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Ten startups participating in Startup Tourism

Yesterday, Icelandic Startups announced the ten companies that will be participating in Startup Tourism 2017.  From the announcement:

“Startup Tourism received 94 applications this year, which is an increase of about 29% from last year. The selection committee emphasized products and services which could increase recreation options, strengthen infrastructure and support the distribution of tourists all across Iceland, all year round.”

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Tulipop introduces new product line with US toymaker Toynami

Tulipop, maker of the cute figures from Tulipop island, is launching a new product line with the US toymaker Toynami. The product line includes plush toys, piggy banks, and small vinyl figures that will be sold in Happy boxes.

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SidekickHealth maker Goodlifeme raises $1.5m round led by Frumtak Ventures

Frumtak Ventures just announced a $1.5m investment into Goodlifeme AB, maker of Sidekick Health. Other participants in the round include Tennin ehf. and other investors.

This investment gives our team of physicians, psychologists, public health professionals and game developers the opportunity to deepen SidekickHealth’s global reach, particularly in the United States,” said Tryggvi Thorgeirsson, co-founder and CEO of Goodlifeme said in a statement.

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Sidekick Health is a lifestyle companion app, utilizing insights from behavioral economics, artificial intelligence, and evidence based guidelines from the US CDC, to enhance the effectiveness of lifestyle education and coaching.

According to the statement, the app has shown great benefit to its users:

To date, companies and health organizations that have augmented in-person Diabetes Prevention Programs (DPPs) and employee fitness initiatives with SidekickHealth have seen an 82% retention rate among participants over a 4-month period, 76% increase in participant weight loss, and a 65% reduction in soda consumption.

Eggert Claessen, managing partner of Frumtak Ventures: “SidekickHealth’s solution … presents a significant opportunity to positively impact the wellbeing of employees and patients, while also reducing health-related overhead costs for enterprise companies and organizations globally.”

Picture is of Sidekick Health co-founders Tryggvi Þorgeirsson and Sæmundur Oddsson.

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Innovation Center Iceland opens co-working space in New York

Innovation Center Iceland (NMÍ), the government institution tasked with projects focused on entrepreneurship and innovation, is entering a partnership with other Nordic countries to open a co-working space in New York City.

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Do startups in Iceland offer stock options?

Startups and employee compensation

Over the last couple of weeks I’ve had several discussions about the technical talent pool in Iceland. Some of them led to discussions about compensation schemes.

One of the topics was employee stock option plans and whether they’re frequent or not. Personally, and anectdotally, I have a feeling that they’re not, but I don’t know.

A little background. Until recently, stock options in Iceland were taxed as income at the date of exercise. That means if an early employee decided to leave a startup and wanted to exercise her options, she would have to pay the tax on gains at the time of exercise. With innovation bill this changed, and Iceland is now one of the most lenient countries in the world when it comes to stock option taxation. Even Silicon Valley has people stuck in “handcuffs” because exercising their rights would create a huge tax charge.

But I have a feeling there is something else at work here as well. Because even though taxation like this could stop people from leaving the company, it doesn’t stop top-tier companies in handing out stock options, and employees expecting them, in Silicon Valley. As an example, Facebook – now one of the world’s most valuable companies – gave stock options to the guy who sprayed graffiti on the office wall.

My hunch is that the following mix is at play (caveat: wild guesses, the point is to start a discussion):

  • Owners / founders prefer not to give options because they don’t want to lose their stake. Icelandic exits are few, far apart, and often modest, which leads to the marginal utility of each percent to be higher. That is, if a company is sold at 100m ISK, each extra percent of ownership for the founder has more value to the founder than if it is sold at 10.000m ISK.
  • Employees aren’t used to options. Iceland is a heavily regulated labor market. Theoretically, people could go through their whole working lives without ever negotiating compensation. A labor union has done it for them at some point. Perks and benefits are often also pre-negotiated (like the May and December “bonuses”, vacation days, and random stuff like eyeglass- and fertilization grants). Basically: Employees don’t ask for options. Which leads to them not getting them.
  • VC’s not focused on this. In fundraising rounds, VC’s can affect the option pool available to employees both in nice and not-nice ways. Not blaming VC’s for anything (remember, I don’t have any real confirmation that this is an issue) but I’d guess that VC’s would want their companies’ employees to have a stake in the upside.
  • Maybe people are using other forms of bonus or compensation schemes tied to outcomes. The Icelandic gray market for startup stocks has probably not been very liquid, so stock options could often end up being just worthless paper. Some founders might be using bonuses or similar instead.

What do you think?

  • Are you a founder / executive? Do you offer options to your employees? Why / Why not?
  • Are you a startup employee? Do you have options? How do you feel about that?
  • Both: would you participate in a study / survey about compensation in startups?

As usual, just shoot me a message and tell me what you think!

Update: I got a lot of responses to the Memo when I initally sent it out, some of which I’ll feature in next week’s Memo – sign up here so you don’t miss it.

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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Startupbootcamp Fastrack tour comes to Iceland

The team behind the Netherlands-based Startupbootcamp Smart City & Living accelerator is touring Europe to meet startups. They’re in Reykjavik on February 2nd.

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The outlook for the Icelandic startup ecosystem in 2017

A record year in startup investments in Iceland

Late last week, we published our annual funding report, summarizing the highlights in Icelandic startup and tech dealflow and funding. The highlights are the following:

  • Record in number of investments, 19 investments recorded.
  • Huge drop in total capital deployed, due to three megarounds in 2015.
  • Distribution across round sizes is very close to the distributions in the Nordics as a whole.

While our data gets more accurate every year, I think there’s a number of investments that goes below the radar, especially angel investments. Did you angel invest, or receive angel investment in 2016? Please let me know.

Overall, a great year for Iceland? Yes …

But there are some warning signs

Here are the main issues I’m currently worried about. Please let me know what you think (agree, disagree etc.) Just hit reply.

  • Fewer active Icelandic VC’s: While the Icelandic VC funds are still active, two of them are mostly depleted (Eyrir Sprotar and Frumtak 2). News from late last year of a new fund (Crowberry Capital) are promising, but they haven’t finished raising. Frumtak will probably raise their third fund as well, not sure about Eyrir. While NSA participated in follow-on rounds, they didn’t make any fresh investments – they’re basically fully deployed. In any case, if nothing changes, the only active VC fund that has money available for fresh investments will be Brunnur. (If you’re interested in a more detailed analysis of the investment funds in Iceland, reach out).
  • Few exits: 2016 had only one exit (Zymetech) which was right at the start of the year. That’s a part of a bigger trend: Iceland is lacking in success stories. A good ecosystem needs recycling of talent and capital (people to exit to start new businesses or invest in others) to thrive. NSA Ventures didn’t announce any exits last year, which further hinders them in investing in new opportunities. Frumtak I, is also due for exiting some of their companies soon.
  • I have a hunch / theory that one of Iceland’s bigger drawbacks as a startup location is the difficulty of exit. In bigger countries you have more corporations and conglomorates that have the capital and power to do acquisitions and acqui-hires. Startups that aren’t on a superstar or high-growth trajectory might opt for a soft landing or graceful exit to pay back investors, get some cash and get back in the game. Icelandic companies generally have to be interesting enough for foreign companies to buy them, because secondary market or PE activity generally hasn’t been active in the startup sphere.
  • There was only one investment in Q4 and no Icelandic investor participated. Most of the activity came in the first three quarters of the year. This may be seasonal – although in 2015 Q4 was the most active by far – but we don’t have enough data yet to confirm that.

VC investments is not the only metric that tells us whether a startup ecosystem is in good or bad health. But it is a measurement, that can be compared to measurement other places and time periods, which in turn helps in analysing the environment.

Northstack is gathering data on other metrics as well, and hopefully we’ll be able to do more analyses in the future.

Is investment in Iceland lacking in some stages of a startup’s lifecycle?

There’s regularly talk and discussion about whether Iceland is lacking in VC funding. Some suggest we lack in early stage – that’s the thesis of the Crowberry Capital founding team. Their rhetoric implies that they have interesting early stage investment options lined up, which supports that idea. To be fair, if I were raising an early stage fund, I’d probably use the same rhetoric.

Others say we lack in late stage; that companies hit a roadblock when they reach the growth stage.

We don’t know. Maybe both is true. To visualise it in some way, we decided to map rounds by sizes and compare to Nordics overall, and try answer the question with data. (Nordics data graciously provided by The Nordic Web)

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Iceland looks similar to the Nordics, except for the drop in $0.5-1m rounds (typically early stage) and jump in $5-10m rounds (typically growth stage). Remember that this is a small data set, so take with a grain of salt. The question of where funding is most needed is still an open one.

What do you think? What do these numbers say about the state of startups in Iceland? Message me 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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A record number of startup investments: The 2016 Iceland Funding Report

After an incredible 2015, where Iceland contributed more than 10% of deployed venture capital in the Nordic region, 2016 shows continued growth in number of investments, while total dollars invested take a deep dive, mostly due to the lack of mega rounds. While 2015 had three investments amounting to $30m or more each, the biggest investment in 2016 was $11.4m (€10m) in Fintech startup Five degrees. Also, if you haven’t signed up for the Northstack Memo, we’re publishing some thoughts and predictions for 2017 this Monday. Sign up here

This is our (from now on) annual funding report, analysing and discussing the high level trends in venture and early stage investing. We only include disclosed investments and translate all amounts to USD at an exchange rate close to the day of announcement. All data on the Nordics is from The Nordic Web. If you’re interested in more detailed analysis or the data, you can reach out to us.

New record in investments

Last year was the biggest year on record in regards to dealflow. We recorded 19 investments, 8 of which had foreign leads or participants. A good trend for the Icelandic ecosystem, that could easily reverse in 2017 if the VC industry isn’t able to raise enough new funds.


While the number of investments graph trends up-and-to-the-right, the amount invested isn’t as pretty. While still considerably higher than in 2014, last year was far behind 2015 (from now on termed the Monster Year of Icelandic Startup Investments), in terms of invested dollars. This is only due to three big rounds – $95m Verne Global, $45.6m CRI, and $30m CCP.


A look at the year

Looking at the year, the outlier is the lack of activity in Q4, with only one investment.


Overall, the distribution of round sizes is interesting. Smaller rounds should vastly outnumber the bigger ones, but here they don’t. This could be explained by the fact that the Technology Development Fund plays a very big role in early stage funding in Iceland and angel activity goes mostly unreported. (If you have info on angel investments in Iceland, please let us know).


 

Compared to the Nordics

If we compare the activity in Iceland to the Nordic region we see that Iceland is following the general trend in the Nordics in terms of deals (that is, up and to the right). The jump in investments in the Nordic is dramatically bigger though, suggesting a different pace – we jumped 2014-2015, the region is jumping 2015-2016. The data on the Nordics is from The Nordic Web.


In terms of capital deployed, 2015 is a clear anomaly.


In fact, if we remove the three big rounds (Verne, CRI and CCP) from the 2015 numbers, the trend for Iceland is even more similar to the nordic region.


And if we play the national sport of comparing ourselves to other countries based on headcount (known as Par-Capita-ism), we see Iceland is contributing just a bit more to investments in the Nordics than to headcount in the region.


Active investors

In 2016 we had good mix of foreign and Icelandic investors. Seven deals included foreign investors. One of them, Velocity Capital, participated in two rounds – Meniga and Five degrees.

Active investment companies
Baliopharm
BOM Venture Capital
Brunnur
Capital A
Eyrir Sprotar
Frumtak 2
Glu Mobile
Investa
Karmijn Kapitaal
Klappir
Life Sciences Partners
NSA Ventures
Probiocon
Seventure Partners
Velocity Capital

Outlook for 2017

While this report shows a good year for Icelandic startup financing, the future isn’t all rainbows and unicorns (heh). Potentially fewer active local VC’s and shortage of successful exits make raising funds – both for startups and venture capital funds – harder. More thoughts and predictions about 2017 will be published in next week’s Northstack Memo, you can sign up here.

Northstack is Iceland’s premier analysis and reporting institution on the Icelandic startup and tech scene. This is part of our regular funding reports. You can find more here. If you’re interested in data or reporting the Icelandic startup or tech scene, let us know, we can help.

Why is it so important that TravAble recieved funding

A social enterprise gets funding from the Icelandic Technology Development Fund

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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.

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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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Nortstack – Reporting and analysis of the Icelandic startup scene