Icelandic VC closes $87M fund as country’s startup scene comes of age

Amid increasing interest in Iceland’s tech ecosystem, Reykjavik-based Frumtak Ventures has closed a $87M fund aimed at local startups. This is the venture capital firm’s fourth fund, following a $57mn predecessor in 2021.

While sector-agnostic, Frumtak Ventures has so far mostly invested in B2B SaaS startups at the seed or Series A stage.

The new fund will focus on the intersection of AI, software, and deeptech. It will especially target historically strong industries in Iceland, such as ocean tech, life sciences, logistics, travel, energy, and gender equality.

“While the venture capital scene is relatively young compared to mature ecosystems such as Silicon Valley, the Icelandic VC funding scene is starting to garner international attention and for good reason,” Andri Heiðar Kristinsson, Partner and Investment Manager at Frumtak, told TNW.

“Our unique combination of a highly educated workforce, robust tech infrastructure, and a culture that prides itself on perseverance makes the country an ideal landscape for investment.”

Frumtak will invest in startups that show early traction and have the potential to become global market leaders in their space.

The firm estimates that the fund will enable 10-15 investments in total, with the initial investment size ranging between €1mn and €3mn. The lifetime of the fund is 10 years with a possible three-year extension. Half of the capital will be reserved to follow through the growth of the selected companies.

Increasing interest in Iceland’s scene

In 2023, Iceland attracted the highest investment capital per capita among all Nordic countries. This translates to €73 per every of the approximately 382,000 inhabitants. Iceland also held the top position in 2022.

While the figures might be less impressive considering the country’s small population, growing interest from foreign investors represents another indication that the local ecosystem is coming of age. Last year, Icelandic startups saw a threefold increase in foreign investment compared to 2022 levels.

Active in Iceland’s VC scene since 2008, Frumtak has invested in numerous high-growth companies. These include sound simulation startup Treble and medtech Sidekick Health, whose digital therapeutics platform has secured it partnerships with industry leaders such as Pfizer and Bayer.

According to the CEOs of the two startups, Dr Tryggvi Thorgeirsson of Sidekick Health and Finnur Pind of Treble, Iceland’s strategic location offers a unique advantage: easy access to both the European and US markets that facilitates international growth.

“The close-knit nature of Iceland’s startup scene [also] fosters collaboration and innovation,” further supported by a “strong network” of VC firms and accelerators, Pind told TNW.