Three new VC funds announced in Iceland in one week with USD 80 million to invest

Frumtak_logo

The first week of february in 2015 marks a watershed moment for the Icelandic startup ecosystem as three funds announced that they had finished their funding rounds and were ready to invest.

For many years the only VC fund in Iceland was NSA Ventures which was established in 1997 but his origins were government loan funds. NSA Ventures is an evergreen fund so it needs to exit an investment to have funds to be able to invest again. NSA Ventures CEO is Helga Valfells.

The second VC fund was Frumtak which was established in 2008. Frumtak had a strategy of assisting companies during their growth phase as opposed to NSA Ventures which were more often the first investor in companies. Frumtak had an investment period of five years which ended in 2012 and have been looking towards opening a second fund since then. The CEO of Frumtak is Eggert Claessen.

In addition to those two funds there have been smaller funds which have invested in small companies but normally not with a focus on startups such as Eyrir Invest, Thule Investments and Auður I.

For many years there has been talk of creating new VC funds as both NSA Ventures and Frumtak are fully invested and have very little flexibility to go into new investments. Last year there were news of five different teams working on new funds but no news until this week. According to McKinsey consulting Icelandic companies should annually invest around USD30M in venture capital to be on par with investment levels in the USA. Although this statistic is not formally measured it has been believed that we are far below this number in the last few years.

The first fund announced was on February 4th when the establishment of Brunnur a ISK4Bn (USD 30 million) venture fund co-founded by Landsbréf and SA Framtak was announced. Landsbréf is a subsidiary of Icelandic bank Landsbankinn and operates several funds including Icelandic Tourism Fund which invests in new tourism related startups. SA Framtak is relatively new but founded by experienced entrepreneurs including Sigurdur Arnljotsson one of the founders of CCP. Among the investors in the fund is Landsbankinn, seven pension funds and a few private investors.

Later that very same day a second announcement reached the press. A new fund called Eyrir Sprotar had finished its first funding round for approximately ISK2,5Bn (USD 19 million). Eyrir Sprotar will be operated by Eyrir Invest, an investment company best known as the leading investor in one of Iceland’s largest companies, Marel. Eyrir Sprotar is funded by Eyrir Invest, Arion bank, pension funds and private investors. According to their press release they are still working on gathering more new investors.

Two days later, on February 6th the third announcement was in the press as Frumtak announced that they had secured ISK 5Bn (USD 40 million) funding for Frumtak 2 which will work after the same investment philosophy as Frumtak 1.

This should not be it for the VC funds as the third of Iceland’s three large banks, Islandsbanki, doesn’t have a VC fund yet but has talked about its plans to create one with private investor Bala Kamallakharan.

In the review of the startup year of 2014 I specially noted that we should hopefully get some news on new VC funds but this week has made sure the startup year starts with a bang this year.

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