The Q3 2017 Icelandic Funding Analysis

Once again, we’ve teamed up with our friends at Northstack combining our insight with Kristinn’s own observations.

(NoteThey’ve teamed up with Crunchbase, meaning their data (and graphics) are now augmented with Crunchbase data)

Kristinn: 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.

Neil: After no investments in Q1, Iceland was back at it in Q2 with 4 investments announced. Fortunately Q3 was more similar to Q2 than Q1, with 3 investments announced totalling a rather less than impressive $3.8 million. It has to be said, that we’ve been saying for some time now that a higher number of investments must just be around the corner, however, we are still yet to reach it.

Three rounds were recorded 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.

Kristinn: 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.

Neil: We can expect Crowberry to start announcing their first investments soon, and if Brunnur can continue to be as active then we should finally see the number of investments increase. It’s also promising to see local angel groups be active and manage to get in the deals that top-tier firms like Index are leading, this should always be considered a positive for an ecosystem.

This quarter most of the investment came from Iceland. The only non-icelandic capital were participants in Teatimes’ round (Index Ventures et al).

Kristinn: 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.

Neil: An excellent quarter for exit activity which is the first sign of any ecosystem maturing. It’s still hard to imagine this happening on a consistent basis just yet due to the modest levels of investment activity in recent years, but there is hope as Kristinn points out that even these activities in the last quarter could see more liquidity find itself eventually ending up in the early-stage ecosystem.

Kristinn: 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.

Neil: On balance, Q3 was a good quarter for Icelandic investments and particularly exits and the latter should help the Icelandic funds manage to raise new funds, putting the local ecosystem in a position where they will have four active VC funds and a fairly active angel group. I’m going to say it one last time, from next year we should expect to see a considerable uptick in Icelandic investments.

Neil S W Murray founded The Nordic Web in 2014 in order to provide the Nordics with the quality coverage it deserves. As well as being Founding Editor of The Nordic Web, Neil is also an active community builder in the region, participating in a number of initiatives, and has previously worked for Tech.eu.