Startup Financing and Business Development
Banner STór.png


Business Development and Company Updates

Keeping "focus"

The second industrial revolution began right at the beginning of the twentieth century with the use of conveyor belts in production. The entrepreneur of the conveyor belt was Henry Ford with his famous car model Model T. Ford, however, emphasized handling the manufacturing process from A-Z and letting the company itself construct all the parts and manage the assembly of the cars. It was said that even the wood in the dashboard would come from Ford's privately owned forest. This made the manufacturing process very complicated and resulted in a number of disadvantages. This was partly due to the fact that the company was in the midst of a complete upheaval when the third decade of the last century passed. Fords’ failure can be called a lack of focus. Instead of focusing on the production of cars, the focus was on producing all the car parts, which is not the same at all.


Much water has flowed to the sea since then, but still the most common mistakes of our time are focused on production. This is especially true for entrepreneurs.


However, one of the main benefits of the technological advances of recent years is that outsourcing projects is becoming much easier. An example of this is that utilization of software solutions and other components of production is no longer the exception but rather the "norm" in business operations. Thus, businesses can increasingly focus on their field of expertise and stay focused.


This is very important for smaller companies who have a hard time managing high overhead costs. A small entrepreneurial company is also built around innovation in a very specific area, e.g., the design or function of individual components of larger process. Thus, employees and owners need all their attention to gain a foothold on the marketplace they have chosen.


This demarcation creates opportunities for small businesses to have a great impact on a large market and provides considerable income growth opportunities. These revenue opportunities lie in, among other things, the sale or lease of design or patents, as the expertise of a small company can be used on a very large scale. Such an impact on the operation of large international companies can be great, and they are to pay sums that are proportional to the size of the company.


Flexibility and a "smaller world" provide companies with better negotiating positions against large companies interested in utilizing the technology of the company. These increased possibilities for specialization create opportunities for smaller and more isolated nations like Iceland. Due to advances in telecommunications technology, we are no longer bounded by our geographical position. We can use globalization to create more diverse job opportunities in the country. Specialization and diversity in employment also make us less dependent on changes in key industries.

Jökull Jóhannsson
Can a small domestic market be an advantage for startups?

Innovation has received increased government funding in Iceland over the last few years. A societal consensus on the importance of innovation for the Icelandic economy has been established. This increased funding has resulted in an increase in grants to promising startups, which are critical for their development.

It is apparent that sustainability is needed in the long term when it comes to government funding of innovation and therefore it is vital that the value created by innovation finds its way back to the government in the form of taxation.

The Icelandic economy is small on a global scale and therefore it is common for Icelandic startups to look to the domestic market only as a testing ground for international expansion. As investments in startups generally carry more risk than investing in established companies, the need for fast growth is generally greater to offset this added risk. For this accelerated growth, many Icelandic entrepreneurs look for foreign markets to sell their goods and services.

A large proportion of Icelandic startups also manufacture their products abroad. This is generally due to lower production costs and salaries and proximity to key markets. It has to be considered unreasonable to expect strong startups to go through their entire growth stage exclusively here in Iceland and for the entire value chain to also be located in Iceland.

When it comes to entrepreneurial success the Nordic startups are not lacking, dominating when it comes to producing Unicorns (startups valued over a Billion USD) per capita only being surpassed by the Silicon Valley and Beijing areas far more dense when it comes to population.

It is believed that a key factor in the success of Nordic startups is how small their domestic markets are. This may sound odd that the small size of the domestic market are considered a positive not a negative, but the truth is that this fact pushes Nordic entrepreneurs to think globally much earlier or even from the start. This global outlook causes the domestic market to become a “testing ground” instead of the view that the domestic market is key and if all goes well then a global strategy is maybe considered. A global outlook affects the company’s plans, the design of its products, the selection of employees, and much more providing Nordic startups with an advantage when to comes to globalization.

It can be argued that Nordic entrepreneurs are “forced” to think big and grow quickly, a mindset that creates results.

Rapid growth demand not only brave entrepreneurs but also access to funding. These accelerated results of Nordic startups have sparked the interest of foreign investors, mainly American and West-European. Key Nordic high-jumpers like Spotify and Supercell were in large part funded by investors not from Nordic countries.

Investments in high growth companies create substantial returns for investors if things go well, so it is important that Icelandic investors and investment funds develop a culture for participating in the funding of the country’s strongest startups and instead of the current culture of large investment rounds in startups being generally led by foreign investors.

Through the ownership of the strongest startups being in the hands of Icelandic investors and investment funds, it can be ensured that the value creation is returned to the Icelandic government in part benefitting society at large via continued economic growth, diversity in the labor market and creating sustainability when it comes to government grants to innovation.


Jökull Jóhannsson
Spakur raises a 120M ISK Series A for Freyja Healthcare

Freyja Healthcare lead by Jón Ívar Einarsson announces the closing of a it´s series A financing

The company is located in Boston where Jón Ívar holds the position of Professor at Harvard Medical School.

The round consists of an investment of 120M ISK (1M USD) by Icelandic Investors at a post-money valuation of 1.000M ISK (10M USD), Spakur Finance assisted with the financing.

Freyja Healthcare specializes in the design of medical devices.

Jökull Jóhannsson
Drone in the shape of a bird

The startup company Flygildi has closed an angel financing round to fund its overseas marketing efforts. Flygildi’s competitive edge comes from its

drone’s design. The drone flies using flapping wings for lift and propulsion, disguising itself as a bird. Spakur Finance has led the financing of the company in Iceland with its latest round of financing allowing Flygildi to continue the development of the drone’s software.


In the following months, Flygildi’s representatives will go on a series of meetings in the United States with possible strategic partners and investors. According to Helga Viðarsdóttir, the chairman of Flygildi, the drone has already garnered significant interest from Tom Moss of the drone company Skydio; Palmer Luckey, the founder of Oculus; and the defense company Lockheed Martin, which has shown an interest in participating in further financing of the company. The goal of the meeting series is to get partners who can offer knowledge, funds, and an international sales/distribution network to participate in Flygildi’s growth.


The founders of Flygildi are the electrical engineer Hjalti Harðarson and the aerospace engineer Dr. Leifur Þór Leifsson assistant professor at Iowa State University who also holds a position at Reykjavik University. Flygildi is Hjalti’s third venture having previously founded Hugrún ehf. in 1982 with his bother Kjartan and Hafmynd ehf.  in 1999 along with the Fishing institute of the University of Iceland and the Marine and freshwater research institute of Iceland. Hugrún ehf. was acquired by Norwegian investors in 1997 and Hafmynd ehf. was acquired by the US firm Teledynce, Inc. in 2010.


The competitive edge of the bird (Flygildi’s drone) is considerable. The bird is not detectable by radar and can be manufactured to look like almost any bird which acts as a disguise for the drone. The drone can appear to look like a raven, seagull or eagle blending into its environment. The bird is equipped with cameras and other sensors and is usable both on a bright day and a pitch-black night. The airport company Isavia has recently signed a contract with Flygildi with the aim of using the Flygildi’s drones to scare away living birds near airports, which are becoming an ever-increasing problem. In addition to its use at airports, Flygildi’s founders believe the drone would be ideal for the surveillance of rivers that offer angling and fish farms.



Jökull Jóhannsson
Spakur, raises a 51M ISK series A for geoSilica.

The Icelandic silica supplement company geoSilica announces completion of a 51M  (≈ 450.000 USD) series A financing round with the help of Spakur Finance.

GeoSilica has had good headwind recently, with close of a 40M ISK  (≈ 350.000 USD) seed round last October.

The pension fund Lífsverk is responsible for the bulk of the round with an angel investor from the previous round protecting his share in addition.

Pension funds investing directly in start-up companies remains rare in Iceland so the investment in geoSilica is a great validation of the company as it continues it´s international growth and the expansion of it´s product line.

We at Spakur congratulate geoSilica on this milestone!

Jökull Jóhannsson
How valuable are grey hairs in Iceland?

There has been a lot of discussion in Iceland recently about the difficulty ex-politicians face when looking for work, which is the opposite of the situation ex-politicians face in many countries. Ex-politicians should be considered valuable employees as there is real practical knowledge and experience generated in politics. For some reason, however, this knowledge is not highly valued in Iceland. It can also be said that knowledge and experience from the corporate scene are undervalued. The reality for most executives in Iceland is that they can’t rely on lifetime employment and 5-10 years is not an unusual tenure for a CEO of a large corporation in a competitive industry in Iceland. Sometimes an executive position is followed up by another executive position, but sometimes it isn’t, and as people get older the odds of being rehired worsen, this has led to an ever-increasing pool of “ex-executives” many of which would gladly give out valuable advice and remain active than go into early retirement. We, therefore, wonder: How valuable are grey hairs in Iceland?


The current population of Iceland is 330,000 people. Therefore the proportional value of each employable adult is greater than in most countries. The fact that we are few means we have even more to gain by utilizing the experience and knowledge of the individuals mentioned here above in an optimal way. In order to accomplish that goal, we need to establish a national culture where it is encouraged that people with extensive experience and a valuable business network share their knowledge and for example by becoming an advisor to a startup company. We are talking about the managers and employees of companies that operate internationally, buying and selling products and services to foreign companies.


The authors of this article have for example in their business been in touch with one of the most skilled retail managers of Iceland with the purpose of connecting him to a startup which can utilize his know-how and experience in its entrance to foreign markets in the field of retail. The effect of such a cooperation was quickly apparent. The access to the business network opened doors which would have otherwise remained closed.


There is an abundance of promising Icelandic startups spanning many different sectors. The startups are diverse when it comes the stage of development and the strength of the team. Knowledge in key areas—for example, law, business administration, and engineering—can make the difference between success and failure for these companies. The same can be said when it comes to access to industry-specific knowledge and access to a powerful business network.



It can be highly beneficial to bring together powerful entrepreneurs and experienced individuals that can join the board of directors or advisors of the entrepreneur’s startup. The collaboration possibilities are not limited to boards of startups. In the US, the culture of mentor relationships has been growing where highly experienced individuals coach and give advice to less experienced individuals not unlike what is common in fields like carpentry, plumbing, etc. This kind of cooperation is also highly beneficial in other fields and could see more utilization in Iceland.


It is often said that you only learn by mistakes, but they don’t, however, have to be your own mistakes. You can take the advice of experienced people who have faced similar challenges to the ones you have before you in your career.


Various Icelandic business accelerators like for example Startup Reykjavik and Startup Tourism have done great work in this regard connecting startup teams with experienced parties from the business world who offer them advice in a meeting that can evolve into further cooperation.


Scheduled cooperation between mentors and less experienced individuals creates more value however than meetings at a startup accelerator. It is important that young people don’t hesitate to seek such a collaboration, and it is also important that there is a place where such cooperation can develop.


It is clear that companies are competing on their human resources to an increasing amount and we estimate that this development will continue. The fact that the inhabitants of Iceland are few, the channels of communication are short, and “everyone knows everyone” makes it important that us Icelanders play to our strengths and mobilize experienced individuals who are well suited to serve as members of the board of directors of startups or as mentors.


Jökull Jóhannsson
Technological progress and the future of work

Icelanders recently celebrated the 100-year anniversary of their sovereignty. The technological advancements of the last 100 years have been staggering and experts estimate that the rate of advancement will only grow in the coming decades. It is therefore appropriate to consider the competitiveness of nations in the year 2118 or on the 200-year anniversary of Iceland. Which factors will be decisive?


Work in the coming decades


Computers have advanced greatly and are able to solve problems of ever-increasing complexity. Advancements in the field of agriculture, fishing and other production have not only created extreme economic growth and increased efficiency but also created significant technological unemployment.

 In the coming decades, we will see increased technological integration and advancement in areas where technology is already being implemented. Self-driven cars, automated warehouses, self-check-out machines and software that make general office staff redundant are already being integrated.

We can expect that these changes will result in increased efficiency but also the loss of employment for many.

Advancements in artificial intelligence and information technology indicate that computers will be able to solve more complicated problems currently solved by experts like for example the general contract work of lawyers and various finance work. It has to be considered likely that in the coming decades jobs in many speciality sectors will decrease in number.

 Advancements in telecommunications are allowing companies to outsource employees for an ever-increasing number of sectors from abroad. Computer scientists, graphic designers, web designers and various other specialists in Iceland are starting to face increased competition from English speaking, Eastern-European professionals with great expertise and low salary demands.

 It is still unclear what the effects these changes will have on the employment situation in Iceland. In the US, however, the effects of technological unemployment are already visible. Employees who have worked for decades in their chosen field are being made redundant, forcing them into underemployment with increased reliance on multiple part-time jobs. The authors of this article are of the belief that similar developments are likely to follow in Iceland in the coming years.

 People being pushed out of specialised jobs due to technological advancement can have serious consequences with respect to job loss, which can develop into widespread unemployment. To ensure a healthy economy it is important to balance job creation and job loss due to technological advancement.

Innovation is the answer


Is it a wise choice to spend tens of billions on a cable car system in Reykjavik when self-driving cars are coming in the foreseeable future? During the constant wage discussions of the labour unions is it not also important to look at things from a wider perspective and consider the effects technological advancement will have on unemployment? It is important to note that if Iceland has unemployment in the tens of percentages, then wages won’t be our biggest problem.

If we as a nation with all of our natural resources focus on the solutions of the future and utilize the opportunities and the challenges that technological advancement will bring, then we can ensure the competitiveness of our nation.

The creation of new sectors is not simple, but it is clear that considerable innovation is needed. To achieve success in the field of innovation proper funding and knowledge are demanded. The level of education in Iceland is extremely high and even though it is always possible to make improvements it has to be conceded that the challenges Icelandic Entrepreneurs face are more likely to be associated with lack of funding than lack of know-how.

Icelanders have substantial potential when it comes to innovation. It is important that we support our most promising start-ups to realize that potential. To do that serious funding is needed. The demand for start-up funding in Iceland currently outweighs the supply. This discrepancy is though not due to Icelandic Entrepreneurs being less talented than their American counterparts but due to the relative difference in the supply of start-up funding between the countries.

This discrepancy points to the existence of substantial overlooked opportunities in the field of innovation in Iceland. It is important to utilize these opportunities to counteract the great changes predicted in the decades to come.


Jökull Jóhannsson
Spakur: geoSilica raises a 40M ISK seed round

geoSilica an Icelandic supplement company making silica supplements from geothermal ground water completes it´s seed round financing with the help of Spakur. The company has been steadily increasing its domestic sales while expanding abroad. The seed round funds continued marketing efforts as the company expands to new markets. The round closes at 40M ISK (≈ 350.000 USD) in total at a 700M ISK (≈ 6,5M USD) Post-Money Valuation. We at Spakur congratulate geoSilica on achieving this milestone and look forward to seeing what geoSilica will accomplish in the future.

Jökull Jóhannsson
Is growth always a good thing?

Growth is generally a positive thing for companies; higher sales generally lead to higher operating profit and an improved standing for a company. It is common for a new project, merger or acquisition only to be evaluated by its operating profit.

The whole story isn’t told by the volume of sales or the operating profit of a project. It is necessary to analyze the return on invested capital or ROIC for short. ROIC is the yearly amount the project produces divided by the amount invested. It is essential once the ROIC percentage is found to calculate the weighted average cost of capital or WACC. ROIC percentage subtracted by the WACC percentage portrays the true effect of the project on the value of the company.

Let’s take A Inc. as an example. The Equity is valued at 500 m ISK. The company takes a 400 m ISK loan for a project that turns an operational profit. The return on the invested capital is 10% per year while the weighted average cost of capital is also 10% per year. Even though the assets of the company increased in value, the total sales and operating profit of the project still doesn’t increase the company’s value.

It is therefore a possibility that a project generating significant income has no effect on the value of a company or even destroys value despite it producing growth and operating profit.

No company has access to unlimited resources. It can still be a wrong decision to pursue a project that turns a profit and increases the value of the company. It is essential to take the opportunity cost of not pursuing other potential projects into account to be able to evaluate if investing in a project under evaluation is the most economical option for the company.

The value of a project is however not only measured in dollars and cents. In established companies, it has to be considered unlikely that a company project will take place in a vacuum, so it is pertinent to consider the effect of the project on other parts of the company. A project within an established company is of course likely to impact other departments. Evaluating potential opportunities to utilize extra production capabilities, systems or personnel in other departments or opportunities to utilize quantity discounts between departments brings the effect of a project in a more accurate light.

As mentioned above, there are a lot of factors to look at when evaluating a potential project. Company resources are limited, and that is also the case when the time of management is considered. The existence of marginally useful information regarding a project does not mean that delaying the decision is automatically the right course of action.

Managers need to be able to make difficult decisions and evaluate complex situations without the existence of perfect information as perfect information is never a reality on the job. If managers lack the courage to make decisions with imperfect information, then that can lead them to continual information search when the decision isn’t obvious. This information search is partially reasoned by the existence of potentially “useful” information. This tendency can lead managers to delay decision making until enough information has been gathered so the decision “is made by itself.”

Managers need to realize that there is danger in both over- and under-analysis of a project. It is necessary to find a middle ground between over- and under-analysis and to estimate every situation independently.


Jökull Jóhannsson
Startup Valuation: What comes first the chicken or the egg?

The prerequisite for business between two parties is that both parties are of the opinion that they will benefit from the transaction. Therefore if a party estimates that he will not benefit from a transaction, he will not complete that transaction.

An entrepreneur seeking an investment is therefore of the opinion that the value created by the investment justifies the dilution of the entrepreneur’s shares. The investor is of the opinion that the value created is sufficient to justify an acceptable return considering the risk involved.

How the added value of the investment is divided is generally unclear when an investor invests in a startup company. The valuation of a startup is derived from a “Pre-money” valuation or the value of the company before the investment. The investment is then added to the “Pre-money” valuation which then becomes the “Post-money” value of the company or the value after the investment as the funds invested are of value in and of themselves.

Several valuation methods are available when it comes to establishing a Pre-money valuation. It is common that the valuation methods are based on the operations plan of the company at least partially. Basing the valuation of a startup on its operations plan brings forth the question whether the operations plan should be based on the assumption that funds from investors are available or not. The difference between the two is substantial especially when it comes to young startup companies where the influx of funds can be the foundation for ongoing operations.

The value of a startup with limited funding, strong patents, and an innovative product is not accurately estimated with an operations plan that doesn’t include the funds from investors in the operations plan. It can also be said that an entrepreneur who includes the funds from investors in the operations plan which the Pre-money valuation is based on and also counts the worth of the funds is counting the value of the funds twice in the Post-money valuation of the company.

It’s important for entrepreneurs and startup investors to realize how the value created by the investment is split between them when the investment terms are negotiated to ensure an ideal result for both parties. The goal of an operations plan is to paint an accurate picture of the future operations of the company, therefore it’s normal that the plan includes operations possible with the funds from investors. If that is done however it’s reasonable that the entrepreneur gives the investor a discount on the pre-money valuation so the value provided by the investment is split in a precise way between the entrepreneur and the investor.


Jökull Jóhannsson