Interview with Pétur Ólafsson, founder of BuddyPhones and ONANOFF

In today’s multi-media content driven world, kids of all ages are exposed to sound all the time, more often than not viewing or listening with headphones. This led to a considerable amount of kids developing hearing issues due to the high volume possible through the headphones

This, in part, is what drove Pétur Ólafsson to found BuddyPhones, headphones designed specifically for children and teenagers. Their company recently raised a $1m convertible bond from Icelandic investors.

(My questions in bold, Pétur’s answers in italic

Based on the numbers from the press announcement ($4.3m revenue in 2018), BuddyPhones is probably the most successful Icelandic consumer electronic company. You just raised $1m; what was the main purpose of the fundraise?

BuddyPhones is growing globally, we’re already in over 60 different countries and have more in our sights, so we needed more working capital to drive the machine. Building an innovative global brand is in many ways capital intensive, so this round will support us in taking us to the next level of operation. 

You’re based in Hong Kong – is the operation completely there, or is anything in Iceland?

Most of our core operation is done in the China Greater Bay Area of Shenzhen, Dongguan and all the way towards Guangzhou. Our main headquarters is at our office in Hong Kong. On top of that, we have small sales operations in the Netherlands and California, and an engineering team in Japan. You can say we very much operate globally.

We have used designers and photographers in Iceland, we have a lot of talented people in Iceland and I would love to do more things back home. The dream was always to set up a brand and design office in Iceland, but we will need to wait because basing operations out of Iceland is just too expensive. 

Did you try working on this project from Iceland? What was the main factor for you deciding to set up shop in Hong Kong? Do you think you would be able to run it from Iceland? Why/Why Not?

I strongly believe that we needed to either be close to our manufacturing hub in China or our key market in the US. It would be difficult to be somewhere too distant like Iceland, especially in the beginning of building the operation and brand. There are companies that have bridged the gap to operate in Iceland, but for a small growing company like us, I chose to spend energy on being efficient in what we are capable of at this stage. Hong Kong is very well-located in terms of access to the electronic manufacturing base in China- I can be on the factory floor in the morning and then be in sales meeting in Hong Kong in the afternoon. Hong Kong is a major hub in international trade and shipping and we get a lot of international buyers coming through for big electronics shows. Overall, it is the best place for us to be based.

What has been the most challenging thing about building the company?

This is a big question, a lot of challenges have come up through the years. I think finding good people to join the brand journey is key. As founders, we can be visionaries, but we need motivated and talented people with us- from logistics all the way up to the board and investors. If you find this type of support, your chances to survive the start up phase is considerably higher.

What advice would you give to Icelandic entrepreneurs that want to build up a consumer electronics company?

This links with the previous question, I think another key ingredient that you need to build up a successful company is to be doggedly persistent over a long period of time. It’s true what people say, running a startup is a long-distance ultra-marathon, not a sprint. To be honest, I have not seen much glamour from being a startup, just hard work. Of course, it’s rewarding to see your dreams come true but it is first and foremost hard work. You also need to know and believe in the value you are bringing to your users. Steve Jobs famously said that people don’t know what they want; fundamentally he knew he just needed to add value to the end user as the ultimate goal of the project. Technology for technology’s sake is only worth a fraction compared to technology that adds true value to users.

Featured image is of Petur H. Olafsson and co-founders Bjarki Vidar Gardarsson, Yvonne Lo, Petur H Olafsson.

This post originated in the Northstack Memo – our regular newsletter about the Icelandic startup, tech and venture scene. You can subscribe below.

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Buddyphones maker Nordic Enterprises Ltd. raises $1m

Creator of kid headphones Buddyphones, Nordic Enterprises Ltd., recently announced a $1m (125m ISK) funding round. The funding was through a convertible bond purchased by local (Icelandic) investors. Centra assisted with the financing.

The company was founded by Pétur Ólafsson and Bjarki Garðarsson with the goal of designing and developing headphones specifically for children and teenagers. In a statement, the company says that around 12.5% of young people between ages 6-19 have had hearing damage due to listening with headphones with too loud volume.

The company had around $4.3m in revenue last year and projects 46% growth this year, to $6.3m. The biggest customers are Target and Amazon and the product is available in over 60 countries.

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Hefring Marine raises an undisclosed amount from New Business Venture Fund

Hefring Marine, an Icelandic startup that builds products to increase seafarer safety and give vessel owners insights into the use of their ships, just announced a funding round from New Business Venture Fund. The amount remains undisclosed, but it follows the announcement that the fund will receive a bit under a quarter of the company.

“We believe Hefring is an interesting company that falls well into the investment thesis of the fund,” commented Huld Magnúsdóttir, CEO of New Business Venture Fund.

Hefring participated in the Nordic Innovation House run TINC accelerator in Silicon Valley, and will unveil its product to customers in Iceland and Norway later this year.

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Raising €700K through a funding platform: an interview with Lava Cheese cofounder Guðmundur Páll Líndal

Last week we wrote about Lava Cheese raising money through Funderbeam. The story is interesting to me on several points: A company raising a solid seed amount using somewhat unconventional methods; most of the money coming from outside of Iceland, and the fact that a foreign platform supports funding Icelandic companies with regards to legalities and so forth.

To dig a bit into that, I interviewed Guðmundur Páll Líndal, co-founder of Lava Cheese. Questions in boldanswers in italics. This is a post originally from the Northstack Memo, our newsletter on everything startups, tech and venture capital in Iceland. You can sign up here.

You chose to use Funderbeam to fundraise, which would be considered somewhat unconventional in early stage funding. Why did you choose that way? 

There were a few reasons we chose to go with Funderbeam. First and foremost that the active Icelandic VC funds are focused on tech startups which immediately limited our access to domestic capital. As for private investors in the Icelandic food sector, we were raising in the middle of strikes and pay-raises which had many production and manufacturing companies spooked and fighting to conserve their resources.

At the same time we were speaking with a number of Scandinavian private investors which were immediately sold on our story and product. We figured that we would have much more luck there since the food startup sector in Scandinavia is very active and well funded. Funderbeam would give us access to all these investors. 

Finally, Funderbeam, unlike the other European platforms, is active in Iceland and has done the legal background work here. They have incredibly engaged staff and Rünno Allikivi, Head of Funderbeam Scandinavia, has this perfect habit of making things happen.


How did people react when you first told them about this approach? 

I think the reaction was mostly positive. Of course there was some skepticism, especially from the older generation, but having told my family I was quitting my law career to melt cheese I’m kind of used to that. 

What’s the investor demographics like? Icelandic? Foreign? How much were people investing? Anything interesting there? 

Very interesting to say the least! Only about 10% came from Iceland. That could be explained by a number of different factors. First of all the overall small population of Iceland. Second, Funderbeam has been operating in other markets for far longer than Iceland so they’ve had more time to build up a good user base. Third, Iceland is such a volatile market in general. For the past few years Icelandic startups have almost been competing with real estate in terms of yield, with the risk in real estate being comparably almost non-existent. Thankfully this period seems to have run its course. 

The smallest investments were EUR 100 and the largest was EUR 200.000. We’re actually very excited about the many smaller investors since we believe we’ve got some super-fans there with actual skin in the game! 

Would you choose this approach again? What kind of companies do you think this is good for? And which don’t fit? 

We would definitely choose this approach again. We felt that this approach has benefits for us that definitely outweigh the flaws. The main one being that having 300 smaller investors in our company puts 300 stakeholders out there bringing the good word to the world. The only “flaw” to speak of is that you open yourself up to considerable scrutiny which you have to spend valuable time on. However, this is the kind of accountability that can definitely help us grow and continuously improve our game. 

I think equity crowdfunding can be for any company, but I think some companies will definitely have an easier time fundraising there. On one end we have high tech startups with a complex B2B business model whose product will require years of development. On the other end we have companies such as Lava Cheese with an easy to understand, B2C business model that has created revenue from the get go. There’s a lot of grey area in between but I think these are the main factors to consider. Then again I could be completely wrong. 


Lava Cheese is part of a growing scene in Iceland, small-ish, artisanal, new types of food and snacks. What are the main challenges for that industry? 

Iceland is an island and that alone puts production and manufacturing companies at an insane competitive disadvantage since cost of goods is inherently higher, and shipping will put another slice of hell on your prices. Thankfully we were able to overcome that barrier by setting up a second production facility in Sweden and therefore on the mainland, but this is by far the biggest hurdle to overcome. We were both lucky to get an experienced angel investor in at the beginning and that Jósep was able to move to Sweden and oversee our operations there. Boots on the ground are important.

Another thing is that many food startups rightfully decide to focus on just one product. This is harder in Iceland since the market is extremely small and the cost of running a food production facility can rarely be sustained by just one product. It gets very tempting to start launching different products to lower unit costs and ramp up the revenue, but it usually causes the founders to lose focus on the original success. Now that we’ve closed this round we feel pretty confident that we can start thinking more about further product development without losing our footing.

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Aldin announces Waltz of the Wizard: Extended Edition

Icelandic VR developer Aldin, recently announced Waltz of the Wizard: Extended Edition, following the success of their earlier game and the highest rated VR title on Steam, Waltz of the Wizard.

“The Extended Edition adds new spells and interactive objects, with major visual remastering, performance improvements and additional options that keep the experience a great showcase of virtual reality’s potential for friends and family,” Hrafn Þórisson, co-founder and CEO comments in a statement.

Aldin, which last year raised a $1m round led by Crowberry Capital, worked closely with Valve (owners of Steam) for the extended edition, to support Valve Index, the next generation of VR hardware from Valve, and is featured for the device.

Waltz of the Wizard: Extended Edition will be available from July 10th on Steam.

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LavaCheese raises €700k seed round through Funderbeam

Icelandic food startup Lava Cheese, recently closed a €700k seed round using fundraising platform Funderbeam. The company, which is part of a growing scene of local, artisanal, specialty food producers, originally set aims for a round of €350-650K but had to cut fundraising short as they sailed passed their stretchgoal.

Lava Cheese is only the second Icelandic company to use this funding source (the other is FlowVR).

“There were a few reasons we chose to go with Funderbeam for our funding,” Guðmundur Páll Líndal, co-founder, told Northstack. “The local VC funds are mostly focused on tech startups, and we were raising in the middle of union-strikes and pay rises, which had the local food players spooked and fighting to conserve their resources.”

The funds will be used to scale up production in new markets, like Sweden, where Lava Cheese has already opened a production facility.

Northstack interviewed founder Guðmundur Páll Líndal for the Northstack Memo, sign up below to get it right into your inbox!

Svana Gunnarsdóttir is the new Managing Partner at Frumtak Ventures: an interview

Frumtak Ventures currently has two funds, Frumtak and Frumtak II. They were one of the three funds announced in early 2015. They were very active for two to three years, with their last fresh investment in 2017.

This post is from The Memo, a newsletter from Northstack analysing the startup and venture scene in Iceland. You can sign up here.

Questions in bold, answers unformatted.

You’ve been a part of Frumtak for a long time, with Eggert. What is the reason for this change of roles?
Eggert and I founded Frumtak Ventures as equal partners, but decided for the continuity from the first fund into the second fund that he would continue to be Managing Director and that I would take over at a fitting time.  That time has now come. 

Why at this point in time?
We formally announced on May 9th that we will be raising a new fund, Frumtak III in 2020 which will operate up until 2030.  Potential investors want to know who will be leading the fund the whole time.  As Eggert had indicated that he wants the option to retire in 2025 we decided that now would be a good time to make the change we had originally decided, and that I will lead the new fund.

Frumtak II hasn’t done fresh investments since 2017 (Sidekick Health). Will your first undertaking be to raise a third fund?
The experience from the first fund was clear in terms of the number of companies and amounts to invest in that were sensible and as there was ample supply of investment opportunities when Frumtak II was founded, it took only 2 years to select the investments that we deemed appropriate for the size of the fund.   We also left enough in the fund to be able to support our companies going forwards.  I am deeply involved with both funds and will simultaneously head the fundraising for Frumtak III.

How do you think the current landscape for raising a venture fund in Iceland is?
I think the landscape is good for raising a venture fund in Iceland as the LP’s that have invested in venture funds in the startup asset class realize the importance of creating and building new companies and they understand that it takes time to create value and deliver financial returns.

I believe that the work we have been doing for the last 10 years is an important part of growing the venture industry and ecosystem in Iceland and it is important to preserve the experience and knowledge that we have built. It is important to grow that further by having a new fund which gives us the means to grow our team and continue to build a strong venture partner.
 

What could be better? What has changed since last time you raised a fund?
What our industry needs is more success stories. If we had more good/ great exits, it would be easier to raise a fund.  

When we raised Frumtak II, we were in the forefront of setting the traditional venture terms and activity of the funds with the LP’s in Iceland. The co-operation with our LP’s has been very good and they have shown us lot of trust.

Back in 2015 it was big news when three venture funds were announced in the same month. There has not been much fund activity lately beside new investment of Crowberry Capital and hopefully we can participate in new investments with our third fund next year.

General knowledge, paperwork and terms have become much clearer since 2015 which we hope will make our task easier when it comes to raising a new fund.

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The One is a new dating app based on chatting, not swiping

Last week, dating app The One was released for iOS and Android, with the goal of changing how online dating works.

“Dating apps have become a way to nourish your confidence – that someone likes how you look,” comments CEO and co-founder Davíð Símonarson. “It’s the exception, not the norm, that people actually strike up a conversation in these apps.”

That is one of the main things The One is meant to solve.

“In The One you get one match per day that is chosen for you. The only information you get about your match is a picture, their first name, and their distance from you,” Davíð explains. “You then have less than 24 hours to chat with your match, and once the time is up, both have to choose whether to continue the chat or not.”

The One Company, which develops the app, is founded by Davíð Símonarson and Ásgeir Vísir. They previously co-founded and worked on startup projects like Blendin and Watchbox. The company raised a $120k angel round (15m ISK) earlier this year from angels Investa, Tennin, and Miðeind.

“If the matched people decide not to continue the conversation, the match is gone forever,” co-founder Ásgeir Vísir tells Northstack. “But if they decide to extend the chat, we offer more options to converse like images and GIFs, and are working on more ways for people to express themselves in conversation.”

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Disconnect and “Decelarate” in Startup Westfjords, the Startup Decelerator located in fishing village Þingeyri

In stark contrast to the hectic life of startups, entrepreneurs and digital nomads can head to Þingeyri, a small town in the Westfjords of Iceland, to “decelerate.”

“What our ‘decelerator’ really offers,” Arnar Sigurðsson, cofounder of the Blue Bank which hosts the program, “is the rare opportunity to slow down, disconnect from everyday work life, to gain mental clarity and reconnect to projects with a greater sense of purpose.”

The Blue Bank is a community and coworking space in Þingeyri, a once-thriving fishing town in the majestic Westfjords, and now home to only 250 people, founded by Arnar Sigurðsson and Arnhildur Lilý Karlsdóttir. In their new program, Startup Westfjords, twelve participants will be picked from applications to participate in a two week (with two optional, additional weeks) program. For those chosen, the participation is free.

“When we were designing an event to build our own village startup community, we did not want to make a smaller or less interesting version of what was already being done in Reykjavík,” Arnar told Northstack. “We wanted a unique value proposition, and believe we have found that in the ability to disconnect from the distractions of every day life.”

While Traditional accelerators focus their program on product development, growth, sales, marketing and other “startup-y” topics, Startup Westfjords promises that “participants will be invited to get under the skin of Icelandic village life. Scheduled activities include Yoga Nidra, hot tub/sauna sessions and a hike to the top of Westfjords’ highest peak, Kaldbakur.

“While accelerators teach us to launch, grow, and even fail fast, finding a decelerator that shifts the focus to slowing down while starting up is a breath of fresh air,” Þórunn Jónsdóttir, founder of Poppins and Partners, and mentor at the 2019 program, commented.

The Blue Bank has already changed Þingeyri to some extent. “We’ve been running a remote coworking space and creative hub here for almost two years and are now getting the first visitors relocating here permanently,” Arnar said. “They’re working in creative industries for global clients online. When we started out, there was not a single person who worked an office-based job in the entire village, so this is a significant change.”

“What we hope do do is create a beautiful harmony between the traditional ways of life based on farming and fishing, and the digital creative industries of tomorrow”

The Startup Westfjords program is supported by KPMG, and local companies Arctic Fish and Kerecis (which just announced a $16m fundraise and is partly located in neighboring town Ísafjörður).

Applications are open until June 25, head to their website to apply.

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Monerium becomes world’s first company to be granted e-money license

Icelandic blockchain startup, which recently raised a $2m seed round led by Crowberry Capital with participation from ConsenSys – a major player in the blockchain space, has just been granted an e-money license by the Icelandic Financial Supervisory Authority.

A more in-depth report on the license and what it means can be found on Coindesk.

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