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Reinventing Reykjavík: Business Iceland is turning the nation's economy upside down

A country with a rich history of fishing and tourism has a innovative tech scene that’s rising to the surface

From almost anywhere you stand in the Icelandic city of Reykjavík, you’ll be able to see stunning vistas of glaciers and volcanic rock formations. However, the stunning scenery is increasingly becoming obscured by cranes and construction sites because Reykjavík is a city undergoing change.

It’s still one of the best places in the world to eat fish – and an essential bucket list destination for those that want to see the northern lights. But there’s a new identity slowly coming to the forefront, led by a wave of exciting new businesses.  

IT Pro was graciously invited to see this burgeoning startup ecosystem by Business Iceland, a type of lobby group that aims to promote the country's businesses around the world. The ultimate goal is to boost the Icelandic economy through exports, and part of the strategy includes ‘Innovation Week’, a nationwide business festival highlighting its growing tech ecosystem. 

Like almost everywhere in the world, COVID-19 shut down most of Iceland’s traditional industries, including fishing and tourism, but tech companies – and also digital-savvy ones – continued to operate, and even grew. Business Iceland is now seeking to highlight the country’s innovative startup scene and capitalise on its most resilient, and potentially lucrative, market as it aims to turn the nation’s economy upside down. 

From one crisis to another

Journalists, for the first time, were invited by Business Iceland to visit its headquarters in Reykjavík. Here, we were introduced to ten of its startups, each of which was represented by a spokesperson or executive. One of the first things that stood out was that four of the companies were fintech firms. Was that something Iceland now specialises in? 

Many of its fintechs came from the financial crisis of 2008, which left the Icelandic banking system on its knees and largely cut off from the rest of the world. We met Egill Almar Ágústsson, who says he was working for an Icelandic bank in 2008 but went on to co-found one of its fintech darlings, Standby Deposits. 

Three people including journalist Bobby Hellard speaking at an event in Icleand

Sigurjón Ragnar ljósmyndari

Journalists were, for the first time, invited by Business Iceland to visit its headquarters

“A lot of the banks specialised in global financial roles, but then the banks; they disappeared,” he tells IT Pro. “And, although the banks still exist, they really do just ‘Mom and Pop’ lending and isolated small corporate stuff. So you had a lot of people that have huge talents, or that have been exposed to finance around the world, not knowing what to do in June of 2008. Out of that sprung a lot of fintech startups.”

Ágústsson is a native, but spent most of his childhood in the US, so his English has an easy Californian accent, which isn’t uncommon in Iceland. A number of the founders and investors we met had similar accents and backgrounds. His company, Standby Deposits, offers ‘cash free’ security deposits as an alternative to stumping up cash for a landlord. Ágústsson explains it’s a model that exists in Europe but not in the US in the same way, which makes it a potentially lucrative market.  

Fintech was mentioned frequently throughout the trip, with the startup Monerium name-dropped more than most. This was the first company to win an ‘e-money’ licence to operate on blockchain to provide fiat payment services across Europe. So rather than using cryptocurrencies to replace traditional money, it wants to use distributed ledger technology to modernise it. Such is Monerium’s rapid rise, it already has backing from one of the biggest names in finance (Goldman Sachs). 

Despite the clear success here, however, it isn’t fair to call Reykjavík a ‘fintech hub’ as that would be a disservice to its quite varied tech ecosystem. During the short stay in the city, we were introduced to a wide array of businesses, and the list of technologies being experimented with at this level was quite staggering; from artificial intelligence (AI) and machine learning to virtual reality (VR) and augmented reality (AR), there seems to be a startup for almost every type of emerging technology in Reykjavík. 

An event at Iceland's Innovation Week

Sigurjón Ragnar ljósmyndari

Innovation Week is a nationwide business festival highligting Iceland's growing tech ecosystem

Gaming is also a big success in the region, though it's not a new success; CCP Games has been going since 1997 and has offered its flagship platform Eve Online since 2003. From the brief tour of its headquarters, CCP can be described as an employer that’s fully immersed itself in the classic US startup business model. Upright arcade game cabinets, a pool table and a dartboard can be found in its chillout space, which is clearly a strategy to retain young talents. There was also a wall of swords, which is CCP’s Nordic way of doing it; for every employee that stays with CCP for ten years, they are given a sword, but the complex forms one has to fill out to take it home means most employees have left these weapons at the company’s office. 

Soaking up talent from all over

There’s a growing talent pool of tech-savvy workers underpinning Iceland’s tech sector, many of whom have come through the country’s brilliant education system. In addition to that, talent is being enticed from around the world, lured in by the growth potential of its startups. At a pre-show drinks party for the Nordic Startup Awards we met a man called Richard who told us he had moved from the Netherlands, partly to be with his Icelandic girlfriend, but also because he’d found a role as a director of business development at TakTikal, which is a cloud-based startup that offers similar services (and more) to DocuSign.

At the same event we also met chief information officer (CIO) Vanessa, who is originally from Vancouver, Canada. After many years working for a number of tech companies in Denmark, Vanessa is now putting her design and technology PhD to use in Iceland at Gagarín, which is a design studio that designs mixed reality experiences for educational purposes. These are just two examples of both the diverse talent coming to Iceland for digital jobs and also an insight into the country’s vibrant tech scene. 

The main stage at the Nordic Startup Awards

Sigurjón Ragnar ljósmyndari

The Nordic Startup Awards recognised the brightest talents across the region's ecosystem

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Vanessa also tells us about ‘polar bear pitches’ where budding entrepreneurs will plunge themselves into freezing cold water and attempt to sell their new idea or business to venture capitalists. It’s a very extreme version of the elevator pitch, but a good insight into the mindset of Nordic businesses. 

The location of Iceland could be a key part of its appeal. It sits in a geographical sweet spot between the US and Europe – in the path of most transatlantic flights – which makes it a perfect place to bridge trade links, according to Business Iceland. It wasn’t explicitly said during the trip, but there’s also a sense that Iceland could serve as a potential gateway for the Nordics to attract more investment and trade, particularly from the US, to Finland, Sweden, Norway and Denmark. 

While the smaller business community is pulling in talents from all over, the Icelandic government, and Business Iceland, are still keen to go much further. Travelling around the city, one will see building signs for NetApp, KPMG and Deloitte, but there’s a desire to one day connect with bigger fish in a much larger pond; the likes of Microsoft, Google and Amazon Web Services (AWS).

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