The Startup Scene in Iceland

One of the effects that the economic crisis had on Icelanders, when the unemployment rate rose to 9%, was to awaken the entrepreneurial spirit. Fortunately, many used this difficult time as an opportunity to unleash their creative side with original ideas, which in turn fuelled the growth of the country’s startup ecosystem. The foundations had already been laid, with some ground-breaking initiatives dating back to the 1990s, but in recent years the startup community has taken off. Startups in Iceland are on the rise.

Iceland’s Startup Sector

The establishment of the start-up sector in Iceland has aroused great interest at a global level. Initiatives have emerged not only in traditional areas such as finance and tourism, but also in fields such as gaming, virtual reality and biotechnology.

The start-up market in Iceland is comparatively small, but not insignificant.

There are currently four venture capital companies in Iceland, including Brunnur, NSA Ventures and Frumtak. As funds are limited within Iceland, cross-border co-operation is necessary. These cross-border deals have greatly expanded the Icelandic startup market over the years.

If you are wondering what the most significant startup successes in Iceland have been so far, these are the initiatives that have emerged in the games and media sector. CCP Games was founded in 1997 and has reinvented itself with games such as Eve Online, which are praised for their complexity and the level of interaction between players. The games industry and CCP have reaped huge profits every year and Eve Online fans have even erected a monument in Reykjavik engraved with the names of hundreds of thousands of players.

Another example, which was founded in 2010, is Plain Vanilla Games. The company is best known for its QuizUp, which was the fastest growing iPhone game of all time. In addition to Reykjavik, Plain Vanilla also has a headquarters in San Francisco.

These are just two examples of major initiatives that have made it big. Many new start-ups are trying to become the next big thing in Iceland, such as Watchbox, which has developed a tool that companies can use for internal communication. Employees using the Watchbox app can capture fun moments in the workplace or even outside of it when a team member is travelling abroad, perhaps doing a job swap or just celebrating a colleague's birthday at an office party.

Investment in Icelandic start-ups appears to be increasing, even though it can be difficult for new initiatives to obtain their initial funding. In 2015, the country saw record investment in startups, reportedly around USD 209 million. This figure fell in 2016, but the total number of investments has remained the same.

Startups in Reykjavik

Iceland seems to have crossed all boundaries when it comes to the success of its start-ups, especially when you consider the size and population of the country. The startups based in Reykjavik have been compared to those in Silicon Valley.

Startup Reykjavik, which was founded in 2012 in collaboration with Arion Bank and Icelandic Startups, has been a great help in promoting the startup sector in Iceland.

Startup companies can receive up to 2,400,000 ISK (or $23,000) from Arion Bank to boost their business with perks like free hosting. Under the Startup Reykjavik umbrella, new participating startups can also better connect and expand their networks with people already in the industry. Those who take the opportunity to get their business off the ground with Startup Reykjavik can also pitch their business ideas to angel investors and receive additional support or funding.

Challenges for the Icelandic startup eco-system

Despite the existing and emerging start-ups, Iceland still faces a lot of competition from the global market. The Icelandic weather is not so favourable for many companies, especially in winter. This is also one of the unspoken aspects that investors consider when deciding on companies to fund in Reykjavik. When investors are considering where to relocate a startup, this factor can be the deciding factor alongside the ban on bringing money out of the country.

Aside from the challenges, new businesses are always springing up and it's basically a great example for other countries. Not to mention what a hotspot of talent this country is, with a population that has been able to keep things moving forward even during a major crisis. Swapp Agency helps you connect with the right people in the start-up community.