The Icelandic startup scene is performing better than expected. This may be due to a subdued 2021, but mainly because the Icelandic tech ecosystem is maturing. Iceland attracted the most venture capital per capita among Nordic countries in 2023, although this statistic is somewhat skewed by its relatively small population of less than 400,000. Even more notable is that foreign co-investment in Icelandic startups reached an all-time high in 2023. In this context, it makes sense that venture capital firms would raise more money.
Frumtak Ventures is a perfect example: The firm recently closed its fourth fund at $87 million, which was oversubscribed and significantly larger than its third fund at $57 million.
Frumtak has a strong track record. The firm doesn't disclose returns, and its third fund is too recent to do so, but general partner Andri Heiðar Kristinsson told TechCrunch, “The second fund performed very well.” There are only a few venture capital firms in Iceland, so they often co-invest, but Frumtak focuses on working with global companies, investing at the Series A, B, and C stages. But it also gets deals from local acceleration programs, such as one led by KLAK, which Kristinsson co-founded.
Most of Hrumtak's limited partners are Icelandic pension funds. “We were in a very good situation where all of our existing limited partners wanted to back us again,” Kristinsson said. As for geographic scope, he added that Hrumtak will back Icelandic founders but “focus on local innovations with global potential.”
Icelandic startups tend to look abroad early on due to the country's small population and cultural factors: Frumtak portfolio company Sidekick Health, for example, has partnered with US-based Anthem to expand globally with its gamified digital care platform.
Hrumtak is also active in investing in overseas companies run by Icelandic entrepreneurs, such as U.S.-based ActivityStream, a data platform for the live entertainment industry. [Frumtak’s] “For our portfolio companies to be successful, they have to think outside of Iceland,” the company's CEO, Einar Saeverson, told TechCrunch.
In terms of sectors, Hrumtak says it will invest at the “intersection of software, AI and deep tech in industries that build on Iceland's historical strengths in areas such as marine tech, logistics, healthcare, travel, energy, climate and gender equality.”
Frumtak has invested in seed and Series A stage B2B SaaS startups across industries for the past 15 years, and will now focus on a more diversified vertical.
One thing remains the same: Frumtack will remain “very hands-on,” Christensen said. “We've always said we want to be on the board, work diligently with companies, and be the first point of contact for founders through good times and bad.”
In a country where venture capital is relatively new, Hrumtak is positioned as run “by entrepreneurs, for entrepreneurs,” in the words of managing partner Svanna Gunnarsdottir, who, like Kristensson, is also a former founder. The third partner, Ástildur Ótarsdottir, also has a corporate background.
Iceland's tech industry is biased toward early-stage startups — Frumtak's name translates to “early capture” — but Kristinsson is confident more exits will follow as the industry matures. “Looking 10, 20 years out, my vision is that we'll be able to nurture some of the biggest public companies in Iceland over the next few decades,” he said.
“It may sound like a cliché, but we are an isolated island that has overcome very tough challenges, very tough circumstances for centuries, and I truly believe we have a certain spark of entrepreneurship. Of course, we are very small, but the perseverance, the dedication is in our DNA, and we have seen it work,” Christensen said.