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Uber, Lyft and Iceland: Will they ever come?

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

Transportation Ministry to look into Uber & Lyft

From Vísir:

Jón Gunnarsson, minister of transport, will appoint a working group to look into the possibility of ride sharing companies like Uber and Lyft operating in Iceland to meet the growing demand of taxis. The minister has already decided to increase the number of taxi permits.

”We’re gathering data and following that, soon in the fall, we’ll create a working group which will have the task of going through the data and creating suggestions for the future of these issues in Iceland,” says Jón. He says the working group will look specifically at Uber and Lyft, because both consumers and foreign surveillance authorities have complained about the current setup.

To put this into perspective, we should add a couple of facts (borrowed from Hallgrímur Oddsson’s excellent piece on Uber & Iceland from last year).

  • There are 560 taxi licenses in the Reykjavik area, the same as in 2003. Since then, inhabitants have increased by 30,000, and the number of tourists has grown from 320 thousand in 2003 to around 1.8 million in 2016.
  • Reykjavik is the only capital in Scandinavia Uber hasn’t entered (they’re leaving Copenhagen and Helsinki, more on that later).
  • There’s a notorious “grab a lift” group on Facebook for the Reykjavik area, boasting ~37.000 members, and regularly mentioned as a danger to both people and taxi drivers by taxi drivers.

Also, in 2014, Reykjavik reached some minimum number of signatures for Uber to start looking into coming here, and Ryan Graves, former CEO and then SVP of Global Operations promised to bring Uber to Reykjavik. As you know, nothing has happened since (to the knowledge of consumers, that is).

Lyft, on the other hand, is even less likely to show up anytime soon. They have focused exclusively on servicing the United States, apart from partnership dealswith other ridesharing companies like Didi (China) or Grab (Southeast Asia).

Why should they bother?

The transportation market is undergoing very interesting changes. There are three major changes affecting the market at the same time, as explained by Ben Thompson of Stratechery:

  • Consumers moving to Transportation-as-a-service (as seen by Uber users)
  • Cars moving to electric (making TaaS more affordable in the long run by decreasing marginal costs on driving)
  • Cars becoming self-driving (eliminating the need for a driver, and driving marginal costs even lower).

Uber’s long term play (and gigantic valuation) is by most accounts based on becoming a leading force in this shift. Consumers are already using the service a lot, and Uber (as well as almost every other technology company out there) is investing in self driving cars. Enormous growth (in locations and users) of the last several years, has fueled the company.

Which is why I’ve been pessimistic about the possibility of Uber coming to Iceland. The cost (and risk) is too high and the benefit too low for the company to decide to come here. Reykjavik, even with the tourists, is just too small to make a difference. The smallest city on a list of the world’s 300 largest cities has 361.000 inhabitants, and if you count the metro area, it has 2.2 million.

Reykjavik, with its 123 thousand inhabitants (and 220 thousand in the metro area) doesn’t seem big enough for a company like Uber to risk litigation. Especially not now that Uber has left Finland’s Helsinki because of legal issues, and has been declared illegal by courts in Denmark.

Or well, at least until we change the rules around it.

The opportunity in pre-emptive legalising

These news are therefore very exciting. Iceland’s size and remoteness make it an unattractive market for most companies looking into international expansion. Add to that very strong labor unions, an expensive labor force, high taxes, not to mention the turbulent currency, and you have a mix of ingredients that don’t make Iceland attractive to market entrants – especially not when these entrants are directly challenging the status quo.

That’s why Iceland’s strategy in dealing with these technologies and society-changing concepts should be to legalise first, ask questions later. Not only should we legalise it, we should recruit the companies and help them set up shop here, in some cases even look into subsidizing their market entry. We’ve been doing it with huge investments before (a recent example is United Silicon), so why not the consumer serving companies that are ushering a new way of going around business? The consumer surplus provided by companies like Uber, Airbnb, Amazon Prime, Netflix and more, should at least be worth the discussion.

WuXi Nextcode closes $240m Series B funding round

Genetic data platform WuXi NextCODE just announced a massive $240m series B financing round. The company extended and completed the Series B round with investment from a consortium led by Sequoia China and including TemasekYunfeng Capital and 3W Partners. Temasek, Yunfeng and 3W also participated in the initial Series B round in May alongside Amgen Ventures and other existing long-term investors and partners.

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The winners of the Nordic Startup Awards – Iceland

Today, the winners of the Icelandic finale of the Nordic Startup Awards were announced. “The winners were selected by a panel of judges, each with proven experience and skill in recognising the potential of a startup. These choices were based upon the nominee’s quality and impact within their industry or field,” a statement explains. The event was hosted by Innovation Center Iceland.

Each of these winners will be moving on to compete in the Nordic region’s Grand Finale, which is being held October 18th in Stockholm.

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CCP launches fourth VR installment with Sparc

CCP announced today the launch of Sparc, its fourth VR game. The company, which raised $30m to boost their VR development efforts, has previously released Gunjack, Gunjack 2, and Eve: Valkyrie. Sparc is the first game launched by CCP that’s not part of the EVE universe.

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Greenqloud acquired by NetApp: Digging through the story

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.

Please share the Memo with people you think might enjoy it. Also, if you have any questions or comments, just send me a message.

Anitar’s mobile RFID scanner aims to simplify the life of vets and horse breeders

Anitar, Icelandic agtech startup, recently launched a Kickstarter campaign to finance the initial production of their RFID scanner The Bullet.

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Nordic Scalers: a growth program for Scandinavian Scale-ups

Launching this month, Nordic Scalers is a new growth program that connects the most talented entrepreneurs across the Nordics. The initiative is made to bring well-established startups closer to a global market. The program is supported by Nordic Innovation and Icelandic Startups are fostering the project in Iceland.

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Influencer marketing platform Ghostlamp closes $1m seed round led by Brunnur

Influencer marketing platform Ghostlamp announced they had closed a $1m seed round. The investor is Brunnur Vaxtarsjóður, which makes this the second investment announced by Brunnur this week. The investment comes with a commitment of $1m following the growth of the company. Previous investors include advertising agency Pipar / TBWA and Vetrargil. Both invested undisclosed amounts in the company.

“We’ve been following Ghostlamp for a couple of years and believe it will be able to grow fast and be successful internationally,” Árni Blöndal, GP at Brunnur, said in a statement.

Ghostlamp and investors.

Ghostlamp is a influencer marketing platform, where brands and advertising agencies can connect with local influencers and pay them to advertise their products. According to the statement, the company has over 6 million influencers listed, and categorises them based on age, gender, location and more.

“Ghostlamp ensures that influencers get paid for sharing their creativity, in partnership with brands, with their followers. By partnering with Brunnur, we not only get funding to help support further growth, but also access to valuable experience through people that have been in similar situations as we have,” Jón Bragi Gíslason, Founder & CEO said in a statement.

 

Employee training app Viska raises $1.2m seed round led by Brunnur

Employee training app Viska just announced a $1.2m seed round led by Brunnur with participation from Investa. Sigurður Arnljótsson, GP at Brunnur, will take a seat in the companies board.

“The investment allows us to speed up product development, onboard more customers, and focus our sales efforts abroad” said Vala Halldorsdóttir, CEO and co-founder of Viska in a statement.

Viska Learning team

The company was founded by Árni Hermann Reynisson, Stefanía Bjarney Ólafsdóttir and Vala Halldórsdóttir, all early employees of QuizUp. Viska is clearly inspired by QuizUp at Work, a product aimed at the corporate education market that was later shelved when QuizUp decided to focus its effort on the production of the QuizUp America TV show.

“We are very excited with our collaboration with Viska. There’s a great opportunity right now to revolutionise employee training with the advent of new technologies and artificial intelligence. Viska Learning combines this in a new way,” said Sigurður Arnljótsson of Brunnur.

Viska, which was founded in January, has previously received a $450K grant from the Technology Development Fund, totalling funds raised to just shy of $1.7m.

You can read more in a detailed interview with the founding team in Viðskiptablaðið.

Fortune 500 company NetApp acquires Greenqloud

NetApp, a Fortune 500 company that provides solutions for hybrid cloud environments, has acquired Greenqloud maker of qstack hybrid cloud management software. The acquisition amount is undisclosed.

“At the start of Q2, we acquired Greenqloud, a private start-up company that created a cloud services orchestration and management platform for hybrid-cloud and multi-cloud environments,” said George Kurian, CEO of NetApp in prepared . “Greenqloud augments our team and accelerates our leadership in hybrid cloud data services by providing NetApp with a scalable architecture, unique technology, and expertise that enhances our ability to integrate and deliver cloud data services.”

Investors in Greenqloud include NSA Ventures, Keel Investments, founders and employees, and Kelly Ireland, who invested $4m in the company last August.

This acquisition marks the first Fortune 500 acquisition of any Icelandic startup company, the second Silicon Valley acquisition of an Icelandic company (last one was Clara in 2013), and the first exit for an Icelandic in some time – which is all great news for the ecosystem.

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Nortstack – Reporting and analysis of the Icelandic startup scene