With less than 400,000 inhabitants, Iceland receives more than its share of tourists – and venture capital. Both are good reasons to pay attention to what is happening and what is happening in this unique island nation.
“We need another pillar for our economy,” Áslaug Arna Sigurbjörnsdóttir, Iceland’s Minister of Higher Education, Science and Innovation, recently told TechCrunch at the Icelandic Innovation Week in Reykjavík.
Some diversification has taken place, and the country’s export revenues from IP-driven industries have steadily increased. But more than being a pillar on its own, Icelandic innovation connects to what already exists: Startups build technology to help the country optimize its resources and economic activities – fishing and heavy industry on the list, but also local marketing. talent and culture.
However, it is difficult to infer trends from the scanty data on the number of startup deals that take place in Iceland each year. Here’s what you need to know about the types of startups that have taken root and thrive in the island nation:
It tells me that the medtech company Kerecis, which uses fish skin for novel wound dressings from Iceland: Innovation here often looks in unexpected places for inspiration.
Products from the sea have evolved into high-end cosmetics, as well as food technology, new ingredients, and more. Although it is not clear to Icelanders whether fish skin or algae can be transformed in many ways, support for the circular economy has refocused on sustainability. That’s what the startup accelerator managed by KLAK – Icelandic Startups is targeting.
One of the great sources of inspiration for companies in the country is the past. Especially when it comes to fintech – the sector has less to do with a country’s natural resources and more to do with its history. “I think that the strength in companies such as (neobank) indo is the lessons learned from the banking crisis (2008). And the same with Monerium,” said Gunnlaugur Jónsson, CEO of the Reykjavik Fintech Cluster, an association that aims to nurture the country’s fintech companies.
There are more lessons to be drawn, according to Bjarni Gaukur Sigurdsson. His new company, Blikk, is working on an account-to-account payment platform, as an alternative to credit cards, to reduce payment processing costs. This also has a security angle, as it helps customers avoid relying too heavily on platforms that can be compromised.
But all these innovations will be wasted without support. Thankfully, entrepreneurs here have a great ecosystem to contribute to and learn from while building.
In addition to venture capital and accelerators, the country’s startups can get funding through programs like Horizon Europe, a great addition to the national grants also distributed by Rannís, the Icelandic Research Center.
DTE, for example, is the beneficiary of a grant from the European Innovation Council to bring more efficient processes to the country’s enormous aluminum industry.
But funding isn’t the only thing needed to grow. Talent makes companies, which is why so many startups are coming to the city of Reykjavík, the center of Iceland’s cultural, economic and governmental activities. The area is home to co-working spaces and entrepreneurial hubs like Hafnar.haus, which provides co-working spaces as well as rentable studios for creative people.
Iceland is known for its talent in the creative field, and this tendency has also made its way into the tech scene. Companies like Genki, Overtune and Treble have built technology for music production, composition and even acoustic simulation. Gaming is also big, and Iceland is home to a popular gaming company, CCP Games, the studio behind the popular MMORPG EVE Online.
CCP Games’ presence has inspired many Icelanders to start making games, Porcelain Fortress CEO Ingolfur Aevarsson told TechCrunch.
“Having a big brother like CCP in the neighborhood really opened up people’s eyes (to the fact) that we can actually make games,” Aevarsson said. “But Iceland has very strong roots to write our stories and all these kinds of stories.”
Porcelain Castle is based out of Innovation House, a co-working space founded by Opera and Vivaldi founder Jon Stephenson von Tetzchner. It is also home to Heima, a platform that helps families manage and divide household tasks, PayAnalytics, a provider of equity and workforce analytics, and many other startups.
As startups get bigger and better funded, however, some move to Gróska (the Icelandic word for “growth”), a modern space in the center of Reykjavík Science City. The new district is also home to the University of Iceland’s Science Park.
However, there are limitations that exist in a country with a small population: After reaching a certain size, Icelandic startups often have to look abroad to find AI talent or executives with experience at scale.
Startups from Iceland that have forayed abroad include Nasdaq-listed eye care company Oculis; Prescriby, an opioid addiction prevention company that recently raised €2 million to expand in Canada and enter the US; Sidekick Health, whose digital care platform has gained traction in Europe and the US; and Avo, which was the first Icelandic startup to join Y Combinator in 2019.
Some companies go global straight away, while others prefer to cut their teeth locally first. Crowberry Capital’s founding partner, Jenny Ruth Hrafnsdottir, has a warning for the latter: Since Iceland is a country where most people only call or introduce themselves, it can make startups unsure of a viable market strategy. it won’t fly in larger markets.
However, Iceland’s ease of operation makes it a good testing ground for foreign companies, especially when they can also use natural assets. It also helps that validation in Iceland can often be applied in Europe: Iceland is not part of the European Union, but belongs to the European Economic Area (EEA), with extensive legislative overlap.
Iceland has long held a strategic geographic location worth securing, but the theme experienced anew tailwinds when it comes to the beginning – a bug bounty program Defend Iceland last year received a $2.6 million grant from the European Commission as part of the Digital Europe plan.
And the fact that the NATO Innovation Fund (NIF) is also hosting an event during the Icelandic Innovation Week underlines how much attention Iceland is receiving.
Iceland rarely makes the list of top countries with global investment, but that’s mostly because the startup scene here just stagnates. In a panel at the event, NIF partner Chris O’Connor noted that Iceland’s venture capital ecosystem is fairly new, with most companies only using their first or second rounds of funding.
He has a point: With the exception of the state-owned New Business Venture Fund, funds like Crowberry, Brunnur Ventures, Eyrir Venture Management and Frumtak Ventures were born in this century, if not this decade (Iðunn).
It is too early to say which companies or funds will benefit from the €1 billion NIF fund, but Iceland is on the list of potential recipients as one of the 24 LPs. One of the technology companies, wind turbine manufacturer Icewind, has been part of the first group of accelerators supported by NATO DIANA. These trends will be tracked.
Strategically, but also economically and culturally, isolated Iceland is now at a crossroads.
As a Nordic country, it has a lot in common with Scandinavia (both have a strong gaming industry), and with the Baltics (fintech and tech for the government). It’s also natural for tech companies to look at bigger markets early on. This may bode well for startups and the burgeoning venture capital scene. For the rest of us, it means we can get used to hearing about Iceland and its talent.
Disclosure: Anna Heim traveled to Iceland at the invitation of Business Iceland according to, according to, konjuk in, konjuk in the name City of Science Reykjavík.
