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No face, no service

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Facial recognition technology is being deployed in housing projects, homeless shelters, schools, even across entire cities—usually without much fanfare or discussion. To some, this represents a critical technology for helping vulnerable communities gain access to social services. For others, it’s a flagrant invasion of privacy and human dignity. In this episode, we speak to the advocates, technologists, and dissidents dealing with the messy consequences that come when a technology that can identify you almost anywhere (even if you’re wearing a mask) is deployed without any clear playbook for regulating or managing it.

We meet: 

  • Eric Williams, senior staff attorney at Detroit Justice Center
  • Fabian Rogers, community advocate at Surveillance Technology Oversight Project
  • Helen Knight, founder of Tech for Social Good
  • Ray Bolling, president and co-founder of Eyemetric Identity Systems
  • Mary Sunden, executive director of the Christ Church Community Development Corporation

Credits

This episode was reported and produced by Jennifer Strong, Tate Ryan-Mosley, Emma Cillekens, and Karen Hao. We’re edited by Michael Reilly and Gideon Lichfield.

Transcript

[TR ID]

Strong: So, I’m in lower Manhattan next to some buildings known as Knickerbocker Village. You might hear the subway running up overhead there. So history buffs might know this spot as kind of a birthplace of housing rights. Some of New York City’s first regulations on rental housing came to exist here because of the tenants association. These buildings were also among the very first federally funded affordable housing units. They’re about 90 years old and were built to support a new middle class after the great depression. But the reason I’m here is because it’s also among the very first apartment complexes in New York city to install facial recognition instead of keys. And this is not recently either. It was about seven years ago after Hurricane Sandy tore through the area, doing incredible damage and causing awful flooding. And it was in those repairs that the apartments received some upgrades, including this keyless entry system at all the gates that uses face ID.

And you know, it doesn’t look super different from the usual call boxes that let you buzz somebody up and I did kind of wonder how easy they’d be to spot, but it’s actually super easy for a few reasons. One is the days are short now. And so it’s kind of dark out here and all the entry points have these really bright spotlights shining on them, I guess, to light people’s faces and make it easier for the system to detect them. The other is this kind of funny little dance, maybe it’s like a lean in lean out motion that some of the folks trying to get into the apartment building are doing as they get closer to these cameras. It’s pretty chilly out here. So I’m guessing they’re trying to get the door to unlock more quickly.

Strong: Problems with this setup.. aren’t new. It’s well documented that facial recognition often doesn’t work as well on non-white faces… which explains why some residents have had difficulty gaining access to this building. It’s also unlocked the door to faces of non-residents in the past. In the future, use of this technology might be regulated… but for now, how and where it gets used remains a wild west. I’m Jennifer Strong and as part of our latest miniseries on face I-D, we’re going to look at use in housing, and a bunch of thorny questions that raises.

[SHOW ID]

[Sound from Green Light Announcement: and I welcome you all today to the Detroit public safety headquarters for this exciting announcement of Project Green Light Detroit.]

Strong: That was 2016… and the birth of what would become one of the more controversial surveillance projects in the US.

[Sound from Green Light Announcement: The violence level in this city is not acceptable.]

Strong: For decades, Detroit, Michigan has been listed among the most violent cities in the country. This is Mike Duggan – the city’s mayor.

[Sound from Green Light Announcement: But if we don’t do something differently we are not going to change the trajectory…. and so how many times have you seen on TV if you recognize this person call in and there is such a grainy image you have no idea. It could be your own brother and you wouldn’t know from that image…]

Strong: And so, they tried something new… a collaboration between police and local businesses.. with the latest technology.

[Sound from Green Light Announcement: …and we said.. what if we went to some gas stations, who volunteered, and set a standard that you light your gas station all the way to the perimeter so bright you can read a magazine. And then and you put such high definition color camerasand put in an internet connection we will monitor it real time at police headquarters.] 

Strong: in other words…private companies pay to install top quality cameras that stream live video back to police headquarters… and in return, they receive more time and services from police.

[Sound from Green Light Announcement (Mayor Mike Duggan): … ok so it is on that screen right there]

Strong: Next.. he shows people at the press conference how this system works. 

[Sound from Green Light Announcement (Mayor Mike Duggan): but I want you to see the visibility. [wow!] That is what our officers are looking at upstairs in the real time crime centre right now. They can see dozens of screens at once…I mean how much different is this.]

Strong: And as you can hear from the reaction of the crowd, the quality of this video is a total game changer.

[Sound from Green Light Announcement (Mayor Mike Duggan): This is what we are going to do across the city…. And the other thing is…We’ve got facial recognition software coming next. We are going to be able… before too long… to match outstanding warrants against these cameras… So this is what it looks like at night. Take a look. 10 o’clock at night. You can see how bright the lighting is. And this is why it was so critical that we have the lighting standards in addition to the camera standard.]

Strong: Today, Project Green Light’s cameras cover hundreds of shops… They’re also pointed at public housing… schools… and transportation. But when it started five years ago it was just a handful of gas stations. 

[Sound from Green Light Announcement: So it fell upon us as small business owners to be that catalyst. Because for Detroit to be a great city and come back…  the neighborhoods to come back. They have to be safe. Public safety is a right of every citizen in the city Detroit and we are honored to be part of it]

Strong: At the time there was a lot of support for Project Green Light… many saw it as the community coming together… working with each other and with police to take back its streets…  

[Sound from Green Light Announcement: Project Greenlight is good news. And not just for our police, but it’s great news for our community. We should celebrate it. We should support it. We should expand it. When people talk about neighborhoods we not doing enough for neighbourhoods, well you need to tell them about this program. This is the spirit of Detroit. This just made my job so much easier and if i can have a video of the crime being committed… I’ve just won my case. (clapping)]

Strong: But looking back, it’s not so straightforward. 

Williams: There is absolutely no evidence whatsoever that project Green Light has produced a reduction in crime in Detroit.

Strong: Eric Williams is a senior staff attorney at the nonprofit law firm… Detroit Justice Center.

Williams: in terms of its success with the initial eight stations, there was a substantial reduction in criminal activity at those sites right year over year, since those eight sites, the findings are much less clear.

Strong: And activists including Williams have other concerns with this project.

Williams: Ironically project Green Light is something that I became involved in prior to actually going to the Detroit justice center. I was just, my sensibilities are just offended by its very existence.  I have problems with that kind of police surveillance. 

Strong: His main point of contention?

Williams: The problem that I have with Project Green Light in particular is the utter lack of transparency, right? For example, facial recognition technology was being used in conjunction with Project Green Light for almost two years before people really knew anything about it.

Strong: He says the public didn’t really grasp what was happening. That their comings and goings would be livestreamed to police headquarters from hundreds of points about the city… and their faces could be scanned and identified.  Though, as you heard, the city was quite clear from the day of launch that it planned to use facial recognition. It also provides a public map with the locations of all these cameras… and there are signs, often with a pulsing green light, that mark their presence. But… how many people really pay attention to local government officials talking about public private partnerships? And what would consent mean in this context? There’s little choice when your home, job, school and local shops… are all surrounded by these cameras… 

[Sound from protests in Detroit: chanting]

Strong: Over the summer… tensions between Detroit citizens and the police boiled to the surface. And… one of the key requests?  

[Sound from protests in Detroit: These are our collective demands…. The second one is… getting rid of Project Green Light…]

Williams: We’d like to see, for example, legislation prohibiting the use of facial recognition technology in public housing. Like right now project Green Light is on public buses, is in public schools and actually in places where poor people are disproportionately likely to be right, this is how that’s working. So we’d like to see if nothing else, a moratorium of its use by law enforcement.

Strong: But facial recognition isn’t just creeping into public housing via police. As popularity of the technology grows and the cost of acquiring it drops, landlords big and small are looking to install it as a way to increase security or present the property as having the latest upgrades and conveniences like keyless entry. Facial recognition isn’t regulated, so, we simply don’t know how often it’s used or whether those uses are effective. But we did meet a tenant who, at least for the moment, has stopped his landlord from installing a system that unlocks doors with faces instead of keys.

Fabian: I come from Atlantic Plaza towers. Where our landlord tried to install facial recognition into the building

Strong: Fabian Rogers is a tenant and community advocate in New York City.

Fabian: So, I’m here speaking on behalf of those who usually don’t have the time or money to do so.

Strong: Atlantic Plaza is a rent-stabilized housing complex in Brooklyn. Two years ago he found a notice in his mailbox about improvements to the buildings.  

Fabian: We didn’t know what we were dealing with at the time when everybody did background research trying to understand what was it that the landlord was trying to put in, cause this wasn’t your typical major capital improvement where he’s just trying to change the awnings on the building or trying to update the, the, the terraces. He’s trying to put in facial recognition at the front. And so it will be mandatory to have to use the technology if it were to be deployed and installed in each building.

Strong: Together with more than a hundred other tenants… he decided to fight back.

Fabian: The concerns that we had as tenants was not for more security or more surveillance. We were already being over-surveilled in our building as is with 24, 24-7 HD recording cameras within every nook and cranny of these buildings except in our apartments and the fire escape stairs. We just understood this as another tool to pester with our living situation. This wasn’t just welcoming a new technology that will help our lives be better. It was never that type of situation. 

Strong: They self-organized and sent a letter to the management company opposing the cameras.

Fabian: To this day, we have never gotten a response back.

Strong: And this bugged them. So they enlisted the help of a legal firm… and they got a meeting with the landlord. 

Fabian: What’s the purpose of you installing this technology? Like, what’s the purpose for this for us? What about the case of a police want subpoenas? And they find they have a suspect in the building. Now, what, like, what databases is, is does this tech access, what does it share? What does it save? How does it save? Who does it give the data to? And things like that, all of these ethical questions and logistical questions… they’d even wrapped their heads around it. They were just caught up in like we got some new tech from a startup company. We want to try to implement it so we can try to get some new tenants who are willing to pay a higher rent.

Strong: Ultimately, the cameras weren’t installed. But that doesn’t mean the issue is settled. Security projects like this one might get funding from the US Department of Housing and Urban Development but it doesn’t track whether face ID gets used or how. And landlords can pretty much do what they want with it. 

Fabian: And it’s just scary. And again, this all happens because there’s a lack of legislation. I’m not a stickler against technological innovation. That’s not what I’m saying here. What I’m saying is we need to question the contextuality in which we’re using new technology that is, you know, proliferating and is being deployed in society. Are they really ethical? Are they really better than the low tech solutions that we have? Is techno-solutionism always the answer to the, to the issue at hand and for housing I personally don’t think so.

Strong: There is legislation before the House and Senate that would put a pause on using identity technologies in housing that’s financially supported by the federal government. It’s called the “No Biometric Barriers to Housing Act”. New York City is also considering coming up with its own rules on biometric data, housing and landlords, but blanket bans are concerning to some.  Including a few people we met who provide housing to the homeless.

Knight: I think that we’re losing an entire category of a way to serve and support people who don’t have trust, but need help.

Strong: Helen Knight is the founder of a Candian startup that works with nonprofits. It’s called tech for social good dot c-a. She argues there’s a strong use case for face I-D to help vulnerable communities.

Knight: They are victims of crime. They have recently been evicted from their home. They’re in a crisis situation and it’s completely reasonable that they do not have a driver’s license. Do not have a passport. Don’t have any form of picture ID. They need help today. So you can’t turn them away. You shouldn’t turn them away. The intention is to provide them service. 

Strong: But to do that effectively, shelters need to be able to show how many different people use their services and who those people are… It’s how they’re funded. It’s also how they connect people to social services and other programs.

Knight: As it stands right now, the onus is on the person that’s in the middle of a crisis situation to articulate their exact need I mean, without having an actual way to identify what their journey through the system has been and see where they’ve been to other facilities or food banks or, medical programs, then it’s just, it’s just me standing before you telling you my story over and over again, telling you about the trauma in my life. And hoping that I say the magic words that end up with getting me a house. 

Strong: She directed use of this technology for a homeless shelter in the city of Calgary… and she says all the identification methods available… have problems. 

Knight: So there was a facility that used fingerprint identification, uh, for over a decade and largely it works well. It doesn’t work completely, depending on the people in the shelter facility. It doesn’t really work on cold fingers where it doesn’t work on dirty fingers. It doesn’t work on damaged fingers and it doesn’t work on missing fingers. 

Strong: And issues with using somebody’s fingerprints for ID run deeper than just whether they work or not…

Knight: it’s not trauma-informed to have somebody walk into a facility and say, yes, you can absolutely come in, but let me just take your fingerprints. There’s multiple problems. One, the screen is glowing green, which is a trigger and scary for people that are having paranoid delusions, perhaps they don’t want to touch that, that scary thing that potentially, um, disease transmission, uh, but also the mental experience of having been arrested and fingerprinted in the past. You’re actually repeating that same trauma every time they enter the facility.

Strong: She’s also tried tracking devices powered by R-F-I-D…..which stands for radio-frequency identification. And they tried iris recognition, which is where a scanner reads a person’s eyes. Ultimately though, she found face recognition to be the thing that worked. 

Knight: So, uh, facial recognition is really the only one that is possible and available, um, at all times. … // SO Facial Recognition is kinder emotionally in that it’s passive, it, doesn’t touch them and you can capture it more quickly and there’s no risk of transmission. So there, I, I’m eager to see the extent extended application of facial recognition, because it’s the kindest thing that you can do to people that have had traumatic lives and, and still know who they are and help them in the way that they need to be helped. 

Bolling: Is that a photo of you? 

Strong: Oh, it is. Yes that’s my LinkedIn.

Bolling: So I guess I just identified you utilizing a photo that I took from LinkedIn that I enrolled in our software and then just utilizing a regular webcam with you wearing a mask. I was able to identify you.

Strong: Wow. Wow. That’s that’s me with a mask and a hood and headphones and whatever else around my face here.  

Bolling: Hello, my name is Ray Bolling. I am the president and co-founder of eyemetric identity systems. 

Strong: We’re outside on a city street and he’s giving me a runthrough of his software. His company creates applications powered by fingerprints, iris scans and now with facial recognition to identify someone when they enter a building … including shelters for the homeless … food banks… and public schools.

Bolling: We have seen an increased interest in this technology as a result of COVID. We need to be able to do things in a contactless manner, um, but still be able to properly identify people. Um, but do it in a way. Um, that’s not involving the transfer, you know, our visitor management system where we’d ask someone to hand over their driver’s license when there’s an exchange of a card or an ID, um, you potentially could be transferring germs, utilizing a contactless method of facial recognition or iris it’s something that, um, doesn’t require any transfer or con or, uh, of information, you know, of a physical piece of plastic.

Strong: Other facial recognition systems we’ve talked about on this show sit on top of massive databases of photos taken from the internet. But not this one.

Bolling: Yes, our customers, when they purchase or install, one of our systems, our staff are starting with an empty database. They build the database themselves with known people and that are willingly and actively participating in the enrollment of the system. They are also actively involved when they are recognized. 

Strong: In practice it might work something like this… 

Bolling: Typically we will get an import of all the students or staff members from a school district. And we have all their information. Our first attempt is to try to enroll everybody off of a photograph, an existing photograph, but they have to be of good quality. Typically a school portrait picture works well, but there are cases due to lighting or hair that we need to retake that individual’s photo, uh, to have them enroll directly into the system.

Strong: Then ….

Bolling: The students just walk up to a Microsoft surface tablet with a webcam. They stand in front of it and it signs them into school. …

Strong: And he says it’s more efficient than other options. 

Bolling: …It’s important to the school district because they get reimbursed by the state based upon attendance. So they have a biometric means to verify the attendance of the kids that showed up that day. And it prevented students from borrowing or taking a friend’s ID card and checking them in.

Strong: One of his clients is the Christ Church Community Development Corporation. It provides shelter, engagement and outreach services for the homeless in Bergen County, New Jersey. They use his company’s fingerprint scanners, and over the next couple of months, they plan to also add facial recognition as another way to sign-in. Biometrics have helped them collect better data which they’ve used to tackle some big problems

Sunden: We are the first community in the country to have ended both veterans homelessness and chronic homelessness. 

Strong: Mary Sunden is the group’s executive director.

Sunden: And one of the main reasons that we were able to do that is because of the information we collect and the way in which we use it to help the folks we work with.

Strong: This work has received national recognition from the federal agency that oversees housing and urban development. And she says the additional data they gather has also helped them track trends over time. 

Sunden: So what we’ve noticed in the last two years is a significant increase in people who are 60 and older, who are in the homeless system. This is not something that we ever had in our area 10 years ago, for example. So if all of a sudden, instead of 20% of the people who come to dinner every night are 60 years old or older, all of a sudden it’s 30%. And that goes on for more than just a day or two, then we see something’s going on and we need to go and look into it and try and figure out what’s the cause behind that. But it’s the data that shows you things changing. And then you have to put the personal work into figuring out the motivation behind it or the reasons behind it.

Strong: Right now… she’s testing a camera that takes people’s temperatures…  and hopes it won’t be a far leap for clients to accept the addition of facial recognition.

Sunden: So you walk in the building and it automatically checks your temperature. And it there’s a picture of you. It’s not storing your picture, but there you are, and it tells your temperature, it guesses your gender and your age incorrectly, we enjoy fooling it. I have changed, um, in the last week from an elderly to a middle-aged man or a woman. So that’s kind of fun… but people I don’t expect in this pandemic that when people are in our building again soon that they will have difficulty with that because they’ll understand that the purpose of it is to keep them safe and. Life is just much more invasive now and we’re used to it. Um, so I think that that has an advantage that we’re trying to, we try to take advantage of things that happen. So the fact that, that, you know, people are used to being asked invasive questions about their health. We’re just going to take advantage of that. And the facial rec is just another thing, not that different from the temperature scanning system. 

Strong: Next episode… 

Donnie Scott: You could see a future where as you arrive to the sporting event, it directs you to your parking based on recognizing your car or on sharing who you are from your phone. From parking, you’re going to be directed through the shortest line. You know that line’s going to move quickly because it’s biometrically enabled.

Strong: We look at how facial recognition and other tracking systems are changing the sports experience in the stands and on the court.

Mike D’Auria: What this is intended to do is track the movement of every player and the ball 25 times a second. So you can kind of think over the course of one typical NBA basketball game, you’re able to kind of capture millions of data points that didn’t exist before and use those to build a suite of products or experiences on top of that can really change the way that we see and interact with sports.

Strong: This episode was reported and produced by me, Emma Cillekens, Tate Ryan-Mosley, and Karen Hao. We’re edited by Michael Reilly and Gideon Lichfield.  Thanks for listening, I’m Jennifer Strong.

[TR ID]

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Hackers tied to Russia’s GRU targeted the US grid for years

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Hackers tied to Russia’s GRU targeted the US grid for years

Enlarge (credit: Yuri Smityuk | Getty Images)

For all the nation-state hacker groups that have targeted the United States power grid—and even successfully breached American electric utilities—only the Russian military intelligence group known as Sandworm has been brazen enough to trigger actual blackouts, shutting the lights off in Ukraine in 2015 and 2016. Now one grid-focused security firm is warning that a group with ties to Sandworm’s uniquely dangerous hackers has also been actively targeting the US energy system for years.

On Wednesday, industrial cybersecurity firm Dragos published its annual report on the state of industrial control systems security, which names four new foreign hacker groups focused on those critical infrastructure systems. Three of those newly named groups have targeted industrial control systems in the US, according to Dragos. But most noteworthy, perhaps, is a group that Dragos calls Kamacite, which the security firm describes as having worked in cooperation with the GRU’s Sandworm. Kamacite has in the past served as Sandworm’s “access” team, the Dragos researchers write, focused on gaining a foothold in a target network before handing off that access to a different group of Sandworm hackers, who have then sometimes carried out disruptive effects. Dragos says Kamacite has repeatedly targeted US electric utilities, oil and gas, and other industrial firms since as early as 2017.

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6 Copenhagen investors share their outlook on investing in 2021

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While Denmark and Copenhagen don’t often come up as a destination for European startups, it has a thriving local tech scene that’s home to some of the better startup conferences. After all, who doesn’t want to visit Copenhagen?

A highly educated population, great universities, excellent healthcare and great transport links to Europe make the city as good a place as any to start up a company.

Amongst our investors, we found the trends they were most interested in included sustainable supply chain logistics, esports and gaming, enterprise SaaS, climate tech, deep tech hardware, agritech and edtech. And many said they are interested in the future of work and the transition to different ways of working.

Companies they are excited by included: Afresh Technologies, Seaborg Technologies (nuclear reactors), Labster (virtual science labs), Normative.io (social and environmental impact measurement) and DEMI (connecting with chefs).

In general, investors said they are focused on their home ground but are also spreading their wings to the “New Nordics” (Nordic and Baltic) region. Some are also investing in large European and North American hub cities.

The “green shoots” of recovery they see are appearing in anything digital that comes with a community, as well as among startups that are able to leverage the pandemic to generate new business models that are faster than incumbents.


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We surveyed:


Sara Rywe, associate, byFounders

What trends are you most excited about investing in, generally?
Software and tech (I’m personally extra excited about the “future of work,” fintech, and “future of food”).

What’s your latest, most exciting investment?
Digitail (a veterinary software provider solving the gap between the ever-growing expectations of millennial pet parents and the experience offered by veterinarians with their current tools).

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
I would like to see more founders with global ambitions in the “uniquely transformative” software category (the same way Airbnb transformed the hotel industry and Uber transformed the taxi industry). Many startups we see today are building a feature instead of a full solution and their vision is about making industries incrementally better. So, here’s a callout to all of you Nordic or Baltic visionary founders out there: Write me!

What are you looking for in your next investment, in general?
We always look for competent, visionary and passionate founders building products that people love. As an industry-agnostic VC, we keep our eyes open for a range of different opportunities.

Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
Some of the current trends that I see include:
Fintech: salary advances, factoring, sustainability reporting and measurements.
Food tech: alternative protein, pet food, food waste.
Future of work: virtual offices, collaboration, productivity tools.
If you decide to enter any of the above-mentioned industries, I therefore encourage you to really be thoughtful in how you differentiate yourself and/or how your team is better suited to execute on the mission.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
<50%. We invest across the Nordics and Baltics and I’m covering Sweden, Norway and Denmark.

Which industries in your city and region seem well positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Denmark is very well positioned to succeed in sustainability and energy (many good talents coming from e.g., Vestas and DTU), consumer goods (there’s a large history in the country around building brands such as Lego, Carlsberg, etc.), and biotech (Novo Nordisk among others playing a big part). Moreover, software scaleups such as Peakon, Pleo, and Templafy are really leading the way for a new generation of tech startups to thrive in Denmark. When looking at Danish founder particularly, I’m very excited to see companies such as Qvin revolutionizing healthcare for women by using period blood as an opportunity for a noninvasive blood test.

How should investors in other cities think about the overall investment climate and opportunities in your city?
They should be very excited! Just look at what we’ve seen in 2021 so far:
Exits: Peakon $700 million exit and Humio $400 million exit.
Large rounds: Public.com raising $220 million, Vivino raising $115 million and Labster raising $60 million led by Andreessen Horowitz

Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
Somewhat. We already see a lot of innovation outside of Copenhagen in cities such as Aarhus and Odense.

Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
One industry that has been hit hard by COVID-19 is of course travel and hospitality. The flipside of this is that we see a lot of innovation due to that. Examples from our own portfolio include:
AeroGuest — a platform that allows for a “touch-free” travel experience (skipping lines and reception desks, direct online room booking, etc.).
BobW — a new type of sustainable travel accommodation bringing the best of both worlds: “home meets hotel.”

How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
COVID-19 has not impacted our investment strategy massively and we have the same focus as before (investing in software and tech). With that said, we are happy to see some industries getting an uplift in these difficult times, such as sustainability and impact.
The biggest worries of our portfolio company founders have been around volatility and uncertainty. Since the first lockdown our advice has been simple: You can’t control the outcome. We’ve therefore worked together to ensure that they have some proper scenario planning in place and that we think creatively of how to mitigate eventual negative effects on their business.

Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Tame — one of our portfolio companies — expanded their event platform to also include virtual events, which made it really take off in COVID times.
Corti — another portfolio company of ours — could in less than four weeks build a product for helping fight COVID-19 with artificial intelligence.
Both of these companies are good examples of how “adapting their products” due to the pandemic led to great results.

What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
The sudden rise of awareness around impact and ESG among VCs! Several great conversations have been held on how to improve our ways of working.

Who are key startup people you see creating success locally, whether investors, founders or even other types of startup ecosystems roles like lawyers, designers, growth experts, etc. We’re trying to highlight the movers and shakers who outsiders might not know.
Some of the extraordinary founders that I look up to from Denmark include:
Jakob Jønck (Simple Feast), Andreas Cleve and Lars Maaløe (Corti), Sara Naseri and Søren Therkelsen (Qvin), Niels Martin Brochner, Jarek Owczarek and Viktor Heide (Contractbook), Jacob Hansen, Esben Friis-Jensen, Jakob Storm and Christian Hansen (Cobalt) among others.
There’s also a range of great investors in Denmark including Helle Uth, Christel Piron, Alexander Viterbo-Horten and Anders Kjær amongst others at PreSeed Ventures and Daniel Nyvang Mariussen with his team at Bumble Ventures. Also, the Danish tech ecosystem would not be what it is without all the work that Vækstfonden does.

Mads Hørlyck, associate, Maersk Growth

What trends are you most excited about investing in, generally?
Supply chain/logistics including sustainable supply chains.

What’s your latest, most exciting investment?
Afresh Technologies.

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
In general there are still plenty of opportunities across various parts of the supply chain. We have no particular specific preferences as such at the moment.

What are you looking for in your next investment, in general?
Digital solution to drive efficiencies across one or more subparts of the supply chain, both upstream and downstream focus.

Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
Freight forwarding has been maturing in Europe and North America with several large startups in both regions. However, the market is still large but it requires a strong new model as it’s also low margins.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
Less/little focus on Denmark. Main priority in large European/North American hubs.

Which industries in your city and region seem well positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Startups with the medical and supporting functions tech are doing well. We are excited about Onomondo in the Danish scene — also a portfolio company of ours.

How should investors in other cities think about the overall investment climate and opportunities in your city?
As an upcoming opportunity. Several tech hubs have been created and there is a general good environment including state-backed loans/pre-seed investments and fairly many angels to get going.

Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
We don’t expect any significant changes to the founder-environment in Denmark (too little country).

Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
We see an increased focus on our investment area: Supply chain/logistics as people throughout the pandemic have been much more exposed to and dependent on flexible and reliable supply chains. All the way from supply resilience, supply chain visibility, fulfillment and to last-mile delivery. Consumers have the power to drive changes in supply chains.

How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
Sales conversion rates decreasing/pipelines drying out. Advice is, like everyone else, to minimize cost and extend runway by getting as close to profitability as model allows. Based on this funding needs can be discussed.

Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Yes, we have seen some startups being able to leverage the pandemic over incumbents due to their more flexible and digital structure.

What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
We have yet to see a default wave both globally within our investment area but also in general in Denmark.

Henrik Møller Kristensen, associate, Bumble Ventures

What trends are you most excited about investing in, generally?
Some of the trends we’re excited about are (1) the growing market of digital media and entertainment, in particular esports and gaming, (2) enterprise SaaS, e.g., related to the future of work, (3) climate change solutions, e.g., deep tech hardware and software, and (4) e-commerce businesses, in particular digital native vertical brands and direct-to-consumer cases.

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
Products and services to satisfy the needs of the aging population. The number of elderly people will be growing significantly over the next decades, establishing a growing market for products and services to satisfy the needs from this demographic change and reduce the pressure on societies.

What are you looking for in your next investment, in general?
We highly value team and traction. We are looking for exceptional founders with strong competencies in engineering, product and commercial, preferably with years of experience from the industry they are entering with a new solution. We prefer some indication of product-market fit. We like methodical revenue growth driven by paying customers, rich cohort grids and controllable funnels that proves a robust core business. We don’t like products that are still 2-3 years away from monetization. This means that we will miss the next Facebook, but we are okay with that.

Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
Traditional social media and apps that require millions of users before being able to turn on the business model. SaaS marketing tools also seem crowded.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
Next week we will announce our first investment outside Denmark. This is our first step toward being present not only in Denmark, but in the Nordics.

Which industries in your city and region seem well positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Well-positioned industries in Denmark are medtech, fintech, gaming and clean tech. We’re excited about GamerzClass, Pie Systems, LeadFamly, Omnigame, Organic Basics, Cap desk, Roccamore, Too Good To Go, Pleo, Tradeshift, SYBO, Unity and more. Exceptional founders are Victor Folmann from GamerzClass, Sunny Long from Pie Systems, Frederikke Antonie Schmidt from Roccamore and Christian Gabriel from Capdesk.

How should investors in other cities think about the overall investment climate and opportunities in your city?
Historically, there has been a need for more capital and talent to keep successful growth-stage startups in Denmark and not have to move to foreign countries to attract talent and capital. However, the investment climate is getting better. Greater access to capital and talent go hand in hand, and what is really changing the investment climate for the better is founders of successful Danish startups turning back to Denmark and reinvesting in the startup community.

Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
I think we’ll see more attraction to remote work in the future. However, I believe it is important for startups to be close to other great like-minded startups, founders, advisors and investors, not only virtually but in real life. Establishing a great network and personal relationships are very important factors to succeed and remote is not suited very well for that in my opinion.

Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
The travel and hospitality industry look weaker and we’ll see a shift toward lower demand due to remote work and sustainability issues. On the other side, gaming, e-commerce and digital products and services are growing as you will have more people online behind the screens.

How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
We are still happy to invest despite COVID-19. Gaming has, for example, been positively affected by COVID-19, however, many startups are also struggling due to COVID-19. The best a startup can do is to manage the runway, have close dialogue with their investors, cut costs and try to pivot to the changes. Look for opportunities, not boundaries.

Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Not yet. Only a few of our portfolio companies are negatively affected by COVID-19.

What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
Investors are willing to make new investments and help out struggling portfolio companies. Founders are keeping their heads high and making the best out of the new circumstances. In some cases it actually stimulates new innovations.

Benjamin Ratz, partner, Nordic Makers

What trends are you most excited about investing in, generally?
Energy and the transition to a fossil fuel society, data as governance and the changing role of education.

What’s your latest, most exciting investment?
Seaborg — building modular, small and safe nuclear reactors.
Labster — virtual science labs that help students all over the world immerse in science and STEM.

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
Improving the public sector.

What are you looking for in your next investment, in general?
Views on how and if the world has permanently changed in behavior due to the pandemic.

Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
Micromobility, teledocs.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
100%.

What are companies you are excited about (your portfolio or not), which founders?
Willa. Corti.

How should investors in other cities think about the overall investment climate and opportunities in your city?
A lot of founders leaving success stories of the region.

Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come?
No but we expect the cities to produce more.

Mark Emil Hermansen, associate, Astanor

What trends are you most excited about investing in, generally?
Food and agrotech.

What’s your latest, most exciting investment?
DEMI.

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
I’d love to see more food tech companies that “get food” — the human element of it that is. Too many startups focus only on the technology, less on the fact that it should be deeply human centered. This is so prevalent that I instinctively stay away from startups dubbing themselves as “food tech” — food is not tech and tech is not food and therein lies the challenge and the prize. Here’s a read that kind of sums it up.

What are you looking for in your next investment, in general?
Anything that reminds me of these first lines from “On The Road”: “They danced down the streets like dingledodies, and I shambled after as I’ve been doing all my life after people who interest me, because the only people for me are the mad ones, the ones who are mad to live, mad to talk, mad to be saved, desirous of everything at the same time, the ones that never yawn or say a commonplace thing, but burn, burn, burn …”.

Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
DNVB.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
25% local (DK is still immature from a startup standout — yet the opportunity is that the VC footprint is small and relatively unsophisticated).

Which industries in your city and region seem well positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Companies: Online communities such as DEMI.
Founder: Erez Galonska of Infarm.

How should investors in other cities think about the overall investment climate and opportunities in your city?
Tons of opportunity if you have access to the right deal flow/pedigree.

Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
Communities that transcend digital (like Tonsser and DEMI).

How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
Worries: Uncertainty and recruitment strategy.
Advice: Survive and prepare.

Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Anything physical that has retail footprint. Anything digital that has a community footprint.

What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
That everyone’s pumped for what’s about to come (post-COVID) and the realization (or hope?) that nothing will be as before.

Who are key startup people you see creating success locally?
Kasper Ottesen, Highbridge (legal).
Kasper Hulthin (entrepreneur and investor).
Christian Tang-Jespersen (investor).

Eric Lagier, managing partner, byFounders

What trends are you most excited about investing in, generally?
Future of work, productivity improvement platforms.

What’s your latest, most exciting investment?
Normative.

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
Future of recruiting.

What are you looking for in your next investment, in general?
Passionate founders, solving big problems to build a better tomorrow.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
We are focused on the New Nordics (Nordic and Baltic) region having shown the biggest growth potential in Europe.

Which industries in your city and region seem well positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Climate tech, health tech, fintech. Normative, Corti, Lucinity.

How should investors in other cities think about the overall investment climate and opportunities in your city?
Copenhagen is booming and there is now a strong foundation of experienced founders building really transformative companies.

Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
No — but I expect to see much more diverse teams with a priority on remote first.

Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
An acceleration of online, remote, e-commerce and general faster pace of transactions.

How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
COvid-19 is a giant accelerator of future trends. Those founders that have adapted best will be the winners of tomorrow.

Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Absolutely.

What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
How founders persevere in these times of massive change.

Who are key startup people you see creating success locally?
Jakob Jønck, founder, SimpleFeast; Kristian Rönn, founder, Normative; Andreas Cleve and Lars Maaløe, founders, Corti.

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What the NFT? VC David Pakman dumbs down the intensifying digital collectibles frenzy

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Non-fungible tokens have been around for two years, but these NFTs, one-of-one digital items on the Ethereum and other blockchains, are suddenly becoming a more popular way to collect visual art primarily, whether it’s an animated cat or an NBA clip or virtual furniture.

“Suddenly” is hardly an overstatement. According to the outlet Cointelegraph, during the second half of last year, $9 million worth of NFT goods sold to buyers; during one 24-hour window earlier this week, $60 million worth of digital goods were sold.

What’s going on? A thorough New York Times piece on the trend earlier this week likely fueled new interest, along with a separate piece in Esquire about the artist Beeple, a Wisconsin dad whose digital drawings, which he has created every single day for the last 13 years, began selling like hotcakes in December. If you need further evidence of a tipping point (and it is ample right now), consider that the work of Beeple, whose real name is Mike Winkelmann, was just made available through Christie’s. It’s the venerable auction house’s first sale of exclusively digital work.

To better understand the market and why it’s blowing up in real time, we talked this week with David Pakman, a former internet entrepreneur who joined the venture firm Venrock a dozen years ago and began tracking Bitcoin soon after, even mining the cryptocurrency at his Bay Area home beginning in 2015. (“People would come over and see racks of computers, and it was like, ‘It’s sort of hard to explain.’”)

Perhaps it’s no surprise that he also became convinced early on of the promise of NFTs, persuading Venrock to lead the $15 million Series A round for a young startup, Dapper Labs, when its primary offering was CryptoKitties, limited-edition digital cats that can be bought and bred with cryptocurrency.

While the concept baffled some at the time, Pakman has long seen the day when Dapper’s offerings will be far more extensive, and indeed, a recent Dapper deal with the NBA to sell collectible highlight clips has already attracted so much interest that Dapper is reportedly right now raising $250 million in new funding at a post-money valuation of $2 billion. While Pakman declined to confirm or correct that figure, he did answer our other questions in a chat that’s been edited here for length and clarity.

TC: David, dumb things down for us. Why is the world so gung-ho about NFTs right now?

DP: One of the biggest problems with crypto — the reason it scares so many people — is it uses all these really esoteric terms to explain very basic concepts, so let’s just keep it really simple. About 40% of humans collect things — baseball cards, shoes, artwork, wine. And there’s a whole bunch of psychological reasons why. Some people have a need to complete a set. Some people do it for investment reasons. Some people want an heirloom to pass down. But we could only collect things in the real world because digital collectibles were too easy to copy.

Then the blockchain came around and [it allowed us to] make digital collectibles immutable, with a record of who owns what that you can’t really copy. You can screenshot it, but you don’t really own the digital collectible, and you won’t be able to do anything with that screenshot. You won’t be able to to sell it or trade it. The proof is in the blockchain. So I was a believer that crypto-based collectibles could be really big and actually could be the thing that takes crypto mainstream and gets the normals into participating in crypto — and that’s exactly what’s happening now.

TC: You mentioned a lot of reasons that people collect items, but one you didn’t mention is status. Assuming that’s one’s motivation, how do you show off what you’ve amassed online? 

DP: You’re right that one of the other reasons why we collect is to show it off status, but I would actually argue it’s much easier to show off our collections in the digital world. If I’m a car collector, the only way you’re going to see my cars is to come over to the garage. Only a certain number of people can do that. But online, we can display our digital collections. NBA Top Shop, for example, makes it very easy for you to show off your moments. Everyone has a page and there’s an app that’s coming and you can just show it off to anyone in your app, and you can post it to your social networks. And it’s actually really easy to show off how big or exciting your collection is.

TC: It was back in October that Dapper rolled out these video moments, which you buy almost like a Pokemon set in that you’re buying a pack and know you’ll get something “good” but don’t know what. But while almost half it sales have come in through the last week. Why?

DP: There’s only about maybe 30,000 or 40,000 people playing right now. It’s growing 50% or 100% a day. But the growth has been completely organic. The game is actually still in beta, so we haven’t been doing any marketing other than posting some stuff on Twitter. There hasn’t been attempt to market this and get a lot of players [talking about it] because we’re still working the bugs out, and there are a lot of bugs still to be worked out.

But a couple NBA players have seen this and gotten excited about their own moments [on social media]. And there’s maybe a little bit of machismo going on where, ‘Hey, I want my moment to trade for a higher price.’ But I also think it’s the normals who are playing this. All you need to play is a credit card, and something like 65% of the people playing have never owned or traded in crypto before. So I think the thesis that crypto collectibles could be the thing that brings mainstream users into crypto is playing out before our eyes.

TC: How does Dapper get paid?

DP: We get 5% of secondary sales and 100% minus the cost of the transaction on primary sales. Of course, we have a relationship with the NBA, which collects some of that, too. But that’s the basic economics of how the system works.

TC: Does the NBA have a minimum that it has to be paid every year, and then above and beyond that it receives a cut of the action?

DP: I don’t think the company has gone public with the exact economic terms of their relationships with the NBA and the Players Association. But obviously the NBA is the IP owner, and the teams and the players have economic participation in this, which is good, because they’re the ones that are creating the intellectual property here.

But a lot of the appreciation of these moments — if you get one in a pack and you sell it for a higher price — 95% of that appreciation goes to the owner. So it’s very similar to baseball cards, but now IP owners can participate through the life of the product in the downstream economic activity of their intellectual property, which I think is super appealing whether you’re the NBA or someone like Disney, who’s been in the IP licensing business for decades.

And it’s not just major IP where this NFT space is happening. It’s individual creators, musicians, digital artists who could create a piece of digital art, make only five copies of it, and auction it off. They too can collect a little bit each time their works sell in the future.

TC: Regarding NBA Top Shot specifically, prices range massively in terms of what people are paying for the same limited-edition clip. Why?

DP: There are two reasons. One is that like scarce items, lower numbers are worth more than higher numbers, so if there’s a very particular LeBron moment, and they made 500 [copies] of them, and I own number one, and you own number 399, the marketplace is ascribing a higher value to the lower numbers, which is very typical of limited-edition collector pieces. It’s sort of a funny concept. But it is a very human concept.

The other thing is that over time there has been more and more demand to get into this game, so people are willing to pay higher and higher prices. That’s why there’s been a lot of price appreciation for these moments over time.

TC: You mentioned that some of the esoteric language around crypto scares people, but so does the fact that 20% of the world’s bitcoin is permanently inaccessible to its owners, including because of forgotten passwords. Is that a risk with these digital items, which you are essentially storing in a digital locker or wallet?

DP: It’s a complex topic,  but I will say that Dapper has tried to build this in a way where that won’t happen, where there’s effectively some type of password recovery process for people who are storing their moments in Dapper’s wallet.

You will be able to take your moments away from Dapper’s account and put it into other accounts, where you may be on your own in terms of password recovery.

TC: Why is it a complex topic?

DP: There are people who believe that even though centralized account storage is convenient for users, it’s somehow can be distrustful — that the company could de-platform you or turn your account off. And in the crypto world, there’s almost a religious ferocity about making sure that no one can de-platform you, that the things that you buy — your cryptocurrencies or your NFTs. Long term, Dapper supports that. You’ll be able to take your moments anywhere you want. But today, our customers don’t have to worry about that I-lost-my-password-and-I’ll-never-get-my-moments-again problem.

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