Icelandic Startups in
Need of Angel Investors
A few weeks ago, Neil S W Murray, the editor of The Nordic Web, published a very interesting analysis of funding raised by Nordic startups in the first nine months of 2014. Looking at his analysis, it surprised me how little activity there seemed to be in my home country, Iceland. Were there really no investments in Icelandic startups during the whole third quarter? And only for a total of 1 million euros in the first nine months?
I started asking around whether this could be accurate and if so, why Icelandic startups are getting less investments than startups in Sweden, Denmark and Finland.
Closer to €13 million
To answer the first question: Funding raised by Icelandic startups in the year of 2014 is closer to 10 — 13 million euros. Two investments were publicly disclosed in the first three quarters, whereby Mint Solution raised 4.4 million euros in a Series A round. And the Icelandic fish-skin medical company Kerecis raised 2 million USD in February. That adds up to approximately 6 million euros in the first three quarters.
In more recent investments, GreenQloud raised 4 million USD to expand operation and market reach, and software consultancy Gangverk raised money as well, although the funding amount was not disclosed.
News not being reported
Putting things into perspective, Swedish startups raised 165,5 million euros in the first nine months of 2014 or over 16 times what was raised in Iceland. In Finland, the investment added up to 122 million and 105.2 in Denmark, according to Nordic Web’s analysis. Norway, where startups only raised 8 million euros, and Iceland are indeed lagging behind.*
I asked Neil Murray what he thinks can explain difference between startups in Scandinavia and Iceland.
“Regarding Iceland, I actually think that one of the reasons is that not much is being reported there, I believe that there are angel investments happening, surely there must be, but there is no visibility for people outside of Iceland on these deals, which then creates a vicious cycle of people thinking nothing is going on there, meaning no one is looking to invest. It also means that it is not getting reported by me or elsewhere.”
Is Iceland a black box?
Neil makes a good point. While investors and startups are looking for one another, there is a lack of media coverage.
Bala Kamallakharan, an entrepreneur and angel investor in Iceland, blogged about Nordic Web’s analysis and said Nordic Web was not to blame for not getting the numbers right on Iceland. Bala believes Iceland is a “black box” when it comes to business reporting in English.
“Yes, we are behind in terms of actual money being invested in early stage companies,” Bala said when I asked him to elaborate on the comparison to the other Nordic countries.
“We have been building awareness through Startup Iceland, Startup Reykjavik and number of other initiatives. We have had some good wins (CLARA, QuizUp, DataMarket, Meniga, Kerecis, Orf Genetics, Guide to Iceland, AppDynamic etc), but this is a long road, I committed in 2012 that I will devote 10 years to building the startup community in Iceland. Getting investors interested in startups or early stage companies is a hard job because of the challenges of building teams and getting global traction for the products.”
Keeping a current profile
Oli Johnson, a co-founder of Rainmaking Loft, an office space in London and Berlin for startups, gave his thoughts on it on Twitter, saying it was not only the media who need to do a better job, but also the startups themselves.
In need of angels
Stefan Helgason, a project manager at Klak Innovit, the company responsible for Startup Reykjavik and Startup Reykjavik Energy business accelerators, points out that many suitable angel investors in Iceland have made their wealth of more “normal” businesses such as fisheries or retailing, and are therefore not especially keen on investing in startups. Furthermore, buying safer stocks or government bonds has been profitable over the last few years, dissuading possible investors in funding startups. „There is a certain level of comfort in having some banker doing all the work. Today there is no easy way to buy stocks in a startup,” he said.
The startup community is young in Iceland, like in so many other countries. Both Bala and Stefan point out that success of Icelandic tech companies in recent years, such as CCP, Plain Vanilla, Meniga and DataMarket, can help to stimulate the environment, both by making people more interested in pursuing their own ideas and by creating angel investors.
Other positive signs can be found for startup enthusiasts. At least four Icelandic venture capital funds are being created. According to sources, at least one of them has completed funding and is ready to invest, although the completion has not been made public. In another instance, according to Bala Kamallakharan, he is in the final stages of closing a fund with Íslandsbanki bank. “I cannot disclose anything yet but we have gotten very positive feedback and we are confident we will close the fund,” he says. The size of the fund will be up to ISK 4 billion, or 26 million euros.
Bigger VC funds and more active angel investors could in no doubt spark growth in many Icelandic companies at the startup level. To sum up, here’s what Neil had to say on today’s big picture of Nordic startup ecosystem:
“However, ultimately it boils down to Denmark, Sweden and Finland [who] have seen previous successes, and therefore attract money easier. Norway and Iceland are yet to have a real break through success. Once they do then I think we will see a real change.”
contact: hallgrimuroddsson at gmail.com
