Unpacking the CCP sale

This post is part of The Northstack Memo, a newsletter analysing the tech and startup scene in Iceland.

The CCP Sale

As most of you probably know, Eve Online creator CCP was sold to Pearl Abyss last week, for a $425m in total. Pearl Abyss, a seven year old South Korean gaming company, will keep CCP operating as a standalone studio (for the time being at least).

Several things to unpack here.

First off, it finally happened. There’s been sale rumours surrounding CCP for a very long time. The most recent rumours reached their peak with a hint in Bloomberg, where then VR-leader CCP (they’ve since shuttered VR development), was apparently looking at a $900m+ price tag. Whether or not those were actual talks or not, we’ll probably never know, but it’s fair to say that this lofty price tag was connected to the VR hype of the time.

Second, as the price suggests, unlike most recently acquired Icelandic companies, this acquisition is not an acquihire or tech play, but a business that’s being acquired. Other exits, like Greenqloud, Clara, Datamarket, and more, were all focused on product or people, but never business (that is, revenue). So this acquisition not only shows that we can build cool stuff and great teams in Iceland, but also that there are viable, international businesses that can come from here.

Third, all press regarding this, whether it’s from Pearl Abyss’ CEO Robin Jung or Hilmar Veigar of CCP, mentions that operations in Iceland will continue. It’s almost mentioned too much. Also, people speaking on behalf of the company mention that Pearl Abyss had looked at the government’s plan on removing the ceiling on R&D tax incentives in Iceland when considering the sale. This not-so-subtle hint-hint, nudge-nudge to the government hopefully drives the point home: Iceland needs to be competitive when it comes to tax incentives, because if not, companies leave.

Fourth: the price. $425 million is the highest price paid for an Icelandic technology company ever. The next in line would be the price Amgen paid for Decode in 2012 ($415m). And in typical Icelandic fashion, media immediately started calculating how much money each and every person involved would now be worth (spoiler alert: they’re all doing it wrong). Also, in typical Icelandic fashion, no one really mentioned that part of the price was tied to performance. A big part. A $200 million part. Which is completely understandable, as Pearl Abyss is buying into a cash-cow (Eve Online), probably hoping that the company’s connections in the far east will help Eve grow there, so earnings-related performance ties are completely normal.

The (second?) birth of a gaming sector?

Looking at the news from a higher vantage point, I would make the case that we’re experiencing a birth of a gaming sector.

I know, we’ve had gaming companies before – and when I mentioned this idea to people more experienced than me, I was reminded of a similar time not so long ago when companies like Gogogic were all the rage – but this year alone four gaming companies received their second (or later) round of funding, totaling around $13m, with most of the money coming from leading gaming investors.

Now, I’m not known to be a cheerleader, and don’t want to sound like one, but if at any time we had hope in creating an actual gaming sector, with more than one company consistently turning a profit, developing internationally acclaimed games, attracting talent and creating value for the ecosystem, I’d bet that now is that time.

Guide to Iceland raises $20m valuing the company at $100m

Davíð Ólafur Ingimarsson, Deputy CEO of Guide to Iceland

Traveltech startup Guide to Iceland, which connects travel operators with travelers, and whitelabels such marketplaces through the subsidiary Travelshift, has announced a $20m funding round. State Street Global Advisors, in its capacity as an advisor and manager of private equity, invested in the company. State Street receive a 20% share of the company and a board seat for the investment.

“This allows us to continue marketing Iceland as a travel destination internationally,” deputy CEO Davíð Ólafur Ingimarsson said in a statement. “Aided by this investment, and Icelandic innovation that has resulted in a world-class software, it will be particularly exciting to pursue scaling to international markets.”

Guide to Iceland was founded in 2012, and this is the first investment in the company from abroad. On the companies travel platform, 500 travel operators are connected to travellers looking for experiences in Iceland.

“Our company growth targets are ambitious, but we’ve proven time and time again that we are a company that achieves formidable goals,” Davíð Ólafur adds. “We believe that the size of our company will increase substantially in the coming years.“

 

TripCreator raises $8m from a range of VC funds and business angels

Icelandic travel tech company TripCreator just announced a $8m fundraise from various VC funds and business angels.

“We are very excited to be launching the TripCreator platform to everyone in the travel industry, including bloggers,” said Hilmar Halldórsson, CEO of TripCreator.io. “Our disruptive new model of ‘free forever’, combined with our platform that is capable of both incredible speed and analysis options (in numbers that require a Google search to comprehend the magnitude) means we are poised to shake up the itinerary planning industry. We are simultaneously opening sales offices in both London and New York City and plan to move the company to the latter city by the end of the year.”

TripCreator provides white-label as well as branded solutions that can seamlessly integrate with existing platforms through dedicated APIs. The company is also pioneering a new business model for the travel industry – ‘Free Forever’. Taking a cut of the transaction fee ensures there are no out-of-pocket costs to customers for using the platform.

CCP Acquired by Pearl Abyss for $425m

Korean Pearl Abyss, maker of Black Desert Online, just announced it had acquired Icelandic CCP, maker of Eve Online. CCP will continue to operate as an independent studio with operations in Reykjavik, Shanghai, and London. The sale price is $425m.

Pearl Abyss CEO Robin Jung stated, “We are thrilled to have CCP Games join our team as Black Desert Online continues to branch out globally. CCP is a seasoned publisher with over 15 years of digital distribution experience and know-how.”

Rumours around the inevitable sale of CCP have regularly surfaced, with the most recent and public rumour being when someone leaked to (or placed) Bloomberg news that the company was eyeing a sale.

“I have been seriously impressed with what Pearl Abyss has achieved ever since I first visited their website for Black Desert Onlineand subsequently became an avid player of the game,” said CCP Games CEO Hilmar Veigar Pétursson.

“Pearl Abyss is a fast-growing company with lots to offer in terms of technology, capability and vision. I believe our two companies have a lot to learn from each other. We are very excited to join forces with them and achieve great new heights for our companies, our games and – above all – our players.”

This acquisition is, in nominal value at least, the biggest acquisition in Iceland’s tech history. The next one in line would be Amgen’s $415m purchase of Decode in 2012.

1939 Games raises $2m led by Tencent

1939 Games, maker of World War II digitally collectible card game Kards, just announced a $2m fundraise. The investment was led by Tencent, with participation from Finnish Sisu Game Ventures and Crowberry Capital. Viðskiptablaðið reports.

“It’s a great acknowledgement of what we’ve done so far to have as experienced investors as these participate in the round,” said Ívar Kristjánsson, co-founder of 1939 Games. “The financing should allow us to release the game, and we’re growing the team to support that.”

Their debut game, Kards, is currently in Alpha testing mode, and according to the company, more than 20 thousand have applied to become testers.

1939 Games previously raised an undisclosed seed round from various investors, and has received grants from the Technology Development Fund.

Reinvent the Pen: How an Icelandic Startup Is Tackling Diabetes

One day while visiting his father, Sigurjón Lýðsson realized a gaping hole in the medical treatment of diabetics: there was no straightforward way to monitor injections of insulin. Insulin pumps were too expensive—and though insulin pens might abound, patients could easily lose track of measurements and dosage.

For Sigurjón, the issue is personal. His father, who has type 1 diabetes, relies on daily insulin injections to stay alive.

And in 2010, when his father was also diagnosed with cancer, a brain tumor began to affect his short-term memory.

Thus the scene unfolded: while the two chatted over coffee, his father checked his glucose and injected himself with insulin. Moments later, he turned to Sigurjón and asked, “Did I inject?”

Sigurjón realized that, if he hadn’t been around, his father could have gotten himself into trouble: severe overdoses of insulin can cause seizures, loss of consciousness, comas and even death. Thinking that there must be an easy fix, he began to hunt for a device that could help his father keep track of his injections.

“Sadly,” says Sigurjón, “nobody has that yet.”

Undaunted, Sigurjón pressed on. His zeal for a solution led him to cofound the startup Medilync in 2012. After years of market research, the company has designed an app that utilizes computer vision and artificial intelligence to read usage on insulin pens and glucose meters, then readily tells patients when they’re due for another dose.

At the moment, those with diabetes still have to write down their entire regimen.

“It’s 2018,” says Sigurjón. “I’m like, ‘Why?’ It’s baffling that my dad’s insulin dosage and glucose readings are still scrawled on a piece of paper.”

So far, the company has netted a technology research grant from the Icelandic Centre for Research as well as a European Commission grant. A connection with technology titan Microsoft has proved particularly fruitful: Medilync is part of the corporation’s IoT & AI Insider Labs. Microsoft’s Iceland office also named Medilync its “Startup of the Year” in 2017.

Medilync plans to debut its app within the next few weeks.

Getting investors, however, has proven to be a struggle. Multiple factors could be at play—not only Iceland’s relatively small size on the global business stage, but also an ongoing stigma around diabetes. All too often, patients are blamed for a disease they did nothing to cause.

And Medilync sees its own goals as providing a fundamental service, not churning a profit.

“Everybody that you talk to—other than investors—they get it,” says Sigurjón, noting that most people are enthusiastic about a company that’s trying to help patients navigate the intricacies of a complex illness. “We need an investor who knows what this is about and understands what we are trying to fix. Perhaps we just haven’t been introduced to the right one yet.”

In the meantime, the company plans to take its show on the road: in September, it will partake in the UK Health Show, a London-based event that brings together a multiplicity of groups around the world working to interweave technology and personal care.

Medilync is also developing its own hardware—an all-in-one insulin pen with AI and computer vision—for markets with little smartphone adoption. For example, an estimated 82 million people have diabetes in Southeast Asia alone.

For Sigurjón, his dream is taking flight. He sees a streamlined, user-friendly insulin tool as just as necessary in 2018 as it was on that day with his father in 2010.

He often keeps in mind the story of a Microsoft employee who, won over by Medilync’s vision, began volunteering his time and resources to help the small Icelandic startup. When Sigurjón asked why, he said, “It’s really simple: I want to use my spare time to create something that helps people live better lives.”

Already Surpassing 2017: The Iceland H1 2018 Funding Analysis

Published a little late, this report looks at funding activity for startups and tech companies in Iceland in the first half of 2018, Jan 1 through June 30.

The year started with a bang with three notable investments announced in the first ten days of 2018. We’ve tracked one monster round ($75m+): a $150m round in Arctic Green Energy which we omit in some charts as an outlier, to get better information from the data (it’s noted where we skip it).

More cash flowing

We’ve already surpassed 2017 in total amount invested (not counting monster rounds, we had the $240m WuXi round last yearand in fact, reached that milestone in April. The first half of the year saw $48.9m invested in 11 companies (or $198.9m invested in 12), which will grow even more with investments from later in the year – 2018 is poised to be a great year in Icelandic venture investments, possibly overtaking 2016.

Note: Chart does not include rounds bigger than $75m

Even including big rounds, the outlook for the year is healthy.

Overall, we recorded 12 investments in the first half: five in the first quarter and seven in the second, on par with the last couple of years.

Skewed toward later rounds

Last year the investments skewed heavily towards smaller, early stage investments (<$2.5m). This time around, most investments are bigger, and most of the companies raising have raised before, suggesting a good increase in follow-on rounds.

In fact, of the investments we tracked, only two, Kúla3D and Kara Connect, didn’t have a previous round in our database.

Money is flowing in

Last year, most of the investments were from local investors. The first half of 2018, more than half of the funding rounds were funded partially or completely by foreign investors, and 83% of the capital came from outside of Iceland (not including the Arctic Green Energy investment).

Pharma and Gaming receive the majority of funding

It’s usually not worth it to break out specific industries, as the investments are usually too few for any interesting information to emerge. This time around, however, it’s good to point out two industries: pharmaceuticals and gaming.

  • Pharmaceuticals: Three investments totalling $27.1m, all into companies that have previously received investment.
  • Gaming: Two investments totalling $10m, both companies previously received investments.
  • Together, those industries received $37.1m, or 75% of the funding (not including the AGE round)

Connecting that to the bigger picture, where Iceland has big multinational success stories in both pharma and gaming, suggests that although neither is big enough to warrant its own breakout in Icelandic economic measurements, maybe we have industry seedlings in those two.

Exits

The only recorded exit was Bókun’s sale to TripAdvisor. The amount for the sale hasn’t been disclosed (I’ve dug through SEC filings, with no luck (yet)). Bókun is apparently doubling down on operations in Iceland, and recently sent out ads to hire 30 people in the city.

End note: Local VC is changing

In the first half of the year, the local VC funds (Frumtak I & II, Eyrir Sprotar, Brunnur Ventures, Crowberry Capital, and the government run NSA Ventures) only participated in three rounds, in both cases as lead investors. Brunnur did a follow on, and Frumtak and Eyrir Sprotar were completely silent (as expected, neither are really doing fresh investments at the moment).

NSA Ventures came back from a several year hiatus with a bang, taking part in a $3.8m round in Florealis, with fresh capital from the Greenqloud sale.

Similarly, Crowberry Capital has started to make regular investments, leaving three generally active funds (Brunnur, Crowberry, NSA Ventures).

Tempo to sell 30% to HPE Growth Capital at $62.5 million valuation

The Origo Board of Directors yesterday signed an agreement with HPE Growth Partners on an exclusive negotiation with the objective selling 30% of Tempo (subsidiary of Origo) to the investment fund. The valuation will be $62.5m

This marks the end of a long sale cycle for Tempo, which we wrote about back in 2016. Whether or not the sale comes with additional capital to support the growth of Tempo remains to be seen.

More details in the press release.

Takumi raises $4m Series B to expand US office

Influencer marketing platform Takumi just announced a $4m (£3m) Series B round from UK and US angels and investment funds. The company raised a $4m Series A round in May 2017. The company was founded in 2015 by Guðmundur Eggertsson, Jökull Sólberg og Mats Stigzelius. It has over 40 employees with offices in Reykjavik, Berlin, London and New York.

“We will use the funding to grow our development team in Reykjavik and fuel continued growth in the US market,” commented CEO and co-founder Jökull Sólberg.

As a UK headquartered company, Takumi has benefited from the UK enterprise investment scheme when raising funds. Under the scheme, individual investors are incentivised to invest in new and innovative – and therefore riskier – companies. “Having our head office and parent company in London has been very beneficial for us due to this program,” Jökull told Northstack. “The UK has a good blueprint for how to create a good startup ecosystem.”

The company started by focusing on the UK and German markets, and launched a NYC satellite office in 2017, a late entrant there. “Our tech and commercial presence in Europe is mature. We intend to use the new funds to expedite our US plans.”

The three year old company has worked with more than 800 brands and 15.000 influencers. “Takumi is already the leader in influencer marketing in Germany and the UK, the biggest advertising markets in Europe.”

Takumi connects brands and influencers on Instagram, a market that according to eMarketer doubled in 2017.

“Influencer marketing gets held to a higher standard as budgets grow” explains Jökull. “Consumers are wary of influencers working with the wrong brands, and brands are becoming aware of influencers with fake audiences. But we’ve seen that when it’s done right, and influencers have authentic audiences to sell in to brands it’s the most underpriced major marketing channel today and can have a major impact.”

Takumi is also announcing a new partnership with HypeAuditor, an influencer data vendor that is being integrated into influencer vetting and campaign reporting to bolster audience insights and further ensure that audiences are organic and not filled with bot accounts, a practice that is common in Instagram influencer marketing.

In the second quarter of this year, Takumi started working with Heinz and Gillette, and was nominated for the Digiday awards Best use of Social for their collaboration with Kellogg’s.

“Our focus on a superior influencer experience, and distributed sales teams close to the customer, has proven successful,” Jökull said. “The brands want excellent service and the influencers want a great app and trust to do their work. That is what Takumi stands for, and we believe will be the basis for our continued success in the US market.”

Just One Click: Car Parts, Instantaneous Orders and a Late-night Email to Jeff Bezos

The company started with a basic idea: help businesses streamline and automate their sales processes. The usual administrative headaches ensued. Late one evening, in a fit of bleary desperation, a cofounder concocted an email to Jeff Bezos, Amazon’s CEO and the world’s richest man. And that’s when things started taking off for Clicksale, a small IoT startup based on the outskirts of Reykjavík.

Bjarni Ingimar Júlíusson, Clicksale’s CEO, has long been involved in information technology. His family owns Stilling, a company that has sold spare automotive parts in Iceland for almost 60 years, and Bjarni worked on a first-of-its-kind platform whereby vehicle owners could find all the parts they needed simply by entering their license plate number online.

But Bjarni soon encountered a problem: placing orders for products was far from efficient. Automobile shops often had a glut of general car-related materials but were often lacking in specific car parts. Furthermore, too much time was spent on ordering parts and waiting several days for them to arrive.

Why not allow mechanics to order parts immediately and have them delivered within the hour? Bjarni wondered.

So, in 2017, he formed Clicksale with Árni Jónsson, the first developer at Plain Vanilla Games, makers of the wildly successful trivia game QuizUp. The company ordered several Amazon Dash Buttons, which are physical pads a client can press to order prespecified products instantaneously over WiFi.

“We essentially hijacked the delivery system,” says Bjarni.

Clicksale wasn’t just buying up a bunch of buttons and redistributing them, however. The startup wanted to plug the gaps in Amazon’s system.

“What Amazon does is actually quite limited: they have this physical button that connects to the internet,” says Bjarni. “The purchaser have to do a lot of heavy lifting: connect it, program it, use the Amazon cloud. We created a cloud service for companies to implement this easily and also developed an app to deploy this service within a few seconds.”

Why not make the Internet of Things more accessible and intuitive? The only trouble was, ordering Dash buttons in bulk wound up being more cumbersome than the cofounders had anticipated.

“It’s almost like they don’t want you to order it,” says Bjarni. “We were getting really frustrated.”

It was only then that he considered writing to the founder of the world’s largest online marketplace and a man whose net worth was recently pegged by Forbes at nearly $140 billion: Jeff Bezos himself.

“It was kind of a moonshot idea,” Bjarni admits.

He fired off the email right before he went to sleep, and by the next morning he already had a reply from one of the corporation’s vice presidents. That executive invited the Clicksale cofounders to re:Invent, a massive annual developers’ conference sponsored by Amazon, where the Icelanders met the Dash Button team and ultimately resolved their ordering issue.

One question remained: did Jeff Bezos actually see Bjarni’s email?

The answer was unclear. Amazon staff simply said his email had had been forwarded to the director of their department.

“I don‘t know if Jeff Bezos personally forwarded the email or his team did, but it really paid off,” says Bjarni.

Today, Clicksale is focusing on expanding beyond the automotive sector and developing a platform for the optimization of all kinds of product sales. “We’re not a company that replaces your whole IT system,” says Bjarni. “We have small solutions you can hook into your existing infrastructure.”

By focusing solely on software and programming development, Clicksale hopes to respond nimbly to marketplace changes and hone its swift online ordering model. The startup is also partnering with Sigma, a Swedish technology company, to develop their own physical ordering device that would be more tailored to Clicksale’s needs than the Amazon Dash Button.

In the end, Clicksale’s vision is one that could restructure businesses’ purchases and free up a lot of time and creative energy as well.

“We think these repetitive processes—which currently tie down the market—can be automated,” says Bjarni.

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