I recently returned from a long visit to Iceland, where I have been consulting and mentoring businesses, entrepreneurs, and students for the past three years. It is worth reflecting on the exciting developments in a country very few people know about.
Located in the northernmost part of the Atlantic and tucked away just below the northern Arctic Circle, Iceland is strategically located between the U.S. and the European Union. Until 2006, it was home to a critical U.S. Navy and air base and more recently played a significant role on the business world stage.
Iceland was completely wrapped up in the financial crisis a decade ago. According to The Economist, relative to its size, the systemic collapse of the Icelandic banking system was the largest by any county in economic history. The impact was felt across the globe, and after the dust settled, Iceland went through a significant economic depression and political upheaval.
The country has recovered nicely, however, and has experienced considerable growth over the past few years. Gross domestic product (GDP), a measure of economic growth, reached an impressive 3.6 percent in 2017, which is only disappointing when you consider that it's down from 7.5 percent in 2016.
Iceland's primary economic driver for years was the fishing industry, which is globally renowned for its sustainability. In fact, a network of companies utilizes close to 100 percent of its most valuable resource, cod, including the meat, fish oil, bones (which are dried, pulverized into powder, and sold), and even the skins (fish-leather ties, anyone?).
Moreover, the industry has strict controls to avoid over-fishing, and according to the Icelandic Marine Institute, even as its primary economic driver for years, Iceland's seas have more fish than any time since 1985.
While fishing continues to be important, the main driver of the country's recent growth nowadays is tourism. Iceland welcomed more than 2 million visitors in 2017, the most in its history according to the Icelandic Tourist Board. This is significant considering Iceland has a population of just over 350,000 residents, two-thirds of whom reside in the capital, Reykjavik (RAKE-yah-vik). Moreover, in total, Iceland hosted just 300,000 visitors in 2000.
The boom in tourism is not because of new attractions. Reykjavik has an exciting nightlife, especially in the summer when the evenings are never dark, and the island is full of beautiful natural landscapes and adventures for outdoor enthusiasts.
Instead, inexpensive flights to Reykjavik by the national airline, Icelandic Air, and U.S. and European budget airlines have made the locale an affordable and attractive destination. Some carriers offer up to a seven-day layover in Iceland as a stop-over option on your U.S.-European holiday. Also, a booming hotel industry and the recent growth of the sharing economy has made accommodations plentiful and easy to find.
Be cautioned, however, as the rebound and current strength of Iceland's currency, the krona, has made getting around and living in Iceland a very costly endeavor for visitors and expats right now.
What has impressed me most about Iceland is the healthy business and entrepreneurial environment. It might be difficult to believe that this isolated and quiet country has a robust business environment, but any examination and visit will reveal that it is teeming with new opportunities.
In addition to the tourism and fishing industries, a number of important tech startups are appearing all over Reykjavik, and for good reason.
Iceland is rich in affordable and renewable energy. According to Icelandic Energy Portal, 85 percent of the island's energy is renewable due to its access to geothermal resources. Also, due to the Gulf Stream, the climate is rather mild considering its location and has a consistent cool environment--annual average temperatures of 7C or 45F. All of this makes it an ideal location for technology companies that rely on physical space for equipment.
Also, the general culture in Iceland is welcoming to businesses. Although the country's resident population lacks diversity (93 percent are Icelanders), it is well-educated, open, and globally aware, and places a strong emphasis on family and work-life balance. Residents largely derive from and associate with Nordic countries and are similar in many ways to Americans. The country is also very safe and has a well-organized and convenient (albeit expensive) public transportation system.
Of course, Iceland--like any country--is not without drawbacks. In addition to the currency strength and associated cost of living challenges, there is also the extreme sunlight conditions resulting from its location near the Arctic Circle. During winter months, residents see an average of only four hours of effective sunlight per day. During the summer, it never gets dark, with four hours of "sunset" before the sun rises again. All of this can wreak havoc on anyone not accustomed to the dramatic changes.
Also, while I am bullish on Iceland, colleagues have warned me about the rapid economic growth, tourism boom, and housing spike as reasons for pause, given the similarities to those conditions prior to the last economic crisis. As all savvy investors know, if you are looking to Iceland for opportunities, due diligence is required.
With all of this said, after visiting for the past three years and working with a variety of Icelandic entrepreneurs and organizations, I have found that the island country is ripe for business. Residents understand that the potential for growth in Iceland is limited because of its size and consumption culture, so they are targeting global partners. Additionally, because Iceland's entrepreneurs and business leaders are educated, talented, and ambitious, they provide a great opportunity for foreign companies looking for a rich talent pool.
So while the Iceland winters and cost of living may be a hurdle, it may be worth looking into partnering with any number of the exciting and young companies currently making a dent there. If nothing else, a quick holiday to explore the gorgeous island just might be the recharge you need.
What do you think? Have you visited Iceland? Please share your thoughts with others in the comments below.