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.
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 bold, answers 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.
Pharmaceutical company Florealis just announced it had closes a $3.9m funding round, led by NSA Ventures. Former investors, Einvala, and other private investors also took part in the funding round.
“Exciting times ahead for us, following the addition to our investor group,” said Kolbrún Hrafnkelsdóttir, CEO of Florealis, in a statement. “Our first products have been received very well in Iceland, and we’re ramping up marketing and sales efforts in the Nordics.”
The company, which produces herbal medicines, recently closed a deal with leading pharmaceutical chains in Sweden, that will carry Florealis’ products. The funding will be used to support marketing and sales efforts, as well as developing more products later in the year.
Huld Magnúsdóttir, CEO of NSA Ventures, said in a statement: “Florealis falls well in line with the fund’s investment strategy and are excited to lead a group of investors to this deal.”
The second quarter of the year brings the first funding report we do in 2017. The reason: we only recorded one investment in Q1, so there’s no need for a special report on that. This report also is the first one since we started our big Icelandic startups scene data project which means that the data we’re using now is augmented with data from Crunchbase.
This quarter was much more active than the one before (which only had one investment – Goodlifeme / SidekickHealth), and has the same amount of investments as the year before (Q2/2016).
The main difference between the years is the amount invested; the amount invested increased by over 240%, mainly due to two rather big rounds; Meniga and Takumi.
This leads to a (rather obvious) next chart: the majority of capital invested came from outside the country; around 70%.
The bigger picture
In 2015 we had a big influx of capital; three funds that started and were very active in the first quarters. Those rounds were in general fairly small (never above 500m ISK or between $4-5m) and early stage. As we’ve talked about for some time now, two of those funds have stopped investing in new companies, which leaves only one active Icelandic fund at the moment.
Naturally, the rate of investment will slow down. Hopefully for the ecosystem, the sizes of rounds will increase (because the companies that raised before are raising follow-on rounds). In fact, three of the four companies that raised money in Q2 2017 had at least 2 funding rounds before the one they announced this quarter.
There are also some interesting takeaways in regards of the capital coming in. It’s mostly foreign – when our startup companies need growth money they venture abroad to get it. Which makes complete sense; the Icelandic funds aren’t big enough to be able to go as big as the bigger foreign funds.
Fintech company Meniga just announced a €7.5m funding round led by Nordic investment fund Industrifonden. Previous investors – Velocity Capital, Frumtak Ventures and Kjölfesta – also participated in the round.
“Today’s banks are under pressure to innovate and improve their customer experiences online and yet they are beholden to legacy processes and legacy systems and are usually ill equipped to provide their customers with world class user experience in digital banking,” Meniga co-founder and CEO Georg Ludviksson tells me.
“Meniga has built a reputation as a strong innovation partner to banks and its software solutions help some of the world’s largest banks utilise their data to make their online and mobile banking more personalised and inspiring”.
Ludviksson’s coining of Meniga as an “innovation partner” to banks isn’t simply startup speak, nor is it bluster (the Meniga founder talks in soft, considered Icelandic tones). The company holds five-day onsite design sprints with its banking clients, and last year it conducted more than 80 user testing sessions in four countries — again, many of them in partnership with the banks.
Mint Solutions, along with partners in Belgium and the UK, has received a €2.4m grant from the EU’s Horizon 2020 Fast Track to Innovation. Total cost of the project, including contribution from partners, is €3m.
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 TryggviThorgeirsson, co-founder and CEO of Goodlifeme said in a statement.
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.
Mint Solutions, developer of the medication safety system MedEye, just announced a €5m Series B round led by Brabant Development Partners and LSP (Life Sciences Partners), and Seventure Partners. Other shareholders, including Icelandic NSA Ventures, and smaller private shareholders, also participated in the round.
“This investment comes at a crucial time for our MedEye product,” Gauti Reynisson, CEO of Mint Solutions said in a written statement. “We are experiencing strong demand from Dutch hospitals and we see ample growth opportunity in other care segments, including long-term care, as well as international markets.”
Mint Solutions is an Dutch-Icelandic company that was established to improve medication safety. It’s main product, MedEye, uses computer vision to ensure that patients get the right medication, in the right dosage, at the right time.
Greenqloud, the maker of cloud management software Qstack, just announced a $4m investment from investor Kelly Ireland. Kelly will join the board of directors of the company. This was announced by Viðskiptablaðið today, and Kelly on Twitter a week ago.
In a conversation with Viðskiptablaðið, Jónsi Stefánsson CEO of Greenqloud said this was a very important partnership. “We are moving into the American market, and partnering with a seasoned expert in the technology industry is very good for us,” Jónsi said (translated from Icelandic).
Digital asset management (DAM) company Data Dwell has secured a $1.12m (140m ISK) funding round by Frumtak Ventures. The company also received a $80K (10m ISK) marketing grant from the Technology Development Fund.
“We think Data Dwell has enormous growth potential and like the product offering,” Eggert Claessen, GP at Frumtak Ventures, said in a statement. Following the investment, Eggert takes a seat on the board of directors as chairman.
The company’s list of Icelandic clients includes Marel, Coca-Cola Iceland, and Vodafone Iceland. They also service Cartoon Network, and will use the capital to fund an expansion into the British market.
“The investment will help us grow in foreign markets, and speed up product development,” said Ólafur Helgi Þorkelsson, CEO of Data Dwell, in a statement.
Data Dwell is digital asset management software and was founded in 2012 by Ólafur Helgi Þorkelsson and Skarphéðinn Steinþórsson. It now employs nine people, and has customers in Iceland and the UK.
Norðurskautið covers the Icelandic Startup and Tech scene. Follow us on Twitter or sign up for our mailing list to keep up to date. You can also join our Slack community – http://bit.ly/slack-is