The Memo: Black Friday & last week's earnings season
Last week was an interesting roller coaster of tech news. Tech earnings calls dominated the news cycle. Most of the big companies underperformed, while Facebook hit a home run.
Iceland also had several earnings calls. Norðurskautið uncovered that Nýherji’s CEO Finnur Oddsson used the opportunity to take a jab at the Icelandic support environment for tech companies. We’ll be looking better at that next week.
Black Friday
The most prevalent news story last week was that of a group of layoffs. Three Icelandic equity funded startups cut staff to cut costs. Plain Vanilla cut down 27 positions, Oz laid of all its employees (and will hire some of them back) and Takumi cut one position.
Disclaimer: I (Kiddi) work at Plain Vanilla. My colleague Daði writes everything about Plain Vanilla & QuizUp in the Memo
Plain Vanilla’s layoffs on Friday were their second mass layoffs this year. This brings the total staff down from a high of around 85, to now around 45. According to a statement from Plain Vanilla, the layoffs are to reduce costs so that the company can turn a profit this year. The company cited the same reason in the January layoffs. Acquisition by Glu is expected in the coming 12 months.
Lately, Plain Vanilla’s main focus has been on the interactive TV game show the company is working on with NBC Studios. The show, which will allow viewers to participate on their mobile devices in real time, has a premiere set in September. Initial test runs took place last week.
It’s clear that the company has abandoned its plan to become the next big social network and will pursue interactive TV instead.
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Oz is creating a video streaming platform, where creators can sell access to channels. The company has operations in Iceland – mainly development – and California – sales.
On Friday the company laid of all it’s staff with plans to re-negotiate with some of them. It’s likely hey’ll ask the remaining people to take pay cuts. According to a source close to the company “the actions didn’t surprise much. Most people had been talked to, and the state of affairs was well known. I think the development could operate on five developers in a garage, and probably should do that.”
Should the Icelandic startup community worry? I don’t think so. Startups need to have the flexibility to scale up and scale down, based on strategy decisions and other factors. Venture backed startups will always be volatile. It’s part of the game.
In more positive news, Tempo showed impressive revenue growth. According to Nýherji’s earnings call, Tempo’s Q1 revenue is up 40% year over year, to $3m. Other numbers aren’t given, so we can’t know if it’s profitable yet or not. Norðurskautið will be looking at Tempo in the coming weeks.
I’ve gotten some comments from readers about my earlier post on a possible shortage of Icelandic VC money. I estimated that both Frumtak and Brunnur would be fully invested in the next 2-3 years. I’ve heard that I may be (drastically) overestimating how many fresh investments are left. On the flipside, I might be underestimating the positive effect seen this summer when the capital controls are lifted. I’ll follow up on that in a later post.
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