This time last year Iceland was reeling from an economic collapse of unprecedented proportions. The country would not, it was clear, become a world banking capital after all. Intensive financial restructuring is now well underway but there’s another potential force for change: Iceland’s start-up community.
On the edge of Reykjavik by the docks is a converted warehouse that’s a bustling hub of entrepreneurs. Inside is a café-cum-canteen and down the hallway there’s a large room full of young people working at desks arranged loosely by company. A skateboard is leant against a bookcase, game consoles are scattered about, and an infectious energy fills the space. This is Hugmyndahus, or House of Ideas, and is sponsored by Reykjavik University and the Icelandic Academy of the Arts. Hugmyndahus has the ambitious goal to create, within two years, at least 50 companies and 500 jobs. It holds brainstorming events each week for wannabe and existing entrepreneurs.
Among the firms here is CLARA, a service for online marketing research and monitoring. CEO Gunnar Hólmsteinn worked previously at Coca-Cola as a brand manager before founding the company with friends in 2008. Since then CLARA’s staff has grown from four to 12, most are former bankers. One of its first big jobs also came from a bank when Glitnir wanted to change its name to Islandsbanki. CLARA showed how the new name would stop people associating unhelpful concepts such as “bankruptcy” with the institution. Hólmsteinn says Innovit, an incubator, helped get the company off the ground and a government grant has funded it for three years. He recently met with investors in New York who balked at the idea of investing in Iceland.
One recent visitor to Hugmyndahus is Ville Miettinen, a Finnish entrepreneur and investor. He is looking to collaborate with these start-ups or possibly hire local talent but in the current climate he would not invest directly into an Icelandic company. “It’s impossible to tell what’s going to happen in their economy or what the government will do,” says Miettinen. The banks, meanwhile, cannot make loans, the local venture capital community is still embryonic and the tax and legal system is unfavourable. A new bill proposes tax incentives for early-stage investors, but only up to $2,000, as well as tax leniency on employee stock options.
Yet the start-ups here are not deterred by conditions and take inspiration from successful forebears, such as CCP Games headquartered next door. No longer a bootstrapping start-up, CCP Games is the maker of EVE Online, a hugely popular multiplayer online game, and has offices in Atlanta and Shanghai. As executive producer Nathan Richardsson notes, “This wave of innovation happening in Iceland is a result of the dire consequences of 2008, which provides a useful constraint on developing ideas to find the simplest, best solution.” He says the company actively supports the entrepreneurial community and lobbies the government for improved business conditions. CCP Games has often been approached by other countries with incentives to relocate its headquarters, but has no intention of leaving.
The boom in innovation demands more governmental support to retain companies and help them grow. But while there are several challenges for start-ups here, there is an empowering spirit that they can create real value. In stark contrast to the frothy days of high finance, these bright young leaders have helped create an entrepreneurial culture where banker bragging rights have been traded for humble lunches and transparent business. The view from the House of Ideas is one of optimism.