The Newspaper Viðskiptablaðið recently published an article by Hrönn Greipsdóttir, CEO of the the New Business Venture Fund Kría. The New Business Venture Fund Kría (NSK) has now completed its first year of operation. The fund was established by law at the end of 2024. At the same time, the New Business Venture Fund (established in 1997) and the Kría Seed and Innovation Fund (established in 2021) were dissolved. The new fund took over the assets and obligations of both funds, partly to simplify and streamline the public fund system. At the same time the fund was intended to begin its journey, a new government took office in December 2024. As a result, there was some delay before the new fund formally began operations, and there was even uncertainty about what the future of the new fund would be.
But eventually the clouds cleared. The new minister responsible for the sector confirmed that the fund was intended to play an important role as a leading force in strengthening the innovation environment. Work began on developing a strategy, including the creation of both short- and long-term investment policies. The goal was to build the fund’s activities on the strengths of its predecessors, while the investment policy is guided by the law and regulations governing the fund.
NSK continues to have the authority to invest directly in startups and in funds that invest at the startup stage. The biggest change, however, is that the fund is now permitted to invest in foreign funds. The fund is intended to encourage early-stage investments in cooperation with other investors, without acting as the lead investor. The fund will also continue to operate partly as an evergreen fund, meaning that proceeds from the sale of equity stakes are used for new investments and for the operation of the fund. The fund also receives annual investment authorizations through the national budget, but under the evergreen structure the fund’s operations are largely financed through asset sales and therefore do not require funding from the state treasury beyond what is specifically allocated for investments.
It can truly be said that Kría took off when the sun was at its highest. After a thorough analysis of market conditions and the inquiries received, it was decided to repeat a pre-seed investment initiative, allocating 350 million ISK for that purpose. The initiative was advertised and 88 companies applied for investment, representing a 20% increase compared with a similar initiative in 2023. With the help of a 15-member selection committee, it was decided to enter into agreements with the 11 companies that scored the highest. A condition for investment is that at least an equal amount of capital must come from other investors. The purpose of this requirement is to encourage additional participation by private investors in startup investments. It can therefore be expected that the initiative will result in at least 700 million to 1 billion ISK in direct investments in startup companies, which is an important boost to the innovation sector.
Since the fund began operations, numerous inquiries have been received about investments in funds, mainly from abroad. There is clearly strong interest in the fact that an Icelandic state-owned fund now has the authority to invest in foreign funds. Naturally, one might ask what the purpose of such authority is. The answer is simple: If the fund invests in another fund, that fund must invest at least an equivalent amount in Icelandic startups operating in Iceland. Discussions with foreign funds have therefore generated interest in the Icelandic market and its startup companies. At the end of the year, NSK finalized its first fund investment, in the Icelandic venture capital fund Brunnur III.
The “cherry on top” of the year is Kría Health, a unique investment initiative aimed at creating solutions for the Icelandic healthcare system. 300 million ISK will be allocated to this project, and with matching contributions from other investors the total investment will at least double.
NSK is involved with nearly 70 startup companies in various ways—as a shareholder, lender, or manager. In addition, the fund is now a shareholder in five venture funds that have invested in dozens of startups.
One of the fund’s most important roles is active participation in the innovation ecosystem. NSK is one of the owners of KLAK, which operates business accelerators such as Gulleggið, Dafna, and Startup Supernova. NSK is also a founding member and main sponsor of ICEBAN, the Icelandic angel investor association. It is a partner of Drift EA, Iceland Innovation Week, and a member of Framvís. In this way, NSK strives to be an active participant in the support environment for innovation in order to strengthen knowledge-driven projects.
NSK maintains extensive and productive collaboration with venture funds, angel investors, and private equity funds through its ownership stakes in companies within its portfolio. NSK plays an important role for venture and growth funds because it invests in companies at the earliest stages, while the other funds take over when the companies grow and develop further.
Investment in projects at the earliest stage is about more than money. It also comes with a promise of support and follow-up. However, investments at this stage are typically small in absolute terms, and a well-diversified portfolio is therefore essential to reduce risk. There is always the hope of discovering a star—or even a unicorn—and the success story of Kerecis is a good example of that.
Investment in innovation can be compared to any kind of cultivation. Everything begins with a seed that must be nurtured—ensuring that it sprouts and reaches fertile soil so growth can take place. This first stage is the most important, because without it nothing can follow.
Recently, the government introduced a new economic policy emphasizing stronger incentives for innovation and the intellectual-property industry as one of the most important pillars in the country’s growth plan for the next ten years. To achieve results, the earliest stage must be carefully supported, ensuring that promising companies continue to receive backing and that active investors then take over and help those companies grow and expand into export markets.
There is considerable vitality in Icelandic innovation. In recent years, with the emergence of smaller funds and angel investors, the number of early-stage investors has increased. The role of the Business Venture Fund Kría is to promote and ensure that a support and financing environment exists for startups at the earliest stages.
Iceland’s competitiveness depends on having a thriving business environment that captures ideas, innovation, and technology to ensure continued progress—something that can only succeed if the earliest stage of development is properly nurtured.
