Author: Guest Author

The Nordics aren’t going to be the next Silicon Valley

But they could be something even more exciting for a new generation.

“Si c’était à refaire, je commencerais par la culture.” Jean Monnet

Let’s get one thing out of the way first. Silicon Valley is great. But every time I hear some one say that the Nordics could be the next Silicon Valley or paint Silicon Valley as the one and only recipe for innovative excellence I’m reminded of a report done by Endeavor Insight in 2014. In that report they tried to find the answer to the question: “what do entrepreneurs want in a city?”

Oddur Sturluson

Oddur Sturluson

And while there’s no question that Silicon Valley is the global tech and startup hub of today, the things we outsiders often do to emulate Silicon Valley don’t reflect the findings about what it actually is that entrepreneurs look for in a city (or even what makes Silicon Valley great for that matter). Above everything else, it’s about talent. And attracting talent is about having a place that’s nice to live and work in. The founders rarely mentioned low taxes or business-friendly regulations as reasons for their choice of location, and yet those factors are some of the most common improvements politicians, journalists and lobbyists call for. And that’s understandable. They’re quantitative, easily manageable and rational.

But people aren’t always rational and things that are immensely important to a successful startup ecosystem can often be unquantifiable. Of the 100 descriptive words entrepreneurs used to answer the question “Why did you choose to found your company in the city that you did?”, the words Tax and Girlfriend are side by side. That’s right. Dating plays roughly as important a role as taxation in that regard, and yet I have a hard time seeing local governments opening singles bars for entrepreneurs in an effort to attract talent.

What I imagine a government campaign to attract single, lonely entrepreneurs would be like.

Yet that’s exactly where our focus should be. No, not singles bars. Attracting talent. After all, if our goal really is to try and replicate the Bay Area’s success it’s worth noting that despite California being ranked as the least business-friendly state in the US, it tops them all in job creation. Then again, why are we trying to measure our success by some one else’s metrics? After all, as Adrià Hernández put it, “Imitating any success formula, in the best case scenario, limits you to second place, as you’ll never be able to beat the original playing the same game, with the same rules and less resources.”

The Nordics aren’t Silicon Valley. The culture, history and economy is vastly different. That doesn’t mean we don’t have anything to compete on though. Quite the opposite. A high standard of living, safety, creativity, equality, vibrancy. Things which matter and are only going to become more important in a world where traveling and working remotely becomes easier and spending absurd sums for the privilege of living in cramped quarters competing with millions of others for the same prize seems increasingly ridiculous.

For Scandinavians, trying to replicate the Silicon Valley brand of “startup culture” doesn’t make sense. Scandinavians don’t do 80 hour work weeks and unbridled optimism. We do social responsibility and life-work balance. In a future where access to knowledge and talent is increasingly international, offering entrepreneurs a sustainable lifestyle is going to count for a lot more when it comes to creating a leading startup ecosystem. While the Nordics still face challenges (reforming immigration regulations, access to capital, etc.) the foundation for a truly revolutionary creative and innovative future is already in place. And for us, it won’t look anything like Silicon Valley.

This is a guest post by Oddur Sturluson, project manager at Icelandic Startups. You can find him on Twitter.

Why is it so important that TravAble recieved funding

A social enterprise gets funding from the Icelandic Technology Development Fund

bardur

Bárður Örn Gunnarsson

The Icelandic Technology Development Fund announced its funding just before Christmas. 25 companies received grants ranging from $85K to $420K. There is a wide range of startups on the list, from VR to Robotics, from Ed-Tech to Food tech. They are all built by strong teams looking for funding to scale their business. In many ways they are similar even though the products and services are different. Still one startup sticks out: TravAble. TravAble is an Icelandic startup trying to facilitate access to places and services for the physically impaired with an app. It is a true social enterprise, the only one in the group. It is still built like the others with a strong diverse team and strong technological know-how and meant to scale.

What is a Social Enterprise and what are Social Entrepreneurs

Social enterprises are companies or organizations that are funded to solve social or environmental problems with commercial strategies and often with a startup approach. Social entrepreneurship has often been viewed as an alternative way to tackle issues the public sector has not managed to solve and the private sector has not found profitable. Most Social Startups differ from other startups due to the fact that the driving mechanism in the company is doing good by solving a problem, not profit. They can still be run as for-profit, so if the solution ends up being profitable that’s not a bad thing, social enterprises can of course also be run as non-profits.

“With all the challenges our society faces from health care, education, technology or the environment, we need social entrepreneurs and social enterprises to create solutions that benefit people and the environment sustainably.” says Tanja Wohlrab-Ryan CEO and Founding member of Kveikja a NGO raising awareness, promotion and education on social entrepreneurship. “The concept of social entrepreneurship is still quite unknown in Iceland. To date not many social innovative projects have been supported by the big grant giving funds. For this reason, we would like to see a special grant fund created by the government (common in many countries) that specifically invests in projects that can demonstrate a high level of social and/or environmental impact, as well as profitability.”

Tanja pinpoints that one of the greatest problems with starting and running a social enterprise is funding. Why would anyone invest in a company that is not profitable from the get go. That’s where public money and grants come in. It is essential for social enterprises to meet their goals to have access to capital. That’s where Rannís and the Icelandic Technology Development Fund have stepped in and opened up to funding new types of companies by including a social enterprise in its funding this year. That is really applaudable.

So why is this funding so important

TravAble is a clear example of a social enterprise. The company is lowering barriers in our society for the physically impaired with making information on accessible services, entertainment and facilities easier to find.

TravAble aims to meet that need by connecting in a new way existing information on services and accessibility information in an app for mobile devices. The app will use location services, making it easy for users to plan ahead or navigate to nearby locations.

“TravAble´s vision is to be a global leader in it’s field. This requires close attention to technical implementation, the core system needs to handle high volume of concurrent users and be able to scale easily. TravAble has worked on the system design with experienced experts in the field. Usability is a key factor for success, and the implementation will be user centric and done in collaboration with top tier partners e.g. the Reykjavik University.” says Hannes Pétursson, CTO and founder.

The needs and wishes of physically impaired persons are targeted and those that cater to them. According to Ósk Sigurðardóttir, CEO and founder, “It is estimated that physically impaired, their immediate friends and family are about six million in the Nordics alone.” TravAble aims to build a crowdsource community to ensure collection of information and its reliability.

TravAble will initially use the Icelandic market as a test bed but has already began expanding to the Nordics with partnership agreements.

With such a large market segment, a scalable solution and a constantly growing market TravAble might eventually become profitable.

I hope this will be a motivation for other entrepreneurs to use their skills to solve social and environmental problems. With this gesture the Icelandic Technology Development Fund has indicated that social enterprises stand a chance against the profit driven tech startups that rule the startup scene for now.

You want to start a company. But why?

Hjálmar Gíslason, VP Data at Qlik

Having been through the startup process several times (DataMarket was my fourth as a founder), I have come to the conclusion that the most important part of starting a company is for the founder or founders to think about and agree upon why they want to build the company in the first place, and what they want to achieve. Interestingly enough, this is typically not a priority for founding teams. Working on “the what” – i.e. building the product, growing the team, funding the operations, figuring out how to make the business model work, etc. – is so challenging, time consuming and exciting that we never stop to think about “the why”. Why do we want to start a company? What is our motivation, our purpose and our end goal? But thinking about this in the beginning will help guide many important decisions further down the road.

Let’s imagine a few possible motivations one might have for doing their own startup:

  • Autonomy: Wanting to be independent, working for yourselves and not be controlled by somebody else’s agenda.
  • Desire to create: Wanting to see your idea become a reality.
  • Riches: You want to become wealthy.
  • Glory: You want to become known for your creation whether in certain circles or simply become famous.
  • Fun: You’re in it for the excitement and the joy of working with a good group of co-founders and co-workers.
  • Challenge: You want to prove to yourselves (and/or others) that you can achieve something that’s notoriously hard to do.

There are surely other possible motivation, and most likely your motivations are a combination of more than one of those. But you should really think about what they are, because this will help guide you through some key decisions as you build your company. What follows is an attempt to illustrate that for a few key areas.

The team

The most important part of any start-up – or any company for that matter – is the people. However, the composition, size and nature of your team may be guided by your core motivations. If your primary motivation is to become rich, you may want to have a smaller founding team. If your primary motivation is to have fun, you might focus on a different group of people, and if it’s autonomy you’re after you most likely want to make sure you are the one(s) in charge. It might also change how you want to compensate the team, who get’s in on a founding share, who gets stock options, how much you pay in salaries, bonuses, etc. It is even likely to guide how fast you want to grow the team, and how urgently you want to fill certain positions.

The funding

When it comes to the funding strategy, your core motivations have to be crystal clear. We’re so used to the startup stories that make the headlines that we tend to think about this almost as a single track: First you bootstrap and/or self fund, then you take in an angel investment, next a seed or Series A, then Series B, C, D, etc. until you IPO (or get acquired somewhere along the way). It is true that in most cases as soon as you take in external funding from a typical outside investor, this is the expected path. Money may already be one of your motivations, but rest assured that for outside investors it is almost guaranteed to be the primary – if not the only – reason they want to be involved.

There is nothing wrong with that. In most cases that is the reason for their existence as “investors” (otherwise they would be called something else, like “givers” or “splurgers”). But if you have other motivations too, you now have conflicting interests. When you take in an investment, money becomes the primary target, and you’ve started down the single-track path described above.

If your core motivations are any different, the honest thing to do is to either have an open discussion with your potential investors before they come on board or give in to the fact that money is now your primary game. Some – especially early stage – investors will in fact be open to a different or supplementary agenda. And all of them will appreciate your honesty. You will too, even if it ruins some of your funding opportunities. Also: You may have to compromise some of your motivations in order to achieve others. Many ideas are very hard to make a reality without serious funding, so even if your primary motivations are different, you’ll have to make the money part work out too.

There are other paths, less traveled in the tech startup world. In fact most businesses outside that world are started with much more modest plans and needs for funding, and yet they sometimes manage to make their founders well off, or flat out rich without ever taking in outside funding. This usually takes longer, and doesn’t get as big as a Silicon Valley-type startup, but can get quite big nevertheless.

And this is where your best interests and those of a typical VC investor may diverge significantly. Their business is about maximizing their potential upside even by taking excessive risk: Go big, or go home.

Modest success is not among their desired outcomes, but it may well be yours.

The end-game

Are you prepared to see your baby go? On the typical start-up route there are only three possible outcomes: an acquisition, an IPO or – the most common one – a failure. In the case of an IPO or an acquisition you may still be in a position to control some things, but getting there will take years of good fortune and great execution. Well before the exit you are likely to hold a minority of the shares, often a smaller stake than one or more of your investors. You will be in control as long as everything is going relatively well, but if things go south – you’re no longer in a position to control the outcome. The same is true after an exit. In the case of an IPO you will now be subject to the forces of the markets, quarterly filings, growth and profit expectations and general emphasis on short-term results. Often at the cost of longer term goals. In the case of an acquisition, your level of control will depend on the motivations and goals of the acquirer, as well as the success executing on those plans after the acquisition.

But all of this may be fine. By this time, you may well have reached your goals. The product is out there, the money is in the bank, you managed to pull of something extremely hard that most that try fail at, and you may still be having a lot of fun and autonomy. In fact, even in the case of a “failure”, many of your motivations may have been met.

But if you didn’t think about your motivations beforehand, you may actually realize that you went down a path where your motivations or those of some of your team members weren’t fulfilled. That’s why spelling them out, discussing them and monitoring them on the way is so important.

Hjálmar Gíslason is the VP of Data at Qlik, and formerly founder and CEO of Datamarket (acquired by Qlik).

Nortstack – Reporting and analysis of the Icelandic startup scene