Another week, another Memo. First, a couple of announcements.

We have a new team member at Norðurskautið. Her name is Guðbjörg Rist, an engineer from Chalmers, and she will be leading our efforts into research and reporting. If you’re interested in reports or research about the Icelandic startup scene, send her a line and she can help you.

We’re starting a book club. A group of people from the Slack-group (bit.ly/slack-is) decided to form a book-club. We’ve created a Facebook group for it (here). Our first book is The Power of Habit by Charles Duhigg. We expect to meet and discuss it by the end of June. It will most likely at Watchbox’s office (they’ve volunteered to be the first hosts!). You can join the FB or Slack groups to participate.

Now, on to the Memo.

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Last week I wrote about the Innovation bill. I asked for some feedback on the angel-investment deductions, and got some good discussions out of it. The following is a summary of a discussion I had with an experienced angel investor in the community:

I think this is a good change but it doesn’t go as far as EIS or SEIS does in the UK. There are two main issues I see. First, the deductions don’t apply to companies. Individuals don’t have the same tax benefits as corporations when it comes to deferring profits. Smaller investors might do this as individuals, but I think many will do it through a holding company. That means the deductions won’t be applicable to some investments. The other thing is that the rules don’t allow the investor to have a board seat in the company she’s investing in. I understand that you shouldn’t get a tax deduction when investing in your or your family’s company. But the bill doesn’t allow the investor to be a board member two years before and three years after the funding round.

I hadn’t thought about the tax benefits. Understandable, because I’m not an angel investor. These concerns by the investor sound general, in a way that active angels would have the same concerns. It will effectively bar active angels that invest through holding companies, or groups of angels that use a special purpose vehicle to invest. Which makes me want to re-iterate a point I made in the last Memo:

One thing caught my interest. The economic affairs and trade committee didn’t receive commentary on this from known angel investors. Neither oral nor verbal – at least not according to official records.

Barring investors from joining the boards of companies is strange. Many startups that receive investment from angels might benefit more from the angels’ contributions to their business, than their cash.

Looking at these incentives, it paints a picture of tax breaks meant for, or used by, inexperienced, small-time investors. A low minimum limit (300K ISK / ~$2,300), sub-optimal options when utilising the deductions, and restrictions to taking board seats, makes me afraid that it won’t benefit active, professional investors. I’m not calling it dead or useless, but I don’t have high hopes for the effectiveness, based on how the changes are implemented.

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Startup Iceland was two weeks ago. The event is the biggest in the Icelandic Startup scene. Well produced, speakers from all over the world and much anticipated. I’ve attended twice — this year and last. Many I’ve talked to in the days after the event mentioned that they missed seeing prominent figures from the Icelandic startup scene. And when Startup Reykjavik announced their 2016 batch and “half of the room stood up. I started thinking, where are all the startup people?” one attendee noted.

My question is What happened? In 2015, the Icelandic scene had the biggest funding year ever, with more startups funded than before. Startups are getting more attention and interest is high (just like in many other places). Yet, it felt like there were fewer attendees than before. How come only a part of community showed up?

Did you go to Startup Iceland? Why / Why not? Why didn’t more people show up? Shoot me an email with your thoughts, I’ll keep things off-the-record or anonymous if you want.

Note: I’m going on vacation for a week, so there won’t be a Memo next Monday.