The positive development of the Icelandic startup ecosystem since 2012

I have written before about positive things in the Icelandic startup ecosystem. In short, it’s vibrant with loads of activity on all fronts. I will describe the development in recent years and shed some light on how and why this happened.


Before 2008, there were limited number of supporting entities for startups. The state run Innovation Center along with two smaller consultancy oriented companies, Klak and Innovit. Larger companies had sucked most talent from the universities and few startups were founded. Only one VC fund was operated, the state owned New Venture Fund, but in that year the first growth stage fund was founded, Frumtak. The years 2008-2011 can best be described as status quo from the outside. On the inside, people were simply recovering from the economic catastrophe that overran Iceland in 2008. But something had changed. Well paid jobs were not any longer available, and people in general reorganized their priorities. Hard, economic values were replaced with softer values as this list so well describes.

Icelanders’ four most important values according to Gallup consumption and lifestyle poll in 2007 and 2018.

Living in Iceland in 2008-2012 was bizarre, let me tell you. Sure, life continued and all that. But society was hurting and I can only use one word for people’s view on politicians, banks and institutions; mistrust. Today, the situation is entirely different, the economy is strong and on almost any economic criterion there is, Icelanders have never had it better. Mistrust, however, still looms over the nation, particularly towards politicians.

Development of the Icelandic startup ecosystem
Different attributes of the Icelandic startup scene.


The year 2012 marked a beginning of a renaissance period. The Ocean Cluster (Sjávarklasinn) was formed, we saw the first business accelerator introduced, Startup Reykjavik, and the annual conference Startup Iceland was initiated. Entrepreneurs starting sharing thoughts and ideas in a Facebook group that is still today the best way to connect to pretty much everyone in the grassroot and beyond. Simply digesting these welcome additions took 2-3 years. Suddenly there was structure, not chaos. People had platforms to meet, there was publicity around the accelerator, the conference and the cluster.


The year 2015 was another groundbreaking year. Three new venture capital funds were founded, Brunnur Ventures, Eyrir sprotar and Frumtak II. Crowberry Capital launched its first fund in 2017. Co-working spaces popped up around the city and various meetings, meetups and conferences were held. Founders started attending Slush in Helsinki and visiting Silicon Valley more and more. Hackathons appeared with strong attendance from the grassroot and university students. Since then, there has simply been steady and firm development of more of everything. University of Iceland added a masters education in Entrepreneurship, Reykjavik University requires ALL students, regardless of their education, to take a course in entrepreneurship. Larger companies have taken notice of the environment and even implemented internal accelerators and using the lean startup methodology in one shape or form, e.g. using sprints or business design, see for instance Arion Bank’s internal accelerator. At the same time, due to the growing number of interesting startups receiving funding or founders exiting their startups, media has shown more and more interest in the startup scene, exposing the energy created. The general public is therefore more and more aware of what is going within the “black box” of the intriguing startup scene.

International investors, founders and others have similarly shown interest in seeing what the small community of Iceland has to offer. This has resulted in several exits, more FDI (Foreign Direct Investment) in Icelandic startups. The non-profit company Icelandic Startups (merged company of Klak and Innovit) operates several programs that have international connections. #NordicMade, ties to Tinc, Nordic Scalers and other Nordic joint ventures have contributed to more frequent visits to other ecosystems.

The same company (Icelandic Startups) has been a significant contributor to the positive development. The programs they have been running since 2012 are the most valuable for the local ecosystem. I am personally biased in this respect, since as an employee of Arion Bank, we own and entirely fund the operations of Startup Reykjavik and Startup Energy Reykjavik with others. The invaluable experience Icelandic Startups has gained by working with us on these two first accelerators has benefitted the two newest accelerators, Startup Tourism and Til sjávar og Sveita (e. Sea & Food accelerator). Icelandic Startups simply are the maestros of the grassroot community.

Examples of Icelandic exits, whole or partial, in recent years
Examples of funding of selected Icelandic startups

Government has also done good things

Role of government plays a role in this, too. Some important changes were made, particularly in 2015. These changes were:

  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.

Furthermore, in 2018, a task force was formed by the Ministry of Commerce and Innovation to develop Iceland’s strategy towards innovation in general. Its members come from politics, the private sector and government officials. The chairman, Guðmundur Hafsteinsson, is a former Product Management Director at Google. Personally, I have high hopes for the results of the committee that will be presented this summer (2019).

2019 –

There is only more and better to come. Until there isn’t.

Which types of companies should apply to Startup Reykjavik?

Getting closer to Startup Reykjavik‘s application deadline, I frequently get asked what kind of ideas or companies should apply to the accelerator.

Many consider an accelerator like Startup Reykjavik the perfect forum for business ideas in their early stages and that the program suits founders well for assisting with incorporation, shape their idea and strengthen the business model. To some extent, they are right.

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Startup Reykjavik’s startups from 2012 – How have they performed?

Building an excellent company takes at least ten years. We often see successful companies that we perceive became superstars overnight. Founders of companies like Uber, Lyft and AirBnB had all worked on their current business ideas in some shape or form for over ten years before they became household names. Nothing happens by itself, and it’s usually founders’ tenacity and perseverance mixed with good luck that places excellent companies at the top, where they deserve to be.

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Hvernig fyrirtæki eiga að sækja um í Startup Reykjavik?

Í aðdraganda umsóknarfrests í Startup Reykjavik fær maður gjarnan spurningar sem tengjast því hvernig fyrirtæki eða hugmyndir eiga erindi í Startup Reykjavík.

Margir álíta Startup Reykjavik góðan vettvang fyrir hugmyndir sem ekki eru orðnar að veruleika og að hraðallinn sé fullkominn til að aðstoða frumkvöðla við að stofna fyrirtæki, móta hugmyndir og koma þeim í styrkari farveg. Vissulega er það rétt.

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The digital journey of Arion Bank

Telling a good story on successful business measures is gratifying. Arion Bank has compiled detailed information on how it went about creating its internal accelerator, Digital Future, and presenting real impact of delivering new digital offerings. Investing in internal and external innovation has become part the Bank‘s genome. Continue reading

The ten selected teams in Startup Reykjavik 2017

It’s that time of the year. Spring, sun and a selection process… Startup Reykjavik commences on June 12th, now for the sixth consecutive year. Although we saw a substantial drop in number of application for the accelerator, the quality of the teams is actually improving, at least on paper.


Diversity in the teams is great, as in recent years. Simplified, the participants are in five sectors:

  • 2 hardware teams
  • 2 gaming / VR teams
  • 2 food teams
  • 2 software teams
  • 2 services teams (built on software)

The teams are:

  1. Bone & Marrow –
  2. Dataplato – cloud-based dashboard on monetary factors for accounting systems, targeting SMEs.
  3. Itogha – Technology to identify diet related problems and food based solutions
  4. Myrkur Software – Myrkur has developed platforming game projects, leading edge virtual reality software solutions and is currently working on a third person role playing fantasy game.
  5. My Shopper –
  6. Neat Team – We offer employees a choice of what they can have for lunch by ordering off a versatile online menu from various restaurants.
  7. Porcelain Fortress – game-development company with an emphasize on Virtual Reality (VR) and Augmented Reality (AR).
  8. Project Monsters – eildstætt einstaklingsmiðað námskerfi sem byggt er á nútímatækni og leiðandi kenningum í sálfræði.
  9. SAFE seat – SAFE Seat is the lowest cost suspension seat for boats. It keeps your spine safe in rough seas.
  10. ZIfra –  open source memory cards that provide live encryption. Our smart memory card has the ability to automatically encrypt any information on the fly, as soon as the content is created

As before, Startup Reykjavik is a joint venture between Arion Bank and Icelandic Startups.

Listing your Nordic (startup) company is a viable option

Since 2012, I have worked with investing in startups in Iceland through my work at Arion Bank in Reykjavik, Iceland. These investments come through the business accelerators Startup Reykjavik and Startup Energy Reykjavik. Each participant in the accelerator receives fresh equity in addition to the various support and perks available. Continue reading

Startup Reykjavik 2017 – Application quality is still improving

The Startup Reykjavik saga continues. Arion Bank‘s accelerator program, Startup Reykjavik which was established in 2012, will be held from June – August this year. We have now chosen the ten participating teams for the summer. We will present them in the next few days. As in previous years, the diversity of the teams is great, ranging from food, software, hardware to gaming. Continue reading

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. Continue reading