How To Fix The Economy: Follow Iceland’s Lead

The people of Iceland are among the kindest, most articulate, and most well-educated I’ve ever met, but for a population of merely 325,000 people, it also boasts an impressive economy. Iceland consistently ranks near the top in productivity and unemployment, which has recently been bolstered by an outright commitment to technology-based entrepreneurship.

By all accounts, the Icelandic economy experienced a meltdown in 2008. The country’s three largest banks imploded under the weight of debt more than six times the GDP. But there was no bailout. The banks were nationalized and reorganized. Interest rates were hiked, and the currency was devalued by half.

Out of the struggle emerged an attitude to base the economy on creating instead of financing, and a case study for entrepreneurship was born.

Bala Kamallakharan and his wife (who is Icelandic) moved to Iceland from Texas in 2006, when he was recruited to work for a bank. After the collapse, Bala wanted to help remake the economy and started reading about Brad Feld’s Boulder Thesis, which provided a blueprint for creating entrepreneurial economies outside of major metros.

Bala started evangelizing, recruiting, and implementing. The rest is history.

“I’m fascinated with Bala and the energy he has brought to igniting a startup community in a small country that completely collapsed,” said Brad Feld, managing director at Foundry Group. “I have a deep belief that entrepreneurship and innovation is the path out of economic crisis, and Iceland is a powerful example, where it’s big enough to be interesting but small enough that you can get your mind around it.”

Today, Iceland is booming with entrepreneurship. The government recently launched a big initiative to support R&D and startups, and domestic and international investors alike are raising funds to focus on Iceland.

There is an energy-focused accelerator, and there are plans for a tourism-focused accelerator. Bala himself is taking the next step and raising a venture fund to focus on Icelandic software startups.

The “wins” are impressive — and piling up quickly. CLARA was acquired by Jive Software. There’s QuizUp by Plain Vanilla Games and deCODE Genetics, which was acquired by Amgen.

Betware, Calidris, GreenQloud, Meniga, and CCP Games are all success stories coming out of Iceland.

Like any small community, Icelandic startups struggle with scaling talent and finding experienced executives. But those are good problems to have and outweighed by the quick start Iceland can provide.

“The biggest advantage is that everyone knows everybody, so customer development, product/market fit, and validation of a business model can be done relatively fast,” says Bala.

“[The startup culture is] hard-working, design-centric, and quirky at times. The close family culture is unique. There is a sense of community and wanting to build something sustainable. People volunteer freely. Everyone from friends, neighbors, and relatives jump in to help when needed.

“Plus, Icelanders are doers, so ‘doertocracies’ work here. Everyone is eager to roll up their sleeves and get stuff done. They usually call a spade a spade but are not very vocal about telling the success stories out of Iceland.”