive complement to national grants also distributed by Rannís, the Icelandic Center for Research.
DTE, for example, is receiving a grant from the European Innovation Council to bring more efficient processes to the country’s huge aluminum industry.
But funding isn’t the only thing a startup needs to grow. Talent makes businesses, which is why so many startups are flocking to downtown Reykjavík, the center of Iceland’s cultural, economic and governance activity. The region is home to co-working spaces and entrepreneurial hubs like Hafnar.haus, which offers co-working space as well as studios to rent for those with a creative bent.
Iceland is known for its talent in creative fields, and this propensity has carried over into its tech scene as well. Companies like Genki, Overtune and Treble have developed technologies for music production, composition and even acoustic simulation. Gaming is also big and Iceland is home to popular gaming company CCP Games, the studio behind the popular MMORPG EVE Online.
The presence of CCP Games has inspired many Icelanders to start creating games, Ingolfur Aevarsson, CEO of Porcelain Fortress, told TechCrunch.
“Having a big brother like CCP on the block really opened people’s eyes to the fact that we could actually make games,” Aevarsson said. “But Iceland has very strong roots in the writing of our sagas and all those types of stories.”
Porcelain Fortress is based on Innovation House, a collaborative workspace created by Opera and Vivaldi founder Jon Stephenson von Tetzchner. It is also home to Heima, a platform that helps families manage and share household chores, PayAnalytics, a pay equity and workforce analytics provider, and many other startups.
Once the startups became larger and better funded, some moved to Gróska (a word for growth in Icelandic), a modern space located in the middle of Reykjavík Science City. This new district is also home to the University of Iceland Science Park.
However, there are limitations inherent in a sparsely populated country: once they reach a certain size, Icelandic startups often have to look abroad to find AI talent or executives with experience in scaling. the scale.
Icelandic startups that have made forays abroad include Nasdaq-listed eye care company Oculis; Prescriby, an opioid addiction prevention company that recently raised €2 million to expand in Canada and enter the United States; Sidekick Health, whose digital care platform has gained traction in Europe and the United States; and Avo, which became the first Icelandic startup to join Y Combinator in 2019.
Some companies go global immediately, while others prefer to learn their skills locally first. Crowberry Capital founding partner Jenny Ruth Hrafnsdottir has a word of warning for the latter: Iceland being a country where most people are just a phone call or introduction away, it can make startups that are overconfident about a go-to-market strategy that won’t fly in major markets.
Still, the ease with which certain things can be done in Iceland makes it a good testing ground for foreign companies, especially when they can also exploit its natural assets. It is also helpful that validation in Iceland can often be applied to Europe: Iceland is not part of the EU, but it is in the European Economic Area (EEA), with significant legislative overlap.
Iceland has long occupied a strategic geographic location that deserves to be secured, but the theme is once again experiencing tailwinds when it comes to startups: the bug bounty program Defend Island received a $2 grant last year. .6 million dollars from the European Commission as part of the Digital Europe plan.
And the fact that the NATO Innovation Fund (NIF) also co-hosted an event during Icelandic Innovation Week highlights the attention Iceland is receiving.
Iceland rarely makes the list of best countries for global investment, but that’s mainly because the startup scene here is only just taking off. During a panel at the event, NIF partner Chris O’Connor highlighted that the Icelandic venture capital ecosystem is quite new, with most companies only deploying their first or second fund.
He is right: with the exception of the New Business Venture Fund, a public fund, funds like Crowberry, Brunnur Ventures, Eyrir Venture Management and Frumtak Ventures were born this century, even this decade (Iðunn).
It is too early to say which companies or funds will benefit from the NIF’s billion-euro fund, but Iceland is on the list of potential beneficiaries among its 24 LPs. One technology company, wind turbine manufacturer Icewind, is already part of the first cohort of the NATO-backed DIANA accelerator. The trend is worth following.
Strategically, but also economically and culturally, Iceland, once isolated, is now more of a crossroads.
As a Nordic country, it has a lot in common with Scandinavia (both have a strong gaming industry) and the Baltics (fintech and technology for governments). It is also natural for its technology companies to look to larger markets from the start. That’s probably a good thing for its startups and emerging venture capital scene. For the rest of us, this means we can get used to hearing about Iceland and its talents.
Disclosure: Anna Heim traveled to Iceland at an invitation from Business Iceland in the name of Reykjavik Science City.
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