A quiet quarter on the funding side, but very interesting on the exit side. The effects of having only one active Icelandic fund still linger. Now that Crowberry Capital has officially started and NSA Ventures have more capital available due to an exit this quarter, deals might start ticking up again, and some of the earlier Eyrir and Frumtak companies are due for a round soon.
Three seed rounds
We recorded three rounds in the quarter: Viska Learning, Ghostlamp and Teatime.
Last years Q3 was very active, and this time around there’s less than half of the investments YoY.
Comparing amount invested shows an even steeper drop, as we didn’t see any late stage rounds.
Brunnur the most active investor
Brunnur Ventures led two of the three investments. The fund has for the last quarters been the only active Icelandic VC fund, but now that Crowberry has been founded and NSA has some money to invest, they’re no longer alone in the market.
Investa, the angel / seed fund run by Hilmar Gunnarsson, Hjálmar Gíslason, Jói Sig and more veterans from the Icelandic tech scene participated in two rounds (Viska and Teatime)
The biggest news of the quarter, however, is definitely that fact that Index Ventures, a top tier VC, did its first investment in Iceland.
Seed money is Icelandic, growth money is foreign
This quarter most of the investment came from Iceland. The only non-icelandic capital were participants in Teatimes’ round (Index Ventures et al).
Although we don’t have a lot of deals to go on, you can see a trend emerging. The seed rounds are driven by Icelandic investors, but the later stage rounds are driven by foreign funds. There might be several reasons for that and we’ll discuss those in the upcoming Memo.
Two exits and a listing
Greenqloud was acquired by Netapp, in what is the first acquisition of an Icelandic software company by a Fortune 500 company (the completely first was probably DeCODE, acquired by Amgen in 2012). The amount was undisclosed, but we’ve discussed the acquisition in more detail here. The other exit was when Skynjun, an Icelandic audiobook publisher, sold to Swedish Storytel.
In addition, Klappir Green Solutions – a consortium of three companies, including Ark Technology and Data Drive – was listed on First North. Although no new shares were offered (it was only a listing, not a public offering), that move definitely created some liquidity for employees and investors.
This is the most exit activity we’ve tracked since the beginning of Northstack, which hopefully is a signal of things to come.
This year will probably be the first of (hopefully) many where the Icelandic scene reaches some kind of equilibrium and predictable deal flow. Two to three active, local, venture funds that mostly focus on the earlier stages, and several later stage investments led by foreign funds.
It’s also a when the VC industry in Iceland reaches a certain crossroads: some of the management companies – Frumtak and possibly Eyrir – will likely start raising a new fund because they’ve fully committed their current capital, and whether or not that happens, might depend on whether the funds have success stories to tell. Others, like Brunnur Ventures or Crowberry Capital, are not in as much a need of raising more, because they have more available.
At today’s Pixel 2 launch event, Google unveiled their answer to Apple’s Airpods: The Google Pixelbuds.
Northstack doesn’t normally cover the tech giants, except when it is specifically related to Icelandic tech. And this time it is. The Pixel Buds will include real-time translations, where you can talk in one language and the phone will speak in another.
The good news: Icelandic is on the list. This might open up some interesting innovation possibilities, and should make our minister for education, that recently revealed a new speech-technology plan, very happy.
The demo starts at 1:28, and you can see Icelandic in the rolling list afterwards.
Teatime, a new startup founded by four ex-QuizUppers, just announced a $1.6m funding round, led by London based Index Ventures. Other investors include David Wallerstein, SEVP at Tencent, and David Helgason, founder of Unity. Teatime had previously raised $200k from the founders.
“I am incredibly excited to work with such an extraordinary team, helping them bring to market a completely new concept. Teatime is our first deal in Iceland, a country with a growing tech scene, especially in the games sector,” said Guzman Diaz, investor at Index Ventures, that previously backed successful games companies King and Supercell.
The Teatime founding team is made up of four veterans from the mobile gaming industry: Thor Fridriksson (prev. founder & CEO of QuizUp), Ýmir Örn Finnbogason (prev. CFO of QuizUp), Gunnar Hólmsteinn Gunnarsson (prev. founder of Clara and COO of QuizUp) and Jóhann Þ. Bergþórsson (prev. CTO of QuizUp.
“This all happened incredibly fast,” says CEO and co-founder Thor Fridriksson. “After QuizUp was sold early this year, a long awaited vacation ensued. After a couple of months you started getting the urge to build something again.” He says that the founding team met during the summer and got this new idea that everyone became excited about.
“We pitched the idea to several of QuizUp’s early investor and got great feedback. Later, Index Ventures joined, which not only gives us capital to work with but also very important connections that will help us succeed. This investment will help us work faster towards our mission, which is to reinvent how people play mobile games.” Next up is hiring the first employees and starting production. “We’ll hopefully have something to show within the next months.”
Skynjun, Icelandic publisher of audiobooks, has been acquired by Sweden’s Storytel. The purchase is payed for with shares in Storytel priced at a 30 day weighted price point. In the end of 2019, an additional, performance based earn-out payment. The total payout is estimated at €200K.
Storytel’s acquisition of Skynjun is one of three recent acquisitions of local audiobook publishers, Breakit reports. The others are from Bulgaria and Turkey.
More on Breakit.se
Last Thursday, Klappir Green Solutions (KGS) was listed on Nasdaq’s First North market. After two trades, the company’s B-shares were priced at 14.5 ISK per share, valuing the total available B-shares at roughly 960 million ISK, ~$8.8m. The company also has A-shares outstanding that are not listed. The main difference between the shares is that B-shares don’t have any voting or pre-emption rights.
KGS provides “consulting and software solutions to facilitate sustainability and responsible environmental operations.” Last year the company acquired two other companies: DataDrive and Ark Technology and added their offerings to KGS’s mix of products. According to their annual report for 2016, the company is currently working on merging the operations of the companies.
DataDrive participated in Startup Reykjavik 2015 and later received an undisclosed amount of funding from Klappir. Ark Technology received investment from Brunnur in 2015, but was then acquired by Klappir a little over a year later.
The listing didn’t include any additional share offerings.
Transportation Ministry to look into Uber & Lyft
Jón Gunnarsson, minister of transport, will appoint a working group to look into the possibility of ride sharing companies like Uber and Lyft operating in Iceland to meet the growing demand of taxis. The minister has already decided to increase the number of taxi permits.
”We’re gathering data and following that, soon in the fall, we’ll create a working group which will have the task of going through the data and creating suggestions for the future of these issues in Iceland,” says Jón. He says the working group will look specifically at Uber and Lyft, because both consumers and foreign surveillance authorities have complained about the current setup.
To put this into perspective, we should add a couple of facts (borrowed from Hallgrímur Oddsson’s excellent piece on Uber & Iceland from last year).
- There are 560 taxi licenses in the Reykjavik area, the same as in 2003. Since then, inhabitants have increased by 30,000, and the number of tourists has grown from 320 thousand in 2003 to around 1.8 million in 2016.
- Reykjavik is the only capital in Scandinavia Uber hasn’t entered (they’re leaving Copenhagen and Helsinki, more on that later).
- There’s a notorious “grab a lift” group on Facebook for the Reykjavik area, boasting ~37.000 members, and regularly mentioned as a danger to both people and taxi drivers by taxi drivers.
Also, in 2014, Reykjavik reached some minimum number of signatures for Uber to start looking into coming here, and Ryan Graves, former CEO and then SVP of Global Operations promised to bring Uber to Reykjavik. As you know, nothing has happened since (to the knowledge of consumers, that is).
Lyft, on the other hand, is even less likely to show up anytime soon. They have focused exclusively on servicing the United States, apart from partnership dealswith other ridesharing companies like Didi (China) or Grab (Southeast Asia).
Why should they bother?
The transportation market is undergoing very interesting changes. There are three major changes affecting the market at the same time, as explained by Ben Thompson of Stratechery:
- Consumers moving to Transportation-as-a-service (as seen by Uber users)
- Cars moving to electric (making TaaS more affordable in the long run by decreasing marginal costs on driving)
- Cars becoming self-driving (eliminating the need for a driver, and driving marginal costs even lower).
Uber’s long term play (and gigantic valuation) is by most accounts based on becoming a leading force in this shift. Consumers are already using the service a lot, and Uber (as well as almost every other technology company out there) is investing in self driving cars. Enormous growth (in locations and users) of the last several years, has fueled the company.
Which is why I’ve been pessimistic about the possibility of Uber coming to Iceland. The cost (and risk) is too high and the benefit too low for the company to decide to come here. Reykjavik, even with the tourists, is just too small to make a difference. The smallest city on a list of the world’s 300 largest cities has 361.000 inhabitants, and if you count the metro area, it has 2.2 million.
Reykjavik, with its 123 thousand inhabitants (and 220 thousand in the metro area) doesn’t seem big enough for a company like Uber to risk litigation. Especially not now that Uber has left Finland’s Helsinki because of legal issues, and has been declared illegal by courts in Denmark.
Or well, at least until we change the rules around it.
The opportunity in pre-emptive legalising
These news are therefore very exciting. Iceland’s size and remoteness make it an unattractive market for most companies looking into international expansion. Add to that very strong labor unions, an expensive labor force, high taxes, not to mention the turbulent currency, and you have a mix of ingredients that don’t make Iceland attractive to market entrants – especially not when these entrants are directly challenging the status quo.
That’s why Iceland’s strategy in dealing with these technologies and society-changing concepts should be to legalise first, ask questions later. Not only should we legalise it, we should recruit the companies and help them set up shop here, in some cases even look into subsidizing their market entry. We’ve been doing it with huge investments before (a recent example is United Silicon), so why not the consumer serving companies that are ushering a new way of going around business? The consumer surplus provided by companies like Uber, Airbnb, Amazon Prime, Netflix and more, should at least be worth the discussion.
Genetic data platform WuXi NextCODE just announced a massive $240m series B financing round. The company extended and completed the Series B round with investment from a consortium led by Sequoia China and including Temasek, Yunfeng Capital and 3W Partners. Temasek, Yunfeng and 3W also participated in the initial Series B round in May alongside Amgen Ventures and other existing long-term investors and partners.