Iceland’s Sowilo Raises Pre-Seed to Ride the AI Shopping Wave

Sowilo, an Icelandic startup, has closed a pre-seed funding round to expand Catecut, its AI tool for writing fashion product listings, and to launch its app worldwide on Shopify. The company has not disclosed how much it raised. Backers include Iceland’s state-linked Kría fund, Netherlands and India based TGC Capital, and angel investors from Iceland and Australia.

Shopify’s own numbers explain why that pitch lands now. AI-referred shoppers already convert far better than those arriving through Google, and fashion retailers are rewriting their catalogs for machines that shop, not just crawl. Catecut is a small, early bet on a shift the data already shows underway.

Catecut Reads a Photo and Writes the Listing

Heiðrún Ósk Sigfúsdóttir founded Sowilo and built Catecut as what the company calls a platform-agnostic system. It looks at a retailer’s product photo, identifies the item and its design attributes, and writes the listing around it. Titles, descriptions, metadata and tags come out the other side without a person typing a word.

That output now runs through the Shopify App Store, where Catecut is live globally. For retailers, the pitch is speed and reach rather than novelty. A jewellery brand or apparel label can push multilingual, brand-specific copy for the same product across several markets in one pass, and the app also refreshes listings that already exist rather than only handling new uploads.

• Generate multilingual, brand-specific product titles and descriptions straight from images
• Refresh and update product listings that are already live on a store
• Write image alt text automatically for accessibility and search
• Optimize metadata for both traditional search engines and generative AI discovery

Catecut is already used by jewellery and apparel retailers in the United States and has been piloted with larger international retailers. A company announcement from November described the tool as addressing costly product information accuracy and logistics issues that slow brands down before their items ever go on sale.

Eighty-Eight Applicants Chased Eleven Funding Slots

The pre-seed round formalizes a relationship that started months earlier. On 5 November 2025, Catecut signed an investment and cooperation agreement with TGC Capital Partners, a multinational investment firm based in the Netherlands and India. Kría, Iceland’s government-backed venture fund, joined afterward, alongside angel investors from Iceland and Australia.

Kría itself is new. Nýsköpunarsjóðurinn Kría formed in 2025 through a merger of two older state investment vehicles, and it now runs a competitive selection process rarely seen in a market Iceland’s size. Catecut went through the fund’s investment initiative for early-stage Icelandic startups, chosen as one of 11 companies from a pool of 88 applicants, according to Hrönn Greipsdóttir, chief executive of the Business Venture Fund Kría.

We are happy to have expert investors support the next phase of our growth as we bring Catecut to new channels and markets, and expand our reach to both emerging fashion retail brands and enterprises internationally.

Heiðrún Ósk Sigfúsdóttir, founder and chief executive of Sowilo, said the backing would fund product development, a bigger international sales push and faster adoption of the Shopify app.

AI Referrals Already Outconvert Google Search

The phrase Sowilo uses for Catecut’s newest feature, optimizing metadata for generative AI discovery, describes a channel Shopify now tracks on its own. According to the company’s Q1 2026 commerce data, AI-referred orders grew nearly 13 times year over year, a pace no single traditional search channel is matching.

Generative engine optimization (GEO), the practice of shaping product data so AI tools recommend it, is the industry’s name for the underlying shift. Shopify’s own Catalog system already infers product attributes from billions of transaction signals to feed those same agents, the kind of wager Catecut is making at the level of a single fashion photo.

• 50% higher conversion rate for shoppers Shopify credits to AI referrals versus organic search
• 14% higher average order value on AI-powered search orders
• 194% greater odds of a completed purchase on shopping journeys that touch Microsoft’s Copilot Checkout

That Copilot figure comes from a feature Microsoft launched at NRF 2026, the National Retail Federation’s annual retail show. Copilot Checkout lets shoppers finish a purchase inside the Copilot chat window across Bing, MSN and Edge, and Shopify merchants were enrolled automatically, with an opt-out available.

Small merchants are already reacting to the same numbers. Independent retailers are increasingly chasing AI search traffic over Google for exactly this reason. The referral volume is smaller today, but it converts at a rate ordinary search cannot match.

Why Does Fashion Need Machine-Readable Product Data So Badly?

Fashion catalogs live or die on details a photo carries but a spreadsheet often does not, things like color, silhouette, fabric and fit. Multiply that across markets and languages, and tagging each item by hand becomes a bottleneck. That is the gap Catecut is built to close.

Sowilo’s platform is not limited to one storefront by design. Catecut is described as platform-agnostic, meaning the underlying AI vision system can plug into different retail back ends. Shopify is simply the first storefront where that architecture has a public, self-serve front door through its app store.

Iceland’s own program money reflects where the company is chasing growth. In December 2025, Sowilo won a grant from Tækniþróunarsjóður, Iceland’s Technology Development Fund, earmarked for marketing Catecut across Singapore, Australia and New Zealand. Paired with a pre-seed round backed by an India-linked investor, the company’s next customers are unlikely to be Icelandic at all.

The retailers Catecut is chasing are often small operations without a dedicated content team. That matches a wider pattern: small business AI adoption has climbed past 87%, even as many owners stay unsure the tools are paying off.

A Danish Rival Is Already Chasing the Same Prize

Sowilo is one of several Nordic startups chasing this shift, and one of the smaller ones. Aarhus-based Serpier, a Danish marketing technology company, raised €1.4 million (about $1.5 million) to help e-commerce companies improve visibility in both traditional search engines and AI-driven recommendation systems, ArcticStartup reported.

Bigger, better-capitalized players are already active in the same space. Profound, an enterprise AI visibility platform, tracks brand mentions across more than ten AI engines, including ChatGPT, Claude, Perplexity, Google’s AI Overviews, Gemini, Microsoft Copilot, DeepSeek, Grok and Meta AI. Sowilo’s pre-seed round looks tiny next to that kind of infrastructure, and it is entering from the product side rather than the monitoring side.

What Could Slow Sowilo’s Bet

Pre-seed capital leaves thin margin for error. Catecut still has to prove that its automated listings convert into sales at a rate that justifies a subscription, and that enterprise pilots turn into signed, paying contracts.

There is a second risk built into the pitch itself. If every retailer optimizes copy for the same handful of AI engines using similar tools, catalogs risk reading alike. Google’s own quality reviewers have already begun penalizing what one e-commerce researcher called low-value, repetitive AI content, a sign platforms are watching for that exact outcome.

The same tension shows up in adjacent tools. Website builder Duda’s newer AI features have sped up agency output while risking visual sameness across client sites, a trade-off automated content tools keep running into. Catecut’s pitch of brand-specific, multilingual copy is partly an answer to that same worry.

For now, Sowilo says the new money goes toward three things: continued development of Catecut, a bigger international customer base, and faster adoption of the Shopify app across fashion retailers worldwide.

Frequently Asked Questions

What is generative engine optimization, or GEO?

GEO is the practice of structuring product and brand content so AI tools such as ChatGPT, Gemini, Perplexity and Copilot can find, understand and recommend it, rather than optimizing purely for search engine rankings. Some in the industry call the discipline AEO, short for answer engine optimization, since the goal is landing inside an AI’s answer rather than a list of links.

How much did Sowilo raise in its pre-seed round?

Sowilo has not disclosed the size of the round. What is public is the investor list: Iceland’s Kría fund, Netherlands and India based TGC Capital Partners, and angel investors from Iceland and Australia.

Has Sowilo received funding from other sources?

Yes. In December 2025, separately from the pre-seed round, Sowilo won a grant from Tækniþróunarsjóður, Iceland’s Technology Development Fund, specifically to market Catecut across Singapore, Australia and New Zealand.

Which AI shopping engines matter most for retailers right now?

Industry trackers point to five as the main drivers of AI-led product discovery in 2026: Perplexity, Amazon’s Rufus, ChatGPT, Microsoft Copilot and Google Gemini. Copilot is furthest along on completing purchases directly inside a chat window, through the Copilot Checkout feature it launched at NRF 2026.

Is Catecut locked into Shopify?

No. Catecut is built as a platform-agnostic system, and the Shopify App Store is its first global, self-serve distribution channel rather than an exclusive home. The company has also piloted the tool with international enterprise retailers outside the Shopify ecosystem.