Icelandic startups beat the odds

Years of austerity have inspired IT innovation in Iceland as the nation strives to get the most out of its resources in the post-crash economy.

Of the 10 gongs handed out at the Nordic Startup Awards in May 2015, four went to the Danes; three to the Norwegians; two to the Swedes; one to event hosts Finland; and a solitary award went to Iceland – Startup Reykjavik was named the region's best accelerator.

To many, Nordic means Scandinavia – little Iceland's an afterthought. Yet Norway, Denmark and Finland each have five million people and Sweden nearer 10 million, so a regional award win for Iceland, a country made up of 323,000 people, suggests there's serious startup muscle there.

The banking collapse was pivotal for Iceland, not least because it skewed perceptions. Perhaps we no longer associate it with a sophisticated fisheries economy, or a high-spec and high-tech clean energy industry – Iceland of late has been more about riots, volcanoes and financial restrictions.

Post banking collapse, Iceland has had to play to its natural strengths to recalibrate: a superlative education system, large numbers of computer science grads, an impressive digital infrastructure, low tax rates and a keen work ethic.

Páll Melsted Ríkharðsson, associate professor at Reykjavik University's School of Business, and a 20-year IT industry veteran, thinks the risk appetite of Icelanders is higher. “We take more risks, we don't plan as much, we have a shorter reaction time – Iceland is a fishing culture and a hunting culture. It's a very 'now' mentality,” he said.

“Yes it can go bad – as we've seen – but I also think we're incredibly robust and incredibly creative. We have been able to carve out a living in a hostile country, and Icelanders are hugely proud of that. In business, to be independent; to be your own master; to make a living and not have to depend on someone else is a huge driver.”

Despite seven years of stifling capital controls, QuizUp – the world's biggest trivia app – emerged courtesy of Iceland's Plain Vanilla Games, while Eve Online is the second biggest online game around. It's the hero product of Icelandic gaming company CCP.

The austere years has also spawned tech innovation against the odds in the traditional industries and a powerful new tourism sector. In all quarters, Icelandic startups have found a way to turn being small into an advantage.

"Peer-to-peer learning is big here, we're a community,” says Diljá Valsdóttir, COO of Icelandic non-profit startup resource centre Klak Innovit. “It's such a small scene, everyone knows each other. You can pretty much call up anyone to meet up for a coffee.

“Sure, bigger companies, tend to go to other Nordic countries or the US to open up sales channels but the core business – of CCP, for example – is still here. It's because of the high standard of living and easy access to talent and well-educated people.”

A country with as many citizens as a small city is restricted by definition, but now capital controls have been relaxed it can flow further and faster.