Author: Kristinn Árni Lár (Page 1 of 14)

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Nordic startup organisations announce strategic partnership

Late last week, a group of seventeen startup organisations in the Nordics announced they signed a manifesto to form a strategic partnership.

The partnership, which according to a statement is to “creat[e] a channel for strategic cooperation and decision making,” has not been formalised yet, and exactly what shape it will take hasn’t been decided.

The group, collectively known as the Founding Partners of #Nordic Made, includes Icelandic Startups, SUP 46 and other similar organisations from around the Nordics, media like the Nordic Web and Arctic Startups, conferences like Slush, and more.

What are they committing to?

The manifesto states several things:

We agree to make strategic and collective decisions about:

  • International presence
  • Key marketing messages
  • Tangible measurements of success

Founding Partners of #NordicMade commit to:

  • Formalizing a #NordicMade organization.
  • Exploring opportunities for fundraising for a #NordicMade organization.
  • Establish a #NordicMade committee consisting of representatives from every Nordic countries.
  • To maintain transparency in all aspects of operation.
  • Create an open and inclusive community platform.

While not completely clear in the announcement what this means in practical terms, based on a conversation with Salóme Guðmundsdóttir, CEO of Icelandic Startups, I can say it’s the following:

  • The group will look into whether they should formally create an organisation, that has a CEO, a board / committee and more.
  • One of their long-term objectives is to market the Nordics as a collective region. Basically wrapping the activity in the many ecosystems in Scandinavian and Nordic cities under one Nordic brand, to the benefit of all.

This follows a collaboration that has been ongoing between many of these organisations already.

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The Technology Development Fund’s role in the Ecosystem

Everyone somewhat involved with startups in Iceland knows of TDF (Technology Development Fund). The fund gives out grants to a lot of companies, and is the lifeline of many in the early stages. While some might argue that angel investments are lacking in Iceland, the TDF definitely takes part in the early stage funding of the Icelandic startup scene.

With recent changes, the fund now offers bigger grants over a shorter period of time. Something that many had been calling for regularly. Last week the fund announced the first recipients of their new, big grant: $600k over two years ($300k per year).

TDF’s announcement:

Sprettur is a major grant, meant to support companies with good opportunity for big growth in the next five years. The companies need to show equity based funding to match the grant.

Obviously, great news for the companies. The one thing I’m puzzled about is the role of TDF in all this. As it is now, TDF and its vetting method (Business plan / excel sheet, who many will tell you is mostly made up) is the gatekeeper for government matching of investment money. Actually, this way the investors are matching the government money.

Now, I’m no expert on government matching programs, but this sounds a bit strange. Most matching programs I’ve heard of – be it Yozma BIRD, or varius angel matching schemes in Singapore, Korea or elsewhere – have the government funding following the investor, not the other way around.

I haven’t found any data on any of this, so I can’t make a judgment, but just based on basic intuition it would make more sense to me that the person making the decision have skin in the game, which is something the TDF definitely doesn’t have.

What do you think of this? Send me a message with your thoughts.

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Paula Gould joins Frumtak Ventures as Principal

Paula Gould, who has worked with startup companies in the US, Israel, and Iceland on marketing, branding, and business development, will join Frumtak Ventures as a Principal to spearhead international brand and marketing initiatives.

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Paula Gould

“I’m thrilled to be joining Frumtak’s team and looking forward to working with their exceptional portfolio companies to help deepen their international network and strategize growth opportunities,” said Paula in a written statement.

Paula previously led marketing at Greenqloud, Dohop, and Oz, as well as serving on the board of directors at Clara.

“Paula’s experience working with startups on brand and market growth as well as her passion and advocacy for the Icelandic innovation and startup community fit well with our objective to create a role on our team that brings international awareness to our portfolio of companies,” said Eggert Claessen, Managing Partner of Frumtak Ventures in a statement.

This hire marks a first for the Icelandic VC business, following in the footsteps of the world’s best VC funds that routinely have specialist support on staff to help portfolio companies. Icelandic VC has until now solely had full-time employees in the form of investment managers or administrative staff, so this is what

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Crowberry Capital, and the funding environment report

Innovation ministry releases report on startup financing

From the ministry’s website:

On the basis of the action plan for entrepreneurship and innovation, Initative and Progress, announced by Ragnheiður Elín Árnadóttir, minister of Industry and Commerce, in December 2015, a detailed mapping of the startup funding environment has been made. The aim is to gather information about financing options for entrepreneurs and startups, from the initial stages through growth, identify needs for improvement, and diversifying the funding resources and options offered.

First off, calling the report a “detailed mapping of the startup funding environment” is a stretch. The report gives a brief introduction to the various funds and institutions that directly support startups financially, but includes no empirical data on the funding environment (in my opinion the most important part of mapping a funding environment). The reason is simple: the data doesn’t exist. The ministry knows it – Northstack met with the minister several months ago on this exact issue. While this may sound bitter, it’s not supposed to. We’ve funded the project (thanks to our awesome sponsors) and are working on gathering the data, so that an empirical mapping of funding in Iceland can take place.

This comment is not made to disparage the work of KPMG or belittle the report. The point is simply that doing a “detailed mapping of the funding environment” absolutely has to include empirical data. It’s a disservice to the ecosystem to suggest that we can have enlightened discussions about the problems of the ecosystem without any numbers backing up our hypotheses. I applaud the effort: diagnosing the situation is critical for the creation of strategy (strategy is sadly lacking in much of government). I’m just pointing out that we should have higher demands, and expect our diagnoses to include quantitative data. In this case, it’s mostly unavailable, and hard to come by. Next time, it’ll be more easily available, which can help in defining, evaluating, and choosing actions.

The suggestions are an interesting list of ideas that could, or could not, help. The main problem is that nobody can point to the thing that needs help. Just like a doctor has a hard time suggesting treatment when the only info provided is “I’m sick”, a consultant or government agency can hardly address any ecosystem issues based on a (possibly non-existent) “funding environment” problem.

What do you think? Have you read the report? What are your initial reactions? Shoot me a message with your thoughts.

Crowberry Capital: Iceland’s first female only VC fund announced

Late last week, news broke (Northstack of course broke it) that Helga Valfells, CEO of NSA Ventures, and two of her colleagues, investment managers Hekla Arnardóttir and Jenný Ruth Hrafnsdóttir, are leaving NSA to found their own fund. Their aim is a 5bn ISK / $42m fund, focusing on early stage companies.

Some thoughts:

The move leaves Egill Másson as the only investor at NSA Ventures – other staff are the CFO and the office manager.

According to the press release, the move is in part due to the Ministry for Industry and Inovation’s aim to turn NSA Ventures into a fund of funds. That suggests that the three women are more interested in investing directly in companies than funds.

They aim to raise 5bn ISK, and according to Helga have some commitments. If they succeed in raising that amount (which is probably the bare minimum they could raise to make this work in terms of operating costs) it would mean 17.5 bn ISK (between $140-$150m) in Iceland-focused VC funds in a couple of years.

The trio is betting their livelyhoods (they’re leaving the jobs without having raised the fund) on the interest of LP’s to participate in another VC fund in the short term, and the hypotheses that Iceland has a funding funnel problem that can be solved with more cash in the long term. That it’s the lack of cash, not lack of startups with potential, that is the source of most current problems.

As far as I know, Eyrir Sprotar wasn’t planning on raising another VC fund. Frumtak, however, is likely to take a run at the third fund. Both of their funds are mostly deployed. Frumtak 1 has been completely deployed for some time (and we’ll hopefully start to see some exits soon), and Frumtak 2 has little left for fresh investments. That would mean we have two VC funds competing for capital.

Of the four classic structure VC funds in Iceland, two are all-male, one is mixed, and one will be all female. That has to be some sort of par-capita world record. Most all-female VC funds per capita in the world?

I wholeheartedly wish the trio the best of luck!

What are your thoughts on this? How do you think the LP market will respond? Will they finish raising? (I know way too little about the Icelandic LP market, sadly). Send me a message with your thoughts.

This post was originally sent out as part of The Northstack Memo – our weekly newsletter with commentary and updates on the Icelandic startup and tech scene. You can sign up here.

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The companies funded by the Technology Development Fund

Mid-December is an important time for the Icelandic startup community, because the biggest financial supporter of startups announces what companies receive funding. 25 projects will be offered a grant, for a total of 450m ISK (~3.75m). The grants come in several types, Company grants, which can range from 20-70m ISK (~$160K-$580K) over two years, and Marketing grants, up to 10m ISK (~$85k) for marketing purposes.

Sproti (20m ISK / ~$160K over two years)

  • Blásúra  – We don’t know of this project, but the contact is for Sigríður Suman, a chemistry professor at the University of Iceland, which suggests it’s related to research.
  • e1 – Marketplace for electric car charging stations. It allows people and organisations that have charging stations to register their station, to allow other car owners to charge their car and the station owners to make some extra money. More here.
  • Travable – travel companion for those with special accessibility needs More here.
  • Yellow beetroot snacks – Founder of Crowbar Protein (Búi Bjarmar) wants to create snacks from yellow beetroots.
  • Platome – One of two Startup Reykjavik 2016 companies receiving a grant. Platome creates nourishment for stemcells.
  • Snakerobots – No info on this company.
  • Travelade – Former Linkedin Product Lead, Andri Heiðar, and his travel startup. More here. 
  • Chess-app – to train the mind.
  • Wasabi Iceland – Previously raised $380k from private investors, growing Wasabi in the east of Iceland.

Vöxtur (50m ISK / ~$420K over two years)

  • Omega Algae – Optimizing EPA-rich algae-oil.
  • Lauf Forks – The company behind the Lauf Forks bicyle forks is continuing development on their product.
  • Flow VR – Meditation in VR, Startup Reykjavik alum.
  • Aldin Dynamics – VR analytics, to analyse user behavior in virtual reality apps.
  • Frostmark – Creating refrigeration products for fishing boats.
  • IceWind – Developing wind turbines for communication masts.
  • InfoMentor – The company behind edtech solution Mentor receives a grant for what they call IM Insights.
  • Gagarín – Developer of exhibitions and shows, for a project they call Mapexplorer.
  • Sæplast – Creating new transportation vessels for fresh foods.
  • Oculis Pharma – The pharmacompany that raised 500m ISK earlier this year from Brunnur.
  • Valka – Fishing-tech company Valka receives a grant to develop their fish processing automation products.
  • SnapStudy – A team of ex-QuizUp people, including former CRO Vala Halldórsdóttir, receive a grant for SnapStudy.
  • asco Harvester – A “street-sweeper” for the oceans. More here (Icelandic).
  • GeoSilica – Creating health-supplements from silica. More here.

Marketing grants (10m ISK / ~$420K over two years)

  • Handpoint – maker of POS software for mobile devices receives a grant to expand to the USA.
  • TARAMAR – Maker of skincare products from algae, Taramar is expanding to the US.
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Former NSA Ventures investors raising new early stage fund: Crowberry Capital

CEO of NSA Ventures Helga Valfells, and two investment managers – Hekla Arnardóttir and Jenný Ruth Hrafnsdóttir – just announced that they will be leaving NSA Ventures to found a new VC fund: Crowberry Capital. They’re currently raising the fund.

“There’s a need for an early stage investor right now and we believe that our experience from working in this environment for a long time will help us with this project, Helga Valfells, departing CEO of NSA Ventures said in a statement.

NSA Ventures and the Ministry for Industry an Innovation have during the past several years discussed internally how to increase capital available to early stage companies. At some point there were ideas about raising an early stage fund – codenamed Silfra – as part of NSA to address this. Rather than following that route, the strategy set forth is to develop NSA Ventures into a fund of funds, that invests in venture funds, rather than directly in startups.

Crowberry Capital hasn’t finished fundraising, but according to Helga, the trio have several commitments and aim to raise 5bn ISK (~$45m). The fund will focus on smaller, earlier checks, to come after grants from the Technology Development Fund, but have the ability to follow on into later stages.

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Will CCP be Iceland’s first unicorn?

A huge news story (or rumour) for the Icelandic tech industry dropped just before the weekend. Bloomberg reports:

“CCP hf, the Icelandic game developer that created the cult classic Eve Online game, is exploring strategic options including a sale of the business after receiving interest from potential bidders, according to people with knowledge of the matter.

The closely held company’s owners […] are discussing whether or not to proceed with a sale. A sale of CCP could value the business at as much as 900 million euros ($955 million), the people said.”

There are points to be made about this:

  • I reached out to CCP for comment on various things related to this, and their line is “CCP doesn’t comment on rumours.”
  • VC fund NEA (and others) invested $30m in CCP last year at a rumoured $300m valuation. That would mean a 3x return in a year, pretty decent for an almost 20 year old company.
  • Novator Partners – one of the biggest shareholders – have been buying CCP stock from current and former employees. The going price has been around $23, according to several sources. Rumors followed, that a sale of CCP was the end goal of these stock purchases, and the Bloomberg story supports that. It’s all but certain that people won’t be selling their stock anymore at that price (if there are any small shareholders left).
  • The €900m valuation is mostly based on CCP’s VR efforts. Any regular valuation based on the company’s core business today wouldn’t come close to that price tag.
  • The valuation is great news for Iceland’s fledgling VR plays, and VR in general. It sends the message that someone is willing to pay top dollar for VR ambitions. which increases VR’s viability.
  • In the last year, the company has shipped two VR games: Gunjack on mobile & PS4, and Valkyrie on PC and Playstation. Both relatively successful – Gunjack is often touted as the world’s most sold VR game – and Valkyrie came with Oculus preorders. Now, the most sold VR game is most likely measured in hundreds-of-thousands of copies, not millions. Hilmar Veigar, CCP’s CEO, has said publicly that the company’s VR efforts have already broke even. No numbers have been released about the total number of games sold [all I’ve found is this tweet, retweeted by Hilmar Veigar, which says number is at “more than 500,000 copies”], which usually isn’t a good sign. CCP has, however, established itself as a leader in VR content creation.
  • This acquisition would be the biggest (I think, correct me if I’m wrong) in Icelandic tech history. Period. It’s silly, but I’m partly annoyed that it hasn’t crossed the $1bn mark (for headline purposes). Also, a unicorn exit would totally establish Iceland as the world champion of per capita – Iceland’s per capita unicorns would be off the charts 🙂
  • The “people with knowledge of the matter” in the Bloomberg story are most definitely leaking this strategically. What their strategy is, remains to be seen, motives could include raising interest to raise price.
  • Any discussion about the impact on CCP’s Iceland operation would be highly hypothetical. What we know is that CCP is building a new HQ close to the University of Iceland. We also know that most of CCP’s VR development is outside of Iceland. Gunjack is developed in Shanghai, Valkyrie in Newcastle, and Project Arena in Atlanta.

The company has remained publicly silent, but I would guess that some internal communication has taken place. In any case, these next weeks will be interesting, and rest assured, we’ll be following up on this.

The somewhat clickbait-y subject of this edition was “Will CCP be Iceland’s first unicorn” – and I haven’t answered that question. I personally think it could very well be; the news hopefully spark interest among other potential acquirers, sparking a bidding war, resulting in a higher sale price. Also: we could always calculate the sale price at this summer’s exchange rate, which would make €900m translate to more than $1bn 🙃.

This post was originally sent out as The Northstack Memo, our weekly newsletter with commentary on the Icelandic tech and startup scene. Subscribe here.

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Slush highlights, and why Iceland needs Slush Play

Slush Highlights

I’ve never been to Slush (or Helsinki) before, so everything was new. The first thing I noticed was the sheer size of everything: 17 thousand attendees, endless side events, enormous production value in everything. The size of the event allows for exceptional speakers (Chris Sacca, for example), and droves of investors, startups, and media. The talks covered a wide ranging subject; from cultured meat, to government and startups. There’s certainly something for everyone at Slush.

But the size is also the biggest drawback. The amount of speakers means a smorgasbord of topics, but also doesn’t allow for the depth of talks and discussion a focused event does. When a keynote speaker takes a couple of minutes to explain what machine learning is, you can rest assured that the talk wont go exceptionally deep.

That doesn’t mean the content is bad. It just means that the type of content is more introductory – a spark to investigate further. My two favorite topics were foodtech, companies that are changing how we consume proteins, and mini satellites. Both of the topics I will investigate further, and Slush was a big part of sparking that interest.

Why we must keep Slush Play going

This brings me to the main point of this post. My trip to Slush further convinced me that we (the tech community in Iceland) should absolutely make sure that Slush Play happens next year. There are several reasons for this.

  • First of all, people outside of Iceland are starting to reference it as a hub for VR activity – at least one speaker on the main stage of Slush referenced that.
  • Second, we need events like those to put Iceland on the map, bring media and investors to meet the scene, and build up an international presence. The full potential of an event like Slush Play won’t be realised until it’s been run several times – there are now two under the belt. Let’s get that to five at least.
  • Third, I think Slush Play is important is the focus. While Slush in Helsinki can afford having a wide focus, a fledgling event needs the focus to attract the top speakers and investors to participate.

So, please keep the bigger picture in mind when the Slush Play team comes knocking, asking for help 🙂

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Latvia creates startup law and Iceland should follow suit

This post is was originally published in the Northstack Memo, our weekly newsletter. You can sign up here.

An interesting post on new laws in Latvia made the rounds in the startup circles in Iceland last week:

The Startup Law, approved today by the Latvian Parliament will create a tax regime … that will effectively double venture capital investors’ money in young Latvian startups. This law is seen as part of a wider push to make Latvia an attractive base for startups.

“When investors decide to risk money backing a startup in Latvia, almost half of their money goes to pay social and personal income taxes …” said Andris K. Berzins, board member and co-founder at the Latvian Startup Association … “This is because in most startups there are few other costs aside from salaries. So together with the Ministry of Economics, we decided to tackle this cost directly and the result is this new tax regime.”

The law foresees two tax plans: a special flat tax regime, currently 252 euros/mo per employee … Or for more highly qualified employees with a doctors or masters degree or 5+ years of experience, a regime where all their social and personal taxes are covered by the state, and they receive full social benefits

Latvia is lifting taxes on qualifying startups, so they can make their money last longer. Nothing new, per se, in the increasing competition between countries luring promising companies in. And due to the recent technological, that make starting (and moving) a company much easier than before, this fight might get bigger (and dirtier?) in the coming years.

Other countries do similar. Canada, for example, has on several (confirmed) occasions reached out to Icelandic companies. They offer tax breaks (both personal income and corporate) to move there. The main difference here is that Latvia is blanketing this to all companies, not only companies contacted by the local economic development office. (Question: does Reykjavik have one of those?)

The most obvious reasoning for passing a law like this one, would be something similar to the following (keep in mind, I’m not an expert on Latvian econmics):

Latvia (as the other baltics) is seen as an outsourcing / offshoring nation. Western European companies outsource their software development to Latvia. The long term value in actually having the companies in Latvia is something the government there would very much like, so they subsidize startups that come to / are started in Latvia.

And I think Iceland should absolutely have the same mindset.

Nations and economies depend on the businesses that are operated in them to drive the value creation. This value generation in the end pays for everything the government does. Subsidies and other efforts to lure companies to certain places are one way of artificially creating an ecosystem, that (hopefully) drives economic growth down the line.

Some notes on this:

  • Small nations like Iceland will have a very hard time organically growing a software startup ecosystem that consistently produces medium- to high value companies. We’re simply too small.
  • Another way to get to the same result is to try to artificially create the ecosystem. While I’m not convinced that it can happen – and the government luring companies here would be a better way than actually creating them – there’s no shame in trying. I could argue that it’s better to try and fail than not try at all in these matters (isn’t that generally the case?)
  • Iceland’s tourist boom has covered up the lack of growth in the international sector, identified in the McKinsey report as essential to Iceland’s future prosperity, and pointed out again in the Chamber of Commerce’s follow up report.

Recent news and economic changes support this even more. The strengthening of the Icelandic krona makes operation of international (tech) companies in Iceland harder. As international companies, their revenues are mostly in foreign currency (99% is probably a good guess-timate). At the same time, their costs (mostly salaries) are in ISK. You don’t need an MBA to see the difficulties that arise here. This is already affecting Icelandic companies in a way that is bad for Iceland (i.e. focusing hiring to non-Iceland offices).

Iceland currently has no government, but I hope that when we will, the people at the top take these things seriously.

This post is was originally published in the Northstack Memo, our weekly newsletter. You can sign up here. Image is of Riga, capital of Latvia, from Flickr.

Easing capital controls: Effects on the startup scene

This post is was originally published in the Northstack Memo, our weekly newsletter. You can sign up here.

Last week parliament finally passed a bill easing the capital controls:

Individuals’ and companies’ freedom to transfer funds to and from Iceland and to carry out foreign exchange transactions will increase greatly, according to the bill of legislation that the Minister of Finance and Economic Affairs will present before Parliament tomorrow. The bill is part of the authorities’ capital account liberalisation strategy, introduced on 8 June 2015. With it, important steps are being taken to lift the capital controls in full. The bill has been prepared in accordance with recommendations from the International Monetary Fund (IMF), with economic stability and the public interest as guiding principles. (Finance Minstry)

This is obviously a huge step for Iceland, and could mean big changes for the startup scene. Just for kicks, I dug up an old tweet from investor Chris Dixon at Andreesen-Horowitz:

Investors that wanted to put money into Iceland were able to choose between two exchange rates for the Icelandic krona. Offshore rates which were cheaper for the investors (i.e. got more kronas for each dollar) and onshore rates, which were more expensive. However if you picked the offshore rate, your money was “stuck” in Iceland. Investors that chose the onshore rate could move the money around.

Note: This was a surprise to me. I believed that foreign investors were not able to get money out of the country after they invested. However, I wonder whether that possibility was advertised enough.

Although the possibility was there, to use the onshore exchange rate and invest “normally” in Iceland, some startups chose to go the dual-structure route. Those startups incorporate overseas (Delaware or London, for instance) and keep all intellectual property there. Then they found a subsidiary in Iceland (hence the dual structure) that bills the parent company for development.

This means that the main benefit for the Icelandic scene is making foreign direct investment possible for Icelandic investors. Both individuals and institutions.

Therefore, Icelandic VC’s can now invest in non-Icelandic startups. And Icelandic angel investors can invest in non-Icelandic startups as well. This is great news.

Let’s dive into why.

  • Diversification: Maybe not a major issue, because most startups that receive investment are on an international level. But betting on companies from more locations than one (i.e. Reykjavik) might be a way to diversify the portfolio.
  • Specialisation: Icelandic VC’s and investors could use this opportunity to specialise in a vertical. Instead of specialising in companies that are in Iceland, a fund could decide to focus on VR and AI companies. If that kind of decision is made, it’s obviously better to have access to a bigger pool of startups.
  • Larger funds: Iceland specific VC’s don’t warrant the size of fund that would be optimal. A bigger fund means higher management fees which means the fund can invest more in staff (like analysts) and promotion (office in Silicon Valley, travel more, building bridges, etc.). I think it will be hard to make the case for a big (10-15bn ISK) fund, if it’s supposed to only invest in companies in Iceland, especially since we haven’t seen a VC backed exit from Iceland since Datamarket.
  • Better funds: In the longterm, the Icelandic scene should absolutely want their VC’s to invest all over the world. Just like we want our startups to think big and go global, we should want our VC’s to do the same. One or two globally successful VC funds with headquarters in Iceland would raise the quality of the Icelandic scene quite a bit.

How do you think the easing of capital controls will affect the Icelandic startup scene? Shoot me a message with your thoughts.

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Nortstack – Reporting and analysis of the Icelandic startup scene