A bank that invests in startups

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Since 2012, I have been fortunate enough to be on the team that started Iceland’s first seed stage, mentor driven business accelerator, Startup Reykjavik. Setting up such a venture was neither evident nor self explanatory. Arion bank, my employer, already had plans on aiding the Icelandic startup community in some way at the time but did not necessarily know exactly how. The initiation of a program where entrepreneurs would have the chance to fulfill their dreams by starting a company, receive guidance through mentorship and a small investment, not only requires money but long term commitment. And much of both. Not to mention understanding of how early stage investing works and a whole bunch of patience. In general terms, these are perhaps not the first-in-mind qualities that a bank has (apart from a balance sheet) to most people.

But Arion bank has.

Banks hardly invest without specific interests

During the past four years, I have met around one hundred accelerator directors from six continents and we have exchanged stories about best practices for choosing startups, operating such a program and how it is structured. When exchanging business card they obviously see that I work for a bank. This, without exception, causes them confusion. Why? Well, simply because no one has even heard of a bank both supplying the investment capital and money to fund the operations of an accelerator. Banks do not invest in startups unless they have a specific interest in the team or its technology. A bank investing in various companies from a wide range of industries without a specific interest is almost unheard of. Yet, this is what Arion bank has done since 2012 through two separate daughter companies, Startup Reykjavik Invest and SER Holding.

The total number of investments is as of today 54 companies and rising, of which 40 have come through Startup Reykjavik and 14 through the energy vertical oriented Startup Energy Reykjavik. And in 2016, we will invest in 17 more companies. That makes 71 in total over 5 years. This makes me overly proud. I get to meet fantastic entrepreneurs that are motivated and willing to do whatever it takes. And my colleagues and I get to assist them in our limited capabilities on the startup’s journey.

Thinking long term makes the difference

To date, ⅔ of the companies we have invested in are operational, meaning that ⅓ is not. A few have started to generate revenues, none are self-sustainable at the moment, but in the coming months and years, I know this will change. Building a sustainable company takes time, and usually longer than anticipated.

I do a fair amount of public speaking on startups. One question never avoids me: “How much have you gained from these investments?” The answer is none… yet. Our working portfolio companies are many in the progress of fundraising and building their business at the same time. I can answer this question properly in 5-10 years time. And I intend to answer it with a smile on my face, both on behalf of the startups’ and the bank’s.

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