A reflection on the status of the Icelandic startup environment

I have been involved in the Icelandic startup community since 2011. Before that, I followed the scene from the outside with interest, yet with little or no direct participation. During this time, it is extraordinary to have witnessed the positive change, enthusiasm and increased interest from pretty much everyone in the startup community. Let me reflect a bit on how and what has changed.

Before 2008 there was hardly any startup community in Iceland. Little support was available for newly started companies. There was Klak Innovation Center (founded by Nýherji), Innovit (founded by individuals and the universities) and Innovation Center Iceland (run and funded by the government). Some educational programs and meetups were available through these organizations while they were not highly accessible to the general public. There was only the federal evergreen VC fund, New Venture Fund. In comparison with the status today, the description above looks like the plains of Mordor from Lord Of The Rings, an austere desert or wasteland. Since then, a great deal has happened.

Three accelerators are now operated

There are currently three seed stage, mentordriven business accelerators in Iceland, Startup Reykjavik (2012), Startup Energy Reykjavik (2014) and Startup Tourism (2015). The first two are owned by Arion Bank while the third is owned by Icelandic Startups (previously known as Klak Innovit). Over 80 companies will have gone through those accelerators by the end of 2015. All three provide various guidance and assistance from mentors, Icelandic Startup and the funding partners behind the programs. SR and SER provide equity / seed investment while ST does not. It does not require a nuclear scientist to figure out what structured programs like accelerators do for the environment and the founders behind the participating startups. It‘s all about preparing them fast for making their businesses viable and sustainable.

Three new VC funds founded in 2015

There are now four VC funds in Iceland. Access to funding has always been the Achilles heel in Iceland for the startup scene. These funds‘ investment capacity is around 11 billion ISK (90 USDM). The funds are almost fully invested at this stage, since all of them need to follow up on their initial investments. Much has been written about these funds, e.g. on this blog and by Nordurskautid. Having meaningful amount of capital changes things dramatically to the better and stimulates the community for growth.

International conferences

Who would have thought 10 years ago that Iceland could be a hot place for entrepreneurs, investors and other stakeholder to meet at and share ideas, vision and contacts. Well, it‘s happening. The Startup Iceland conference (2012) has been held five times and both sees new faces every year and returning ones. Slush Play (2015) is likely to grow fast and attract more and more non-Icelandic visitors that want to learn how Iceland has managed to build a successful gaming and Virtual Reality cluster in Reykjavik.

Coworking spaces

Sharing offices with like-minded people can provide value. Founders today in Reykjavik can choose between a variety of coworking spaces in different areas of the city. Most of them are private while Innovation Center Iceland operates some. Here are a few: Ocean Cluster, Orange, Hellirinn, FabLab and Innovation House. Additionally, some angel investors provide offices for their companies. Most of these provide some services and host events or meetups in some shape or form.

Community & events

Activity fosters more activity. It stirs up ideas and communication between people. Supporting bodies like Icelandic Startups and ICI organize all kinds of events and programs, meetups, lunch meetings, etc. Grassroot groups such as Javascript developers under the name JSConf host monthly meetups. Nordurskautid, a startup media/blog, has started a book club and a Slack discussion.

Icelandic Startups has organized the business plan competition Golden Egg for 9 years now, hosted at Reykjavik University (RU) and University of Iceland.  Icelandic Startups also takes care of part of a basic entrepreneurial course for all students at RU.

All in all, if one wants to immerse him/herself in startup stuff, there is plenty around.

Government and framework

It is the government’s role to establish a good framework for society and businesses. In recent years, a few good changes have been made to help newly established companies, particularly ones that are focused on the international market.

  1. Tax incentives / reimbursement of R&D cost.
  2. Tax incentives for private investors that invest in startups.
  3. Tax incentives for non-domestic talent
  4. Stock options for founders are taxed at exit, not at issue date
  5. Increased gov’t funding to the Technology Development Fund.

These measures matter.

Media and public interest in innovation

Based on the things listed above, it should come as no surprise that this activity catches the attention of the media. Listing news from various websites would be tedious work, but news on interesting ideas, founders and successful funding is not only common, but has almost become mainstream. Nordurskautid and Startup Iceland, along with my blog site, cover different aspects of startup life. The best Icelandic Facebook group for startups is Íslenskir frumkvöðlar (e. Icelandic entrepreneurs) in my mind. Content and discussion in these mediums then spills over to the general public. Even the state owned TV station RÚV bought into the production of the startup reality show Toppstöðin, where several teams were followed during the course of 3-4 months. Being an entrepreneur/founder is at least less frowned  upon by parents, grandparents and relatives, than before. It is better accepted as a lifestyle due to better understanding of what being a founder is about.


The startup environment in Iceland has improved substantially to the better in the last five years. For those who seek guidance, assistance, moral support, knowledge and funding, the Icelandic startup scene is heading into spring season. Summer isn’t quite there yet. But there are indeed people and companies that constantly work on improving the infrastructure. We will get there.

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