Iceland’s startup scene is focused on making the most of the country’s resources

With a population of less than 400,000, Iceland receives more than its fair share of tourists — and venture capital. Both are good reasons to pay attention to what is happening and coming from this unique island nation.

«We need more pillars for our economy,» Áslaug Arna SigurbjörnsdóttirIceland’s minister of higher education, science and innovation, recently told TechCrunch at Icelandic Innovation Week in Reykjavík.

Some diversification is already underway, and the country’s export earnings from IP-driven industries are steadily increasing. But more than being its own pillar, Icelandic innovation is connected to what already exists: startups build technology to help the country make the most of its resources and economic activities — fishing and heavy industry top that list, but they also advertise local talent and culture.

However, it is difficult to infer trends from the scant data on the handful 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 are flourishing in this island nation:

It tells that medical company Kereciswhich uses fish skin for new wound dressings, comes from Iceland: Innovations here often look for inspiration in unexpected places.

Products from the ocean have branched out into high-end cosmetics, as well as food technology, new materials and more. While it wasn’t obvious even to Icelanders that fish skin or algae could be repurposed in so many ways, growing support for the circular economy has brought the focus back to sustainability. That’s what starting accelerator run on KLAK – Icelandic startups goal.

One great source of inspiration for companies in the country is the past. Especially when it comes to fintech — the sector has little to do with a country’s natural resources and more to do with its history. «I think the force behind companies like (neobank) Indo lessons learned from (2008) banking crisis. And the same with Monerium”, said Gunnlaugur Jónsson, CEO of the company Reykjavik Fintech clusteran association that aims to nurture fintech companies in the country.

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There are still lessons to be learned, according to Bjarna Gaukur Sigurdsson. His new company, Flash, operates on an account-to-account payment platform, as an alternative to credit cards, to reduce payment processing costs. It also has a security angle as it helps its users stop relying too much on platforms that could be compromised.

But all these innovations would be wasted without support. Fortunately, entrepreneurs here have a good ecosystem to contribute to and learn from as they build.

In addition to venture capital and accelerators, startups in the country can receive funding through programs such as The horizon of Europea nice addition to the national scholarships it also distributes RannísIcelandic Research Center.

DTEfor example, is a beneficiary of grants from the European Innovation Council introduce more efficient processes into the country’s vast aluminum industry.

But funding is not the only thing a startup needs to grow. Talent creates companies, which is why so many startups congregate in downtown Reykjavík, the hub of Icelandic cultural, economic and management activity. The area is home to co-working spaces and entrepreneurial centers such as Hafnar.hauswhich offers co-working space as well as studios for rent for those with a creative bent.

Iceland is known for its talent in creative fields, and this tendency has also entered its technological scene. Companies like Genki, Overlap and Sopranos they 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 gamesthe studio behind the popular MMORPG EVE Online.

The presence of CCP Games was an inspiration for many Icelanders to start building games, Porcelain fortress CEO Ingolfur Aevarsson told TechCrunch.

«Having a big brother like CCP next door really opened people’s eyes (to the fact) that we can actually make games,» Aevarsson said. «But Iceland has very strong roots in writing our sagas and all these kinds of story building.»

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Porcelain Fortress is based on House of Innovationco-working space set up by Opera and Vivaldi founder Jon Stephenson von Tetzchner. It is also home to Heimaa platform that helps families manage and share household chores, PayAnalyticsequal pay and workforce analytics provider and many more startups.

However, when startups get bigger and better funded, some move on Gróska (the word for «growth» in Icelandic), a modern space in the middle Reykjavík Science City. This new neighborhood is also home University of Iceland Science Park.

Still, there are limitations inherent in a country with a small population: once they reach a certain size, Icelandic startups often have to look abroad for AI talent or executives with scaling experience.

Startups from Iceland that have gone abroad include On the Nasdaq list eye care company Oculis; To prescribean opioid addiction prevention company that recently raised 2 million euros expand in Canada and enter the US; Sidekick Healthwhose digital care platform it acquired towing throughout Europe and the USA; and Avowhich became the first Icelandic startup to join Y Combinator in 2019.

Some companies go global immediately, while others prefer to work locally first. Crowberry Capital founding partner Jenny Ruth Hrafnsdottir has a word of caution for the latter: Since Iceland is a country where most people are only a phone call away or an acquaintance away, it can make startups overconfident in their go-to-market strategy, which won’t fly in larger markets.

However, the ease with which some things can be done in Iceland makes it a good training ground for foreign companies, especially when they can also take advantage of its natural resources. It also helps that validation in Iceland can often be applied to Europe: Iceland is not part of the EU, but belongs to the European Economic Area (EEA), with a large overlap of legislation.

Iceland has long held a strategic geographic location worth securing, but the topic is once again experiencing tailwinds when it comes to startups — bug bounty program Defend Iceland received last year support of 2.6 million dollars from the European Commission as part of the Digital Europe plan.

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And the fact that the NATO Innovation Fund (NIF) also co-hosted an event during Iceland Innovation Week highlights just how much attention Iceland is getting.

Iceland rarely makes the list of top countries for global investment, but that’s mostly because the startup scene here is just on the rise. 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 funds.

It has the right: with the exception of state ownership New Business Venture Fundfunds like Crowberry, Brunnur Ventures, Eyrir Venture Management and Frumtak Ventures born in this century, if not in this decade (Iðunn).

It is too early to say which companies or funds will benefit NIF’s fund worth one billion eurosbut Iceland is on the list of potential recipients as one of his own 24 LP records. One technology company, a manufacturer of wind turbines Cold windis already part the first cohort of accelerators supported by NATO DIANA. The trend will be worth following.

Strategically, but also economically and culturally, the once isolated Iceland is now more of a crossroads.

As a Nordic country, it has many points of contact with Scandinavia (both have a strong gaming industry) and the Baltics (fintech and technology for governments). It’s also natural for tech companies to turn to larger markets early. That’s probably a good thing for its startups and the nascent 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 In the name Reykjavík Science City.

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