13275248_10154347066575809_1971521796_o

Why we’re doing a hackathon: to increase FinTech innovation

Einar Gunnar Guðmundsson. Corporate Entrepreneur at Arion Bank.

The Icelandic banking infrastructure is unique. This statement may sound awkward in light of a total collapse of the Icelandic banking system in 2008, yet what I mean is from a standpoint of something else. Most banks globally today are highly focused on payments, trying to improve speed where individuals and companies transfer money. Money transfer may take up to three banking days between banks even within the same country or city. The US still heavily relies on checks for money exchange. In Iceland it happens instantly and has done so for almost 20 years. If I transfer money to my wife who has an account at a different Icelandic bank than I do, she only has to push F5 on her keyboard immediately after I make the transfer, and the transfer amount is visible on her bank account. How is that possible? Well, it’s simple. There is a common core banking platform for all the Icelandic banks (jointly owned by the commercial banks).

Good infrastructure may have slowed innovation down in Iceland

For the above mentioned reason, Icelanders have had little need to improve payments. Only in the past year has Iceland seen new money transfer products like Aur and Kass, where you only need a mobile number and registered debet or credit card within the app to transfer money between individuals, regardless of who your commercial bank is. It’s like Danske Bank’s Mobilepay, the Swedish Swish or the Norwegian Vipps.

My point is that, until now, there has been relatively little urgency in developing either great Icelandic consumer or business financial applications.

Arion is hosting a hackathon to speed up innovation

Arion Bank is the first bank in Iceland to host a hackathon. Arion Bank’s FinTech Party is the first hackathon where hackers from established IT companies, the startup community or universities can work on several APIs to hack and develop new financial services.

While hosting a hackathon is no news in itself, the Arion’s FinTech Party is Iceland‘s first FinTech hackathon and several APIs will be available (see below) to participants, who can hack away for 30 hours on June 3-4 2016 in Arion Bank headquarters.

Who should participate and why?

Participants are likely to be established IT companies, startup companies and university students (computer science, engineering, business)

There are three primary reasons for participation:

  1. Products developed may lead to a revenue generating business opportunity for participants
  2. Code / IP and therefore potential revenues belong to the participants
  3. Meeting new people and guidance from the API providers is valuable. And fun.

Arion’s FinTech Party offers several APIs

We at Arion Bank have been working a great deal with with Icelandic startup ecosystem since 2012 since the bank owns two business accelerators, Startup Reykjavik and Startup Energy Reykjavik, where the bank invests seed money in exchange for an ownership stake. Understanding how startups approach problem solving, along with international digitalisation trend/changes in banking, has lead us to hosting the hackathon. We have also offered several companies to offer their financial APIs in our hackathon. They are:

  • API Arion Bank –
    • Transactions on debet and credit cards
    • Claims – initiate a claim to a unique personal ID number that shows in that person’s / company’s internet bank
    • National registry – Lookup in the national registry by their unique ID number
    • Currency valuations
    • Links to Arion Bank‘s sandbox and Github
  • API Valitor
    • Payments – Send and receive a payment with a virtual credit card
  • API Meniga
    • Datadump on the fast food industry. All transactions over a 12 month period in Meniga’s database related to the Icelandic fast food industry. Data is non-personalized.
  • API RB
    • Mobile banking services
  • API Kodi
    • Market Data – closing day price of listed equities on the Nordic equities listed on the Nasdaq OMX
    • Link to API Kodi descriptions
  • API Advania
    • eSignature

All APIs in the hackathon are open REST APIs.

We are quite enthusiastic about these different APIs, since a combination of them, or seperate ones, gives the hackers vast opportunities in developing great products. Real products or features for real customers, consumer or business ones.

Intellectual Property belongs fully to participants, not to the bank

Different banks may take a various approach on hackathons. Some decide that whatever code is written is theirs but give the participants some perks to sweeten the deal. We understand that for most developers, the right motivators need to be in place. That‘s why any code written will belong to the participant teams, i.e. the Intellectual Property belongs to those who write the code. Arion bank will have a non-exclusive right to use the applications for twelve months and a first right of refusal to buy or use should they be commercialized. Those are fair terms for both sides.

Let’s hope all of the above leads to growth hacking post hackathon. Happy hacking!

The author is a Corporate Entrepreneur at Arion Bank. He occasionally blogs at http://einargunnar.com. Find him on Twitter: @einargunnar

13287975_10209327341970873_733099242_o

Highlights from NSA Ventures’ Annual Meeting

Today was the annual meeting of NSA Ventures, Iceland’s biggest (and oldest) venture fund. NSA Ventures is an evergreen fund, established by the government with a 3bn ISK initial endowment. The fund is not governmentally operated, but its board is nominated by the Minister for Industry and Innovation.

In yesterday’s Memo (sign up here) we put forth four predictions about the event. All predictions came partly or fully true. Below are highlights from the meeting.

  • In 2015, the fund invested in one new company (Sólfar) and followed on in six comapnies.
  • In 2015, the fund exited one company, Stjörnu Oddi, which had been in their portfolio since 1999.
  • The fund hopes to exit four companies this year.
  • The fund has little available cash to invest in new companies. They expect 1-2 deals this year. The number of deals depends on how the fund exits those companies.
  • Silfra, an early stage fund NSA was preparing, is currently on hold. However, much prep-work has been done which will help start that project again later.
  • There will be a full re-evaluation of the funds’ legal structure this year. This is not new, and is mentioned in the Ministry for Industry and Innovation’s plan for entrepreneurship. According to the plan, NSA will focus on investing in funds, rather than individual investments. Norðurskautið will discuss what this means in the coming weeks.

The picture is of Kjartan Pierre Emilsson, CEO and co-founder of Sólfar, who gave a talk on their VR project Everest at the annual meeting. Sólfar is a portfolio company of NSA. Image courtesy of Axel Ingi Jónsson.

Norðurskautið covers the Icelandic Startup and Tech scene. Follow us on Twitter or sign up for our mailing list to keep up to date. You can also join our Slack community – http://bit.ly/slack-is

the memo logo 2.001

The Memo: NSA Ventures’ Annual Meeting

Correction: In an earlier version I wrongly quoted Almar as having said “We hope that preparation and establishment of a new fund will finalize in the next weeks.” The words and establishment shouldn’t have been there, Almar didn’t suggest they were on the verge of starting a new fund.

Happy Monday everyone. I’m writing this from a downtown coffee shop in beautiful weather. I do hope the summer starts arriving / sticking around.

There’s a good number of events coming up. Startup Iceland is next week, as well as the Nordic Startup Awards grand finale. Two hackathons are around the corner as well. Ultrahack is on May 29th and Arion Bank’s FinTech Party is June 3rd (you can sign up until May 27th).

NSA Ventures are hosting their annual meeting tomorrow, TuesdayThey’ll release their annual report at the meeting at Norræna Húsið. Last year’s annual meeting had the following highlights. Note that I wasn’t there, and am basing these points on their press release.

  • 201 million ISK profit.
  • 386 million ISK investment – both fresh and followups. Two fresh investments in 2014 – Kaptio and Sling.
  • Almar Guðmundsson, chairman of the board, discussed that NSA wanted to start a new early stage fund – Silfra. “We hope that preparation of a new fund will finalize in the next weeks.” (Note: as you should know, this hasn’t happened)
  • The fund had 5.3 bn ISK in assets in 34 companies and funds. That’s based on their annual report. Just as with any investment fund with startup assets, valuations are tricky. That means the 5.3 bn number could be over- or underestimated if the fund would liquidate its assets.

We’ll of course be there. Although the meeting doesn’t include time for Q&A (which I find strange), we’ll try to get comments from the fund on the topics they cover.

Sign up for the Memo, our weekly commentary newsletter.

I have some predictions about the event. You should take with a grain of salt, because they’re predictions.

  • We won’t hear much about Silfra, the early stage fund. I think NSA is no longer focusing on this.
  • The fund might discuss that some of their companies are in a sales process. Rumors say 3-4 co’s. I don’t expect much details.
  • NSA doesn’t have much available capital to fund companies at the moment (hence exiting several companies). I doubt they have plans for more than 1-2 investments this year.
  • Last year was a slow year for NSA in fresh investments – the only one we tracked was their investment in Sólfar VR. We know that they increased investments in some companies, but those fundings are rarely disclosed.

You’ll hear more about it tomorrow.

Finance minister Bjarni Ben is pushing for gradual easing of the capital controls.  If I understand it correctly this only affects foreign holders of assets in ISK, and won’t directly affect the Icelandic startup environment. Yet. This is a step in removing the cap-controls, which is very valuable to the industry.

Sign up to the Memo here. If you liked this post, please share it on Facebook or Twitter. If you have comments, thoughts or tips, tweet at me directly at @kiddiarni or  send me an email.

the memo logo 2.001

The Memo: Iceland might be running into a VC problem, part 2

​Good morning everyone – hope you had a great, long weekend. This memo is going out on a Tuesday because we want you to start the workweek with a Memo :-)

A couple of Memo’s back, I promised to revisit my prediction about Iceland’s VC troubles. I’ve had time to research it better, as well as discussing it with several people in the industry.

Current status: two of three funds are almost fully deployed in regards to fresh investments. Eyrir has a couple hundred million available (and not sure about fresh investments). Frumtak is closing two investments and is unsure if they’ll make more. Brunnur aims at 10-15 total. They’re at three announced investments now. In total we’re looking at 9-13 fresh investments left from the new funds.

This means that we need a new fund to start raising soon (it’ll take some time to close a new fund). Otherwise we might end up with a period of little or no available capital for new companies. As we saw last year, raising VC funds in Iceland is possible. But it might be tricky.

Sign up for the Memo, delivered Monday Mornings.

Several (gloomy) points about the outlook for Icelandic VC:

The Icelandic LP market is tiny in a sense that almost all the LP’s are pension funds. Changes in pension fund regulation allow the funds to own only 15% of any slhf. Most VC funds use the slhf. corporate form. This means that to raise a fund, a GP needs at least seven participating pension funds (that is, if all the capital comes from pension funds). Banks have been participating as well, but as I said, the pension funds are the main LP’s. With a lot of money. A lot.

Our funds are small. Most VC funds operate on a 2/20 model. The numbers are interchangeable, but the model is the same. Funds charge a percentage (2%) in annual management fees, and a carry bonus (20%) on gains made. Iceland’s biggest VC fund, Frumtak, is 5bn ISK. A 5bn ISK fund charges 100m ISK (based on 2%) per year in management fee, a little under 8.5m ISK per month. The carry bonus comes into play once the fund has returned a profit to its investors, and therefore not a part of regular operation income or expenses. It’s more so the GP’s have skin in the game.

A VC fund would want to employ investors, analysts, and operators. They need staff to source and vet investments, market their portfolio and build connections. It’s obvious that such operations are hard on a 8.5 million ISK monthly budget. Hence, the three funds all have three or fewer employees.

We also need our funds to be active in collaboration with non-Icelandic funds, building connections and bridges to Silicon Valley and other hubs. That also costs money. We need our VC’s to do a lot, with not very much.

Our VC industry is young, and our VC’s need to have the resources to build these networks and connections. I’m not saying that our funds aren’t doing this, just pointing out that our funds are, well, bootstrapped.

We haven’t had a success story. We’ve had great companies, sure. But we’ve yet to see a financial success story for a VC backed company. We’ve had a couple of moderate exits in the last years (Zymetech was <$10, Datamarket $11-14m, Clara <$12m, Modio was undisclosed), but no home-runs. A success story (or few) would make raising a fund easier.

And then there’s the capital controls. A total no-brainer. It’s essentially illegal to transfer funds out of Iceland without special exemptions. It’s given, that such measures make growing an industry that allocates capital harder.

Sign up for the Memo, delivered Monday Mornings.

But wait, it’s not all bad :-)

Now let’s take a break from all the gloom. What’s been happening in Iceland in the last years is encouraging. The VC environment isn’t perfect, but there were still 12.5 bn ISK announced last year in VC money. That’s more than the last ~20 years before (at least. I think. I’m not that old so I wouldn’t know, and I haven’t researched it a lot).

But, building a powerful and experienced investor ecosystem takes time. Startup guru Paul Graham recently discussed this in a talk he gave in Pittsburgh. The topic was How to make Pittsburgh a Startup Hub.

There is one more thing you need to be a startup hub, and Pittsburgh hasn’t got it: investors. Silicon Valley has a big investor community because it’s had 50 years to grow one. […]

If an investor community grows up here, it will happen the same way it did in Silicon Valley: slowly and organically. So I would not bet on having a big investor community in the short term. But fortunately there are three trends that make that less necessary than it used to be. One is that startups are increasingly cheap to start, so you just don’t need as much outside money as you used to. The second is that thanks to things like Kickstarter, a startup can get to revenue faster. You can put something on Kickstarter from anywhere. The third is programs like Y Combinator. A startup from anywhere in the world can go to YC for 3 months, pick up funding, and then return home if they want.

My advice is to make Pittsburgh a great place for startups, and gradually more of them will stick. Some of those will succeed; some of their founders will become investors; and still more startups will stick. (emphasis mine. Link)

I think we can exchange “Pittsburgh” for “Reykjavik” in Paul’s text, and much of it still holds true.

We’re a young ecosystem, and the most important thing we can do is to show perseverance and tenacity. Grow what we can grow. Make things better, slowly but surely.

This emil is part of our weekly Memo: Commentary on the Icelandic Startup Scene. You can sign up here. If you have comments, thoughts or tips, tweet at me directly at @kiddiarni or send me an email.

startup-iceland-logo

How to get the most out of Startup Iceland

On May 30th, the fifth annual Startup Iceland conference takes place in Harpa. This year’s roster of speakers includes entrepreneur and investor Ingrid Vanderveldt; Mark Solon and Jenny Fielding, both managing partners at TechStars; and Arvind Gupta, Investment Partner at SOS Ventures.

Bala Kamallakharan, founder of Startup Iceland

Bala Kamallakharan, founder of Startup Iceland

There are many conferences in the startup world these days, and attending too many takes focus and effort from entrepreneurs, that could be used building or selling a product. However, conferences can be a great place to expand your network and get some inspiration, but it is important to use your time wisely. That’s why Norðurskautið and the Startup Iceland team bring you a short and handy guide on how to get the most out of Startup Iceland.

Be open to inspiration

While building a company, everyone has their highs and lows. “It’s hard work, and everyone can do with some inspiration,” says Bala Kamallakharan, founder of Startup Iceland. Many of the speakers have gone through incredible journeys to get to where they are now, and hearing those stories can be a great motivator.

Connect with mentors

All speakers who participate in Startup Iceland also act as mentors the next day in a 20 minute one-on-one session with entrepreneurs. “We encourage founders to buy their tickets early because if we have a tie break on the slot for mentoring whoever bought the ticket early wins,” Bala tells us. The mentors all have experience and networks and can help you and your company. Some tips from Bala on how to prep for a one-on-one:

  • Do your homework on the pitch: Be able to clearly articulate your business in a quick and precise manner (you only have 20 minutes, remember).
  • Do your homework on the mentor: Read about the mentors to both help you pick which one you want to meet, and to understand how she may help. What are her areas of expertise? What kind of network does she have? Know as much as you can about the mentor.
  • Know what you want: Prepare questions and topics and know what you want to get out of the meet. Are you looking for an investor? Tell her that, and ask for feedback and guidance in that area. Need help promoting your product? Approach the mentor with questions on promotion

Connect with the community

Conferences bring people together, and Startup Iceland brings a big chunk of Iceland’s startup community to one place. Use it to get validation on what you’re building, sourcing possible customers or colleagues, or talking to potential investors. “Every startup that I have been part of got a break after participating in Startup Iceland,” Bala says. “No one knows what that is going to be but there is only one way to find out: Make it a habit to be there.”

Learn from others

A smart entrepreneur learns from her mistakes, a wise entrepreneur learns from others mistakes,” Bala says. A conference like Startup Iceland has speakers discussing strategy, operations, product and more. Make notes on what challenges you currently face, and try to spot if the speakers discuss them. That can also help when deciding what to discuss with a mentor.

More info on Startup Iceland on their website. Book tickets here.

Page 1 of 25

Norðurskautið – íslenskt sprotaumhverfi