Despite the profound impact of the banking sector collapse in 2008 on Iceland’s economy, the island nation ranks 13th in this year’s Global Innovation Index, 14th in the Ease of Doing Business rankings, and 23rd in the Index of Economic Freedom. There has been much debate and disagreement regarding the key steps that put this social-market economy on a path to successful recovery but no one denies the contribution of the more silent actors transforming the economy for the better—its entrepreneurs. I recently sat down in Reykjavik with President Ólafur Ragnar Grímsson to learn about the entrepreneurs who are building what they call an “anti-fragile” entrepreneurship ecosystem.
Startup Reykjavik, Iceland's first and top startup accelerator which offers a “10 teams/16k/6%/10 weeks” program held a picture perfect “Investors Day” on August 23, 2013. What I had to offer as opening speaker paled alongside President Grímsson, who gave a most remarkable opening speech. To have such a smart and articulate president in the ways of new firm formation did not intimidate the ten startup teams who presented their ventures to delegates from around the world with confidence and precision. Among those in the audience were the European leaders behind Global Entrepreneurship Week who had chosen Iceland for their annual European meet-up.
Iceland is an example of how rapidly resources can align to build a vibrant entrepreneurship ecosystem. Both bottom-up and top-down efforts contribute to its strengthening. The night prior to Startup Reykjavik’s “Investors Day,” the mayor of Reykjavik, Jón Gnarr, chatted with the ten teams participating in the accelerator at the historic Höfði where the 1986 Reykjavik Summit allowed presidents Ronald Reagan of the United States and Mikhail Gorbachev of the Union of Soviet Socialist Republics to move forward towards ending the Cold War.
Iceland’s ecosystem only really began to become a globally competitive force following the 2008 financial crash, when talented people who were laid off from the banks were left with few options but to start their own businesses. By 2012, the nation was attracting international investors’ attention thanks to an Indian serial entrepreneur and angel investor, Bala Kamallakharan, who was living in Iceland and who envisioned an entrepreneurship community on the island. Brad Feld, a thought leader in startup communities, noticed his work to build a previously non-existent entrepreneurship community and he did not hesitate to attend the first Startup Iceland conference in 2012, among other high-profile entrepreneurship gurus. This yearly event now shows how far Kamallakhran’s vision has translated into a budding entrepreneurship ecosystem.
Innovative entrepreneurs are now disrupting Iceland’s economy, diversifying its productivity base into manufacturing and service industries, particularly within the fields of software production, biotechnology and tourism. In "Worthless, Impossible, and Stupid," Daniel Isenberg wrote about Actavis, once a small generic pharmaceutical company based in Iceland that is now the world's fourth-leading generics pharmaceutical maker with plants and offices in 60 countries. There is also Jon Olafsson, dubbed “the Icelandic Richard Branson”; Helga Waage, co-founder & CTO of Mobilitus; and others inspiring a new wave of entrepreneurs. In the 2012 Eurobarometer Survey on Entrepreneurship, one-third of Icelandic respondents had already started a business or were planning on doing so soon.
I also saw a healthy approach to startup capital helped along by organizations such as Frumtak, an investment fund for startup and innovation companies, and NSA Ventures, a VC fund that invests in seed and startup companies. I was especially impressed by Arion Bank which hosted and sponsored the Investor Day. The teams I met with from the Arion—including Einar Gunnar Gudmundsson—seemed culturally closer to startups than any other bankers I have previously met. Arion was a shareholder in each of the ten startups.
Iceland’s fledgling entrepreneurship ecosystem is now visible and tangible through organizations like the Innovit Entrepreneurship Centre, a privately owned incubator led by the enthusiastic Kristján Freyr Kristjánsson. Innovit connected Iceland to the global movement of entrepreneurship through the yearly GEW celebrations which are now holding together expanding startup ecosystems around the world. It is also getting useful and smart “top-down” government help thanks to the leadership of people like President Grímsson and the Innovations Center Iceland, a government institute that promotes and supports entrepreneurship. Iceland may be a rare example of a nation where major credit for a flourishing entrepreneurial ecosystem was indeed the result of healthy government policies. The quality of the country’s legal framework remains among the world’s highest (it ranks 3rd in the world in enforcing contracts, according to the World Bank), and rule of law is embedded throughout the national system. The Icelandic commitment to regulatory efficiency is captured in the fact that starting a business takes only five procedures and five days on average.
For the second edition of the Startup Iceland conference this past June, the organizers made it clear: “The Startup Iceland Conference is not about startups but about building an entrepreneurial ecosystem”. As such, it gathered a range of actors, entrepreneurs, students, universities, venture fund managers, financial institutions, government representatives (including the president) and many others committed to strengthening Iceland’s entrepreneurship scene.
Much has been said about building startup communities. Clearly, Iceland can provide much useful advice. If you have not been, go and visit. Not only are the surroundings of places like the Blue Lagoon different to anywhere else in the world but when you drop by Startup Reykjavik, you might just see President Grímsson who I am told drops by with no fanfare from time to time to just chat with Iceland’s risk takers as they work.
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