This post is from the Northstack Memo, our newsletter and commentary on recent happenings in the Icelandic startup ecosystem, written by @kiddiarni.

The long-awaited exit

It’s an understatement to say that people in the Icelandic startup scene had been waiting for a meaningful exit for a long time. The last recorded sale to a foreign company is Zymetech’s sale to Enzymatica in January 2016, and the last recorded software company exit is when Autodesk acquired Modio in March 2015.

A little backstory to Greenqloud, from Forbes:

GreenQloud was founded in Iceland in 2010, initially delivering two basic Infrastructure as a Service (IaaS) cloud offerings called Compute Qloud (roughly equivalent to Amazon’s Elastic Compute Cloud, EC2) and Storage Qloud (roughly equivalent to Amazon’s Simple Storage Service, S3). The company invested early in building upon and adding to promising software from a startup called cloud.com, which eventually became an open source Apache project, CloudStack. GreenQloud, as the company’s name hints, also made a strong play of its environmental credentials, with its Icelandic data centers entirely powered by the country’s cheap, plentiful, and 100% renewable geothermal energy. A U.S. data center followed in 2013, when the company leased space in Digital Fortress’ green-ish Seattle location. In 2014 they released their modified version of CloudStack as QStack, and actively began pushing a solution to the hybrid cloud challenges that enterprise customers increasingly appeared to face.

The pivotal moment for the company was in 2015 when they announced a shut down of their cloud operations. Under the leadership of Jónsi Stefánsson, who joined to company as CEO in 2014 (had been on the board before that), Greenqloud doubled down on hybrid cloud management software – Qstack – which led to the acquisition announced a couple of weeks ago.

Fundraising history

Greenqloud had several investors, most of them Icelandic (or Icelandic-ish, Novator Partners is run by Icelanders but located overseas), and one American that joined last year. At this years annual meeting on July 7, 2017, the following were shareholders of the company.

  • Keel Investments, 38.8%

  • NSA Ventures, 15.8%

  • Omega Iceland, s.á.r.l (Novator), 13.4%

  • KP ehf. (Birkir Kristinsson), 11.6%

  • Kelly Ireland, 7.5%

  • Meson Holding (Vilhjálmur Þorsteinsson), 1.1%

This totals to a little under 90% of the company. The rest is owned by founders, employees and minority shareholders, as well as a stock option pool for employees.

Keel Investments invested in the company in 2010, NSA Ventures followed in 2011, Novator led a round in 2014, and Kelly Ireland joined last year. Most of these funding rounds were undisclosed (and at the time no one was really tracking investments like these). The only disclosed round was Kelly Ireland’s $4m investment.

Based on public filings, we can see that in January this year, the company issued just under 480 million new shares when a convertible bond, totalling roughly 1.5bn ISK (roughly $14.3 million in today’s exchange). The filings also show that the price per share for the holders of the convertible bond was 3.2 ISK / share. With a total of roughly 950 millon shares after the conversion, that suggests a valuation of roughly 3 billion isk (~$28.5m).

The final piece in this puzzle is obviously the price paid for the company, which hasn’t been announced. Whether it ever will be remains to be seen. NetApp is a public company, and there’s always some confidentiality clauses because of that, but I expect at least a mention of the acquisition in NetApps Q2/18 results due later this year. If something interesting comes out of it, we’ll report.

What happens next?

Jónsi Stefánsson, CEO of now NetApp Iceland, did an interview with Viðskiptablaðið recently. There he announced that the company had plans of doubling its operations in Iceland before the end of the year. The company currently has around 35 staff, which means hiring 35 people in four months, in a market with very low unemployment (1% in July) and fast-rising pay for tech talent. That’s a similar growth trajectory in terms of company size, as when QuizUp went from 15 to 85 in one year.

That’s absolutely great news for everyone involved (well, except those that might have wanted to move to the US). It’ll definitely be an upgrade to the Icelandic tech ecosystem to have a R&D department of a Fortune 500 company operating in Iceland, it increases the possible workplaces for Icelandic tech people, and increases the weight of Greenqloud as a stakeholder in the Icelandic ecosystem.

Which leads to an interesting point: Jón fires hard at the Icelandic environment: “If I was starting a startup today, I’d never found it in Iceland.” The reason: subpar support for R&D operations, and just like Finnur Oddsson of Nýherji, he compares it to Montreal, where according to Jón, “the R&D refund would’ve been ten times [what we got in Iceland].” While harsh, it adds Greenqloud to a growing list of companies that pressure the Icelandic government for more R&D refunds (others include CCP, Nox Medical and Tempo). I’d also question the reasoning behind not starting a startup in Iceland because of tax breaks; I doubt many founders pick a place to found a company because of that. What do you think?

The exit also means one very interesting thing for the environment: NSA Ventures might have some cash to invest. The exit should not, however, have an impact on the overall direction of the fund (currently being worked on a by a working group), which I’m very interested in seeing.

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