With the world rapt at news of a possible breakthrough in the race to develop an effective vaccine for covid-19, investing in life science research and development has been at the forefront of public consciousness like rarely before. And it’s provided a platform for Iceland to showcase its unusual confluence of skills in natural and agricultural resources, biotechnology and entrepreneurship.
At “Small Country, Big Ideas: The Icelandic Life Sciences Ecosystem”—a investment showcase event held remotely on Monday by the Icelandic Trade Consulate in New York and Íslandsstofa (Promote Iceland) —trade officials, investors, and prospective entrepreneurs made their pitch for Iceland as a VC oasis, where innovation is a dedicated government priority and the small size of the economy means every startup seeks a global market.
Speaking at the event, Icelandic Minister of Finance and Economic Affairs Bjarni Benediktsson touted “Iceland 2.0” as the country’s strategy for emerging from the economic effects of the covid pandemic in a comparatively stronger position: stronger because the country was able to avoid “total lockdown” scenario, high per capita income levels provided an economic buffer for domestic consumption.
Benediktsson acknowledged that while Iceland’s tourism industry took a severe hit during the first infection wave, the reopening of its border over the summer showed a faster-than-expected resumption of tourist traffic, boding well for further gains upon the global return to a post-covid “new normal.”
Particularly since the Global Financial Crisis of 2008, Iceland has taken pains to deleverage its government, private sector and household budgets, and to diversify its export-driven economy beyond its mainstays of tourism, fisheries, and aluminum and other energy-related products.
Today, Benediktsson noted, technology and pharmaceuticals account for close to 50 percent of Iceland’s service exports, citing figures from the second quarter of 2020. And the country is increasingly technologically connected, hosting three submarine cables, one connecting it to the United Kingdom, a second to Denmark, and a third connecting the country to the United States by way of Greenland.
October’s economic forecast from Statistics Iceland (Statice)—the country’s official statistics provider—suggest a return to 3.9 percent annualized growth in 2021. The country’s large pension funds have proven a source of economic stability, with assets under management continuing a rapid rise in the first half of 2021 due to a combination of fund inflows and investment returns.
The country favors low debt-to-GDP ratios with government project at 51.7 percent of GDP for 2021, compared to 101.1 percent for the Eurozone and 125.5 percent for all advanced economies. Additionally, Benediktsson expects growth in Iceland’s debt-to-GDP ratio to peak in 2025. In the meantime, Iceland’s government is pursuing relatively aggressive stimulus measures amounting to 4 percent of GDP between now and 2025, with an emphasis on labor-intensive projects supporting long-run productivity, and tax incentives to promote innovation.
While Iceland’s excursions into new markets date back to the Viking Era, its venture capital landscape is still young. Trailblazers in the field—notably deCODE Genetics founder Kari Stefansson and pharma wunderkind Robert Wessman of Alvogen Pharma, a generic drugmaker that anointed him CEO at age 29—have become synonymous with the very homogeneous country’s dual obsessions with genealogy and disruptive technology.
The VC icebreaker was Terry McGuire, founding partner of early-stage venture capital firm Polaris Partners, an early backer of genomic pharmaceuticals developer deCODE in the mid-to-late 1990’s, when Iceland was still an “obscure and mysterious” destination for private capital.
Today, richer in knowledge and in capital—Iceland’s startup landscape has expanded from traditional drug development and biotech into sectors that combine natural resources and agricultural technology with emergent bio-applications.
Barley-tech and nutraceuticals
A standout is Orf Genetics, a developer of recombinant proteins from barley plants that are grown in vertical farms. These patented, barley-tech innovations are used in stem-cell research, as well as the emerging market for cell cultured meats (meat substitutes that are produced using 3-D printers).
Another pioneer at the confluence of bio-ag-tech is SagaNatura, a producer of microalgae for the global nutraceutical ingredients market in North America and the Asia Pacific region. Founded in 2014, the company is on track to book sales of EUR 23 million by 2025, eyeing a possible IPO by that end date.
Svana Gunnarsdóttir, Co-Founder and Managing Partner of Icelandic VC Frumtak Ventures, said Iceland’s “small size/big ideas” combination provided a competitive edge for its startup ecosystem. The country boasts one of world’s most developed healthcare system, superb infrastructure for high-quality clinical research, well-connected clinical healthcare companies, strong collaborative relationships between hospitals, clinics, universities and the business community, significantly lower costs (and faster timelines) for clinical research, and founders with educational pedigrees from leading institutions in the U.S. and Europe.
Gunnarsdóttir pointed to Iceland’s “startup-friendly business environment,” which is supported through government grants, “friendly regulation,” strong interest from foreign investors, and startup-supportive initiatives including a new matching fund-of-funds for venture capital that is to be sponsored by the Icelandic government.
Thanks to the government’s dedicated cultivation of venture funding, the roster of co-investors in Iceland’s startup ecosystem includes Boston’s Tekla Capital Management, Nan Fung Life Sciences, Earlybird, Bay City Capital, Slack, Asabys Partners, Velocity Capital, Wellington Partners VC, Heavybit, Chrysalix, GGV Capital, NEA, Silicon Valley Bank, BlueYard, Heavybit, Blue Yard, Pivotal Bioventure Partners, and Brunnur.
Editor’s Note: Investable Universe is an official media partner for “Small Country, Big Ideas: The Icelandic Life Sciences Ecosystem,” as well as the Icelandic Trade Consulate’s upcoming (remote) investment event, “How Do I Invest in Iceland?” on November 30. Attendees can register (admission is free) at this link.