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8 Czech VCs on green shoots, pandemic impacts and 2021 opportunities

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While London, Paris, Berlin and Stockholm feature regularly in tech coverage, the rest of Europe has been busy.

The Czech Republic may be better known for beer, hockey and the sights of Prague, but its entrepreneurial community is as ambitious as any. Pipedrive is an EU-based CRM company with offices in eight countries, but it has a Czech co-founder in VP of Product Martin Henk, one of several founders to emerge from the ecosystem.

Then there was Integromat, which did not raise any external capital but sold for around 2.5 billion crowns ($114 million), making its seven Czech founders into multimillionaires. Prague’s Memsource is valued at approximately 1.3 billion crowns or $59 million. But this is just the tip of the iceberg.

To unpack this rare gem of Europe’s startup scene, we spoke to eight area investors.

Among the trends they identified are startups in B2B, business automation processes, e-commerce, AI, SaaS and COVID-19-related solutions, as well as “smart” everything: factories, cities, offices, etc. Other themes included cybersecurity, AR/VR, remote work, and cybersecurity.

Saturated areas included cryptocurrency, blockchain, fintech and martech. The people we spoke to said they see travel, dating apps and other businesses traditionally based on physical interaction as weaker segments. Still, new opportunities are popping up in remote work, psychedelics and wellness.


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Respondents said they invest around 50% inside Czechia and 50% across Central and Eastern Europe, while some are more focused across CEE generally, with some percentage of the fund supporting startups that have scaled to the U.S.

Most said their investments hadn’t been significantly impacted by COVID-19, but future uncertainly is a concern. The advice is to “be frugal to accommodate to the new situation and roll on.”

As far as green shoots, COVID-19 has “played a role of an accelerator for innovation in many business areas and even e-government and other rigid/conservative industries,” said one. D2C startups have benefitted and “Zoom selling” now seems “totally plausible.”

We surveyed:


Petra Končelíková, partner, Nation1.vc

What trends are you most excited about investing in, generally?
Innovative.

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

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
I miss a more innovative approach.

What are you looking for in your next investment, in general?
Steady rapid growth, innovative mind.

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?
Social media, logistics, travel.

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 solely focusing on the European market, with an impact on the Czech Republic.

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?
Healthcare, industry 4.0.

How should investors in other cities think about the overall investment climate and opportunities in your city?
Huge potential.

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?
Remote work is not an issue, but the pandemic has of course huge impact on startups. They are forced to pivot and accommodate to this new world.

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?
Travel and gastro.

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?
Accommodate to the new situation and roll on.

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.
Vaccination.

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.
Financial experts — financial planning, CFOs to hire as an service from agencies.

Oleksander Bondarev, associate, Credo Ventures

What trends are you most excited about investing in, generally?
Developer tools, communication apps, applied AI.

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

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
Cloud CI/CD.

What are you looking for in your next investment, in general?
Great team.

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?
Martech.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
Only in founders from: Czech Republic, Poland, Slovakia, Slovenia, Croatia, Romania or Hungary.

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?
Productboard, UiPath, Pricefx, Supernova, Spaceflow.

How should investors in other cities think about the overall investment climate and opportunities in your city?
Maturing.

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?
Yes.

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?
Enabling communication, transparency within the remote workforce.

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?
Be frugal.

Any other thoughts you want to share with TechCrunch readers?
We are trying to be the most founder-friendly fund in the region. As an ex-founder (Olek) I love speaking with and advising all startups that come my way 🙂

Ondrej Bartos, founding partner, Credo Ventures

What trends are you most excited about investing in, generally?
Automation, AI, enabling remote, authentication.

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

What are you looking for in your next investment, in general?
Outstanding founders tackling big opportunity.

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?
VR/AR has been an area with lots of investment, therefore very competitive. AI is overhyped but most AI are actually not that intelligent.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
Less. We focus on Central Europe as a region (if that would count as local, then more than 50%).

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?
Central Europe is well positioned in automation, security, developer tools and analytics. I’m most excited about UiPath, Productboard, Pricefx, TypingDNA, Spaceflow, Around (in our portfolio). Best CE founders are in my view Daniel Dines, Hubert Palan, Marcin Cichon plus Oliver Dlouhý (Kiwi.com).

How should investors in other cities think about the overall investment climate and opportunities in your city?
There are a lot of great developers in Prague, good energy and enough success stories and role models to follow. There is a lot of investment capital there (just as everywhere else I guess), not too much smart money yet, so definitely opportunity for good VCs to take a look (and they are looking).

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 have no doubts that the pandemic has been accelerating remote work, which ultimately should lead to more remote-first startups which might benefit new geos.

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?
Travel and hospitality seem most fragile and unpredictable due to COVID-19. Remote and enabling remote seem like the biggest opportunity; automation and enabling digital transformation are attractive as well.

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?
Our investment strategy is unchanged; actually we’ll double down on it. There is a lot of opportunity for good tech startups, technology is what’s helping people and countries to get out of crises faster with less damage. Our advice to startups is still the same: Focus on your cause and try to solve problems in your space better than anybody else.

Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
We definitely see green shoots in some of the enterprise software companies. “Zoom selling” now seems totally plausible, sales cycles shortened in some verticals as companies need to digitize and enable remote work.

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.
I’ve always had hope. Yes, there have been low moments especially when quarantined, but overall I haven’t lost hope for people to cope with this unprecedented situation, and for technology to play a significant role in the recovery. I still have this hope 🙂

Any other thoughts you want to share with TechCrunch readers?
I feel like I had been traveling too much, two- or three-day transatlantic trips make little sense and I think I won’t go back there. Also, I don’t think I’ll go back to 5+ days in the office every week, home office works fine with me and it will stay with me and the company in some capacity. That being said, it is what I feel now. I may be wrong and things may go back to “old normal” — which I would consider a big mistake and lost opportunity.

Osman Salih, associate, Bolt Start Up Development a.s.

What trends are you most excited about investing in, generally?
We are looking for synergies with our parent company O2 Czech republic and other companies under the PPF Group.

What’s your latest, most exciting investment?
IP Fabric.

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
We would like to see more insurtech startups in Europe.

What are you looking for in your next investment, in general?
We are looking for synergies with our partner companies rather looking into a specific branch.

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?
Fintech is oversaturated with very 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?
We mostly invest locally, but our most successful investment was in Taxify (now Bolt).

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?
Definitely security domain is best positioned. We are excited about IP Fabric (founder is ex-Cisco CEO Pavel Bykov), Whalebone (R. Malovič), Wultra (P. Dvořák).

How should investors in other cities think about the overall investment climate and opportunities in your city?
The interest is bigger, a lot of successful startups raise demand for opportunities.

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 think so, local network is important. Remote work is not for everyone.

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?
There will be shifts in retail. This is an opportunity for startups like Pygmalios, which provide analytics for retail.

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?
Luckily the impact is not big. Biggest worries are about difficulties with travel abroad for business meetings. Our advice is hold the runway longer 🙂

Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Yes, demand for call center tools like omnichannel solution mluvii.com, which works at the home office move up significantly.

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.
At spring our country was “best in COVID” and now it is “worst in COVID.” Last spring thousands of people from the startup community helped and came up with brilliant ideas, apps and solutions but at the end most outcomes (like eRouška and https://koronavirus.mzcr.cz/en/) were screwed by slow or faulty decisions of government. Instead of hope I’m disappointed, but I believe that vaccination will help us to get life back on the track.

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.
Patrik Juránek from Startup Disrupt community.

Any other thoughts you want to share with TechCrunch readers?
Prague is great and safe city for living — when you setup a branch in Prague you can attract people from all of the CEE region to move in.

Lukáš Konečný, principal, Y Soft Ventures

What trends are you most excited about investing in, generally?
Anything that helps businesses run smarter is something we would like to take a look at. More specifically we are interested in areas such as Internet of Things, smart factories, smart cities, smart office, cybersecurity, big data and AR/VR. And especially when there is some kind of hardware involved — that something we really love.

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

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
It would be great to see more startups focusing on hardware. Admittedly, creating hardware and scaling-up a hardware-focused business is always a bigger challenge, but the opportunities are so vast and many are yet untapped.

What are you looking for in your next investment, in general?
Apart from the “obvious” aspects such as innovativeness, global potential, scalability, strong team and fit with our investment thesis, we look for founders who show great strategic thinking and execution skills, who really understand the market and their customers’ needs and listen to feedback.

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?
Considering our focus on B2B, we have better overview of this part of the economy. Lately, we have seen a huge number of startups using AI/ML for computer vision or natural language processing use cases creating very similar products, meaning it will be rather difficult for them to differentiate and outperform the rest of the competition. But that does not mean that a new revolutionary idea cannot appear.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
Our focus is on the Central European region — so far we have invested in the Czech Republic and Slovakia, but we are open to founders from other neighboring countries as well. The majority of our portfolio is located in the Brno/South Moravia region, where Y Soft is based. It is not an outcome of an intentional strategy, but just the reality of which startups interested us the most.

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?
Generally, the Czech startup ecosystem is getting more mature, especially thanks to serial entrepreneurs as well as more experienced first-time founders, and the developing business angel/VC ecosystem. It is hard to pick just one industry, as the spectrum of companies is very vast.

How should investors in other cities think about the overall investment climate and opportunities in your city?
From the investors’ point of view, the Czech startup ecosystem can provide a lot of interesting opportunities, and especially for foreign investors the investments can be a “good value for money,” even though the VC ecosystem has become more competitive in the last years due to influx of new money. The seed and partly Series A segment can be seen as rather saturated, but there is a significant potential in the larger Series A or later-stage investments.

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?
The main Czech hubs, Prague and Brno, are probably not going to see their status weakened, as they are not only business centers, but also have the main universities where the talented people are and are hearts of the cultural life that is attractive to many. But we will see a shift toward remote woking, allowing founders to tap a wider talent pool.

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 believe that after the shock caused by COVID-19 fades away, there will be more opportunities for the companies in segments we invest in, as the induced trends are only forcing businesses to run smarter. The trends most relevant to us will be those associated with accelerated digital transformation, changes in supply chains and evolution of workspaces.

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 strategy. The only changes were on the tactical level, as for a certain period of time we shifted more capacities to portfolio support. Most of our founders had to deal with a negative impact on their sales funnel, as some customers postponed or cancelled the planned deals. Some of the founders had to deal with disruptions in the distribution channels, as some of their partners’ businesses were hit rather hard, and a small number of companies had to resolve issues with their supply chain. These challenges are still, to an extent, worries to our portfolio companies, as the economic development is still uncertain. To deal with the situation, cash flow became the main focus, together with more active communication with key business partners throughout the value chains.

Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
We have seen a lot of positive signals in retention and some green shoots regarding revenue, but the situation is still too fragile.

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.
It is hard to find glimmers of hope lately, as the situation in the Czech Republic is really not developing well. However, I was recently able to participate in several online events that young entrepreneurs, in some cases even high school or university students, attended to present their projects or to improve their business skills. And it was great to see people who are still deeply interested in — and invested in — the entrepreneurial path, regardless of the current situation.

Vaclav Pavlecka, managing partner, Air Ventures

What trends are you most excited about investing in, generally?
We are sector agnostic, so it’s not so much about “trends,” rather than other aspects of startups in our pipeline.

What’s your latest, most exciting investment?
Cross Network Intelligence.

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
Many sectors are “to-be-disrupted yet” but for example I believe that the predictive medicine (that helps you avoid the problem instead the one that is helping to solve the problem that is already there) will be one of the major trends for the near future.

What are you looking for in your next investment, in general?
Distinctive unique selling proposition, market-oriented and sales-hungry team, disruptive potential, upmarket potential.

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?
Social networks in general are the type of services I am concerned about due to a long-term impact on one’s mental health and due to social confirmation bias and decreasing ability for a healthy unheated critical discussion in society. As for oversaturation, it is hard to generalize, since every industry still has its niches. But a top of my mind idea for an oversaturated market is the marketing technologies sector (as well as many other software products). Solutions are easily replicable (think chatbots) and successful only at the limited market.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
We tend to focus on companies with the local strings (with exceptions made — e.g., Californian clothing startup Nahmias).

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?
We see a huge potential of local talents in cybersecurity, industry automation (due to the fact that Czechia has one of the densest “per capita” car production in the world), gaming industry (including esports), crypto and health. As for companies I think Apiary, Beat Games, Warhorse gaming studio, Mews.com, Kiwi.com, Snuggs, Prusa Research, Productboard, Rossum, Integromat and Alheon.

How should investors in other cities think about the overall investment climate and opportunities in your city?
“Local” VCs and investors are definitely willing to make meaningful connections and co-invest. The ecosystem is more mature every year and grows stronger. Prague and the surrounding region also has its charm that attracts many talents as the city has an ideal balance between the life quality and costs in comparison to other metropolitan areas.

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 believe that we will see a big “return to the good part of the old system” in the end of this year/early 2022, so I won’t expect the big shift in the sense of geographic “founder density” outside of the major cities. If, however, the COVID-19 restrictions should last more years, then many social changes can be sparked, including geographic mobility and flexibility.

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?
No surprise there — the whole travel industry, gastronomical industry and culture tech are in the deepest crisis in decades. Many other industries are under big pressure to increase the speed of change, e.g., the education industry, the entertainment industry. Also in general small to medium businesses are having tough times locally, since the government restrictions are not being implemented efficiently and their communication isn’t built around a sound strategy.

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?
Our investment strategy is built around long-lasting principles and therefore we didn’t have to change it completely. Of course the investment appetite in sectors hit by crisis decreased significantly but other opportunities emerged. As for portfolio impact, proptech vertical was hit heavily and some of our companies had to reiterate their product offering. Our general advice to any startup in our portfolio is to boost the dialogue with their customers, learn how their needs are shifting (if so) and try to steer the wheel in the right time. If needed, we are ready to support our founders financially and also teamwise, since we are hands-on investors.

Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
D2C startups with a sound unit economy and their own strong distribution channels are thriving (not only locally). This includes our portfolio.

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.
Not losing hope really. I think people were in much deeper crises and that we refer to the current situation as we do only due to lack of historical comparability. We are still living in times of prosperity and the pandemic will eventually go away thanks to the scientific progress people have achieved. So I think the beacon of positive change are all the RNA vaccines out there. I am thrilled by the restless work of scientists involved in their development and I believe they should receive much greater social credit than they do nowadays.

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.
Cedric Maloux, Lubo Smid, Dita Formánková, Tomas Cironis, Ondrej Bartos.

Roman Horacek , partner, Reflex Capital

What trends are you most excited about investing in, generally?
B2B, business automation processes, e-commerce, AI, SaaS, COVID-19-related solutions — across verticals (remote work, conferencing, etc.).

What’s your latest, most exciting investment?
Webnode, SignageOS and some others that unfortunately cannot be disclosed yet 🙂

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 AI startups (actually using AI).

What are you looking for in your next investment, in general?
Rockstar founders, existing and real market need, scalable solution with solid IP.

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?
Cryptocurrencies, blockchain, talent marketplaces.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
As of now our portfolio is approximately 75%/25% (75% CEE and 25% USA/other).

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?
Our companies — APIFY, Productboard, Smartlook, Alice Technologies, SingageOS. Other companies — DoDo, Around, UiPath, Pex,

How should investors in other cities think about the overall investment climate and opportunities in your city?
Great technical talent with superb ideas falling behind with go-to-market and sales skills.

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 don’t think so, I believe the talent will still be attracted by existing major hubs. Smaller the team, more interaction is needed. Despite all the innovations in remote work one-to-one interactions and social time cannot be fully replaced (yet).

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?
Exposed — travel, dating apps … all businesses traditionally based on physical interaction. Not a surprise I guess 🙂 Opportunities — remote work applications, psychedelic applications, well-being startups, life science solutions, logistics and related industries, e-commerce for SMEs.

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?
Not really. Our No. 1 investment criteria is strong founders. Most of them were able to adjust their business models to the new market conditions. Spring 2020 advice was cash is king, stay frugal and adjust your business to the new market conditions ASAP or others will.

Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Yes. I believe COVID-19 played a role of an accelerator for innovations in many business areas and even e-government and other rigid/conservative industries.

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.
Given all the events of 2020 we had a solid year as a fund. What was inspiring — seeing founders coming across whatever obstacles thrown under their legs … overcoming them with new ideas/inventions and unbreakable entrepreneurial spirit.

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.
Hard to name one or a few … every single player plays a different role and one individual is unimportant without others. Same as in nature, even the strongest/biggest predators cannot thrive without a thriving ecosystem as a whole.

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Facebook faces ‘mass action’ lawsuit in Europe over 2019 breach

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Facebook is to be sued in Europe over the major leak of user data that dates back to 2019 but which only came to light recently after information on 533M+ accounts was found posted for free download on a hacker forum.

Today Digital Rights Ireland (DRI) announced it’s commencing a “mass action” to sue Facebook, citing the right to monetary compensation for breaches of personal data that’s set out in the European Union’s General Data Protection Regulation (GDPR).

Article 82 of the GDPR provides for a ‘right to compensation and liability’ for those affected by violations of the law. Since the regulation came into force, in May 2018, related civil litigation has been on the rise in the region.

The Ireland-based digital rights group is urging Facebook users who live in the European Union or European Economic Area to check whether their data was breach — via the haveibeenpwned website (which lets you check by email address or mobile number) — and sign up to join the case if so.

Information leaked via the breach includes Facebook IDs, location, mobile phone numbers, email address, relationship status and employer.

Facebook has been contacted for comment on the litigation.

The tech giant’s European headquarters is located in Ireland — and earlier this week the national data watchdog opened an investigation, under EU and Irish data protection laws.

A mechanism in the GDPR for simplifying investigation of cross-border cases means Ireland’s Data Protection Commission (DPC) is Facebook’s lead data regulator in the EU. However it has been criticized over its handling of and approach to GDPR complaints and investigations — including the length of time it’s taking to issue decisions on major cross-border cases. And this is particularly true for Facebook.

With the three-year anniversary of the GDPR fast approaching, the DPC has multiple open investigations into various aspects of Facebook’s business but has yet to issue a single decision against the company.

(The closest it’s come is a preliminary suspension order issued last year, in relation to Facebook’s EU to US data transfers. However that complaint long predates GDPR; and Facebook immediately filed to block the order via the courts. A resolution is expected later this year after the litigant filed his own judicial review of the DPC’s processes).

Since May 2018 the EU’s data protection regime has — at least on paper — baked in fines of up to 4% of a company’s global annual turnover for the most serious violations.

Again, though, the sole GDPR fine issued to date by the DPC against a tech giant (Twitter) is very far off that theoretical maximum. Last December the regulator announced a €450k (~$547k) sanction against Twitter — which works out to around just 0.1% of the company’s full-year revenue.

That penalty was also for a data breach — but one which, unlike the Facebook leak, had been publicly disclosed when Twitter found it in 2019. So Facebook’s failure to disclose the vulnerability it discovered and claims it fixed by September 2019, which led to the leak of 533M accounts now, suggests it should face a higher sanction from the DPC than Twitter received.

However even if Facebook ends up with a more substantial GDPR penalty for this breach the watchdog’s caseload backlog and plodding procedural pace makes it hard to envisage a swift resolution to an investigation that’s only a few days old.

Judging by past performance it’ll be years before the DPC decides on this 2019 Facebook leak — which likely explains why the DRI sees value in instigating class-action style litigation in parallel to the regulatory investigation.

“Compensation is not the only thing that makes this mass action worth joining. It is important to send a message to large data controllers that they must comply with the law and that there is a cost to them if they do not,” DRI writes on its website.

It also submitted a complaint about the Facebook breach to the DPC earlier this month, writing then that it was “also consulting with its legal advisors on other options including a mass action for damages in the Irish Courts”.

It’s clear that the GDPR enforcement gap is creating a growing opportunity for litigation funders to step in in Europe and take a punt on suing for data-related compensation damages — with a number of other mass actions announced last year.

In the case of DRI its focus is evidently on seeking to ensure that digital rights are upheld. But it told RTE that it believes compensation claims which force tech giants to pay money to users whose privacy rights have been violated is the best way to make them legally compliant.

Facebook, meanwhile, has sought to play down the breach it failed to disclose in 2019 — claiming it’s ‘old data’ — a deflection that ignores the fact that people’s dates of birth don’t change (nor do most people routinely change their mobile number or email address).

Plenty of the ‘old’ data exposed in this latest massive Facebook leak will be very handy for spammers and fraudsters to target Facebook users — and also now for litigators to target Facebook for data-related damages.

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Geoffrey Hinton has a hunch about what’s next for AI

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Back in November, the computer scientist and cognitive psychologist Geoffrey Hinton had a hunch. After a half-century’s worth of attempts—some wildly successful—he’d arrived at another promising insight into how the brain works and how to replicate its circuitry in a computer.

“It’s my current best bet about how things fit together,” Hinton says from his home office in Toronto, where he’s been sequestered during the pandemic. If his bet pays off, it might spark the next generation of artificial neural networks—mathematical computing systems, loosely inspired by the brain’s neurons and synapses, that are at the core of today’s artificial intelligence. His “honest motivation,” as he puts it, is curiosity. But the practical motivation—and, ideally, the consequence—is more reliable and more trustworthy AI.

A Google engineering fellow and cofounder of the Vector Institute for Artificial Intelligence, Hinton wrote up his hunch in fits and starts, and at the end of February announced via Twitter that he’d posted a 44-page paper on the arXiv preprint server. He began with a disclaimer: “This paper does not describe a working system,” he wrote. Rather, it presents an “imaginary system.” He named it, “GLOM.” The term derives from “agglomerate” and the expression “glom together.”

Hinton thinks of GLOM as a way to model human perception in a machine—it offers a new way to process and represent visual information in a neural network. On a technical level, the guts of it involve a glomming together of similar vectors. Vectors are fundamental to neural networks—a vector is an array of numbers that encodes information. The simplest example is the xyz coordinates of a point—three numbers that indicate where the point is in three-dimensional space. A six-dimensional vector contains three more pieces of information—maybe the red-green-blue values for the point’s color. In a neural net, vectors in hundreds or thousands of dimensions represent entire images or words. And dealing in yet higher dimensions, Hinton believes that what goes on in our brains involves “big vectors of neural activity.”

By way of analogy, Hinton likens his glomming together of similar vectors to the dynamic of an echo chamber—the amplification of similar beliefs. “An echo chamber is a complete disaster for politics and society, but for neural nets it’s a great thing,” Hinton says. The notion of echo chambers mapped onto neural networks he calls “islands of identical vectors,” or more colloquially, “islands of agreement”—when vectors agree about the nature of their information, they point in the same direction.

“If neural nets were more like people, at least they can go wrong the same ways as people do, and so we’ll get some insight into what might confuse them.”

Geoffrey Hinton

In spirit, GLOM also gets at the elusive goal of modelling intuition—Hinton thinks of intuition as crucial to perception. He defines intuition as our ability to effortlessly make analogies. From childhood through the course of our lives, we make sense of the world by using analogical reasoning, mapping similarities from one object or idea or concept to another—or, as Hinton puts it, one big vector to another. “Similarities of big vectors explain how neural networks do intuitive analogical reasoning,” he says. More broadly, intuition captures that ineffable way a human brain generates insight. Hinton himself works very intuitively—scientifically, he is guided by intuition and the tool of analogy making. And his theory of how the brain works is all about intuition. “I’m very consistent,” he says.

Hinton hopes GLOM might be one of several breakthroughs that he reckons are needed before AI is capable of truly nimble problem solving—the kind of human-like thinking that would allow a system to make sense of things never before encountered; to draw upon similarities from past experiences, play around with ideas, generalize, extrapolate, understand. “If neural nets were more like people,” he says, “at least they can go wrong the same ways as people do, and so we’ll get some insight into what might confuse them.”

For the time being, however, GLOM itself is only an intuition—it’s “vaporware,” says Hinton. And he acknowledges that as an acronym nicely matches, “Geoff’s Last Original Model.” It is, at the very least, his latest.

Outside the box

Hinton’s devotion to artificial neural networks (a mid-2oth century invention) dates to the early 1970s. By 1986 he’d made considerable progress: whereas initially nets comprised only a couple of neuron layers, input and output, Hinton and collaborators came up with a technique for a deeper, multilayered network. But it took 26 years before computing power and data capacity caught up and capitalized on the deep architecture.

In 2012, Hinton gained fame and wealth from a deep learning breakthrough. With two students, he implemented a multilayered neural network that was trained to recognize objects in massive image data sets. The neural net learned to iteratively improve at classifying and identifying various objects—for instance, a mite, a mushroom, a motor scooter, a Madagascar cat. And it performed with unexpectedly spectacular accuracy.

Deep learning set off the latest AI revolution, transforming computer vision and the field as a whole. Hinton believes deep learning should be almost all that’s needed to fully replicate human intelligence.

But despite rapid progress, there are still major challenges. Expose a neural net to an unfamiliar data set or a foreign environment, and it reveals itself to be brittle and inflexible. Self-driving cars and essay-writing language generators impress, but things can go awry. AI visual systems can be easily confused: a coffee mug recognized from the side would be an unknown from above if the system had not been trained on that view; and with the manipulation of a few pixels, a panda can be mistaken for an ostrich, or even a school bus.

GLOM addresses two of the most difficult problems for visual perception systems: understanding a whole scene in terms of objects and their natural parts; and recognizing objects when seen from a new viewpoint.(GLOM’s focus is on vision, but Hinton expects the idea could be applied to language as well.)

An object such as Hinton’s face, for instance, is made up of his lively if dog-tired eyes (too many people asking questions; too little sleep), his mouth and ears, and a prominent nose, all topped by a not-too-untidy tousle of mostly gray. And given his nose, he is easily recognized even on first sight in profile view.

Both of these factors—the part-whole relationship and the viewpoint—are, from Hinton’s perspective, crucial to how humans do vision. “If GLOM ever works,” he says, “it’s going to do perception in a way that’s much more human-like than current neural nets.”

Grouping parts into wholes, however, can be a hard problem for computers, since parts are sometimes ambiguous. A circle could be an eye, or a doughnut, or a wheel. As Hinton explains it, the first generation of AI vision systems tried to recognize objects by relying mostly on the geometry of the part-whole-relationship—the spatial orientation among the parts and between the parts and the whole. The second generation instead relied mostly on deep learning—letting the neural net train on large amounts of data. With GLOM, Hinton combines the best aspects of both approaches.

“There’s a certain intellectual humility that I like about it,” says Gary Marcus, founder and CEO of Robust.AI and a well-known critic of the heavy reliance on deep learning. Marcus admires Hinton’s willingness to challenge something that brought him fame, to admit it’s not quite working. “It’s brave,” he says. “And it’s a great corrective to say, ‘I’m trying to think outside the box.’”

The GLOM architecture

In crafting GLOM, Hinton tried to model some of the mental shortcuts—intuitive strategies, or heuristics—that people use in making sense of the world. “GLOM, and indeed much of Geoff’s work, is about looking at heuristics that people seem to have, building neural nets that could themselves have those heuristics, and then showing that the nets do better at vision as a result,” says Nick Frosst, a computer scientist at a language startup in Toronto who worked with Hinton at Google Brain.

With visual perception, one strategy is to parse parts of an object—such as different facial features—and thereby understand the whole. If you see a certain nose, you might recognize it as part of Hinton’s face; it’s a part-whole hierarchy. To build a better vision system, Hinton says, “I have a strong intuition that we need to use part-whole hierarchies.” Human brains understand this part-whole composition by creating what’s called a “parse tree”—a branching diagram demonstrating the hierarchical relationship between the whole, its parts and subparts. The face itself is at the top of the tree, and the component eyes, nose, ears, and mouth form the branches below.

One of Hinton’s main goals with GLOM is to replicate the parse tree in a neural net—this is would distinguish it from neural nets that came before. For technical reasons, it’s hard to do. “It’s difficult because each individual image would be parsed by a person into a unique parse tree, so we would want a neural net to do the same,” says Frosst. “It’s hard to get something with a static architecture—a neural net—to take on a new structure—a parse tree—for each new image it sees.” Hinton has made various attempts. GLOM is a major revision of his previous attempt in 2017, combined with other related advances in the field.

“I’m part of a nose!”

GLOM vector

Hinton face grid

MS TECH | EVIATAR BACH VIA WIKIMEDIA

A generalized way of thinking about the GLOM architecture is as follows: The image of interest (say, a photograph of Hinton’s face) is divided into a grid. Each region of the grid is a “location” on the image—one location might contain the iris of an eye, while another might contain the tip of his nose. For each location in the net there are about five layers, or levels. And level by level, the system makes a prediction, with a vector representing the content or information. At a level near the bottom, the vector representing the tip-of-the-nose location might predict: “I’m part of a nose!” And at the next level up, in building a more coherent representation of what it’s seeing, the vector might predict: “I’m part of a face at side-angle view!”

But then the question is, do neighboring vectors at the same level agree? When in agreement, vectors point in the same direction, toward the same conclusion: “Yes, we both belong to the same nose.” Or further up the parse tree. “Yes, we both belong to the same face.”

Seeking consensus about the nature of an object—about what precisely the object is, ultimately—GLOM’s vectors iteratively, location-by-location and layer-upon-layer, average with neighbouring vectors beside, as well as predicted vectors from levels above and below.

However, the net doesn’t “willy-nilly average” with just anything nearby, says Hinton. It averages selectively, with neighboring predictions that display similarities. “This is kind of well-known in America, this is called an echo chamber,” he says. “What you do is you only accept opinions from people who already agree with you; and then what happens is that you get an echo chamber where a whole bunch of people have exactly the same opinion. GLOM actually uses that in a constructive way.” The analogous phenomenon in Hinton’s system is those “islands of agreement.”

“Geoff is a highly unusual thinker…”

Sue Becker

“Imagine a bunch of people in a room, shouting slight variations of the same idea,” says Frosst—or imagine those people as vectors pointing in slight variations of the same direction. “They would, after a while, converge on the one idea, and they would all feel it stronger, because they had it confirmed by the other people around them.” That’s how GLOM’s vectors reinforce and amplify their collective predictions about an image.

GLOM uses these islands of agreeing vectors to accomplish the trick of representing a parse tree in a neural net. Whereas some recent neural nets use agreement among vectors for activation, GLOM uses agreement for representation—building up representations of things within the net. For instance, when several vectors agree that they all represent part of the nose, their small cluster of agreement collectively represents the nose in the net’s parse tree for the face. Another smallish cluster of agreeing vectors might represent the mouth in the parse tree; and the big cluster at the top of the tree would represent the emergent conclusion that the image as a whole is Hinton’s face. “The way the parse tree is represented here,” Hinton explains, “is that at the object level you have a big island; the parts of the object are smaller islands; the subparts are even smaller islands, and so on.”

Figure 2 from Hinton’s GLOM paper. The islands of identical vectors (arrows of the same color) at the various levels represent a parse tree.
GEOFFREY HINTON

According to Hinton’s long-time friend and collaborator Yoshua Bengio, a computer scientist at the University of Montreal, if GLOM manages to solve the engineering challenge of representing a parse tree in a neural net, it would be a feat—it would be important for making neural nets work properly. “Geoff has produced amazingly powerful intuitions many times in his career, many of which have proven right,” Bengio says. “Hence, I pay attention to them, especially when he feels as strongly about them as he does about GLOM.”

The strength of Hinton’s conviction is rooted not only in the echo chamber analogy, but also in mathematical and biological analogies that inspired and justified some of the design decisions in GLOM’s novel engineering.

“Geoff is a highly unusual thinker in that he is able to draw upon complex mathematical concepts and integrate them with biological constraints to develop theories,” says Sue Becker, a former student of Hinton’s, now a computational cognitive neuroscientist at McMaster University. “Researchers who are more narrowly focused on either the mathematical theory or the neurobiology are much less likely to solve the infinitely compelling puzzle of how both machines and humans might learn and think.”

Turning philosophy into engineering

So far, Hinton’s new idea has been well received, especially in some of the world’s greatest echo chambers. “On Twitter, I got a lot of likes,” he says. And a YouTube tutorial laid claim to the term “MeGLOMania.”

Hinton is the first to admit that at present GLOM is little more than philosophical musing (he spent a year as a philosophy undergrad before switching to experimental psychology). “If an idea sounds good in philosophy, it is good,” he says. “How would you ever have a philosophical idea that just sounds like rubbish, but actually turns out to be true? That wouldn’t pass as a philosophical idea.” Science, by comparison, is “full of things that sound like complete rubbish” but turn out to work remarkably well—for example, neural nets, he says.

GLOM is designed to sound philosophically plausible. But will it work?

Chris Williams, a professor of machine learning in the School of Informatics at the University of Edinburgh, expects that GLOM might well spawn great innovations. However, he says, “the thing that distinguishes AI from philosophy is that we can use computers to test such theories.” It’s possible that a flaw in the idea might be exposed—perhaps also repaired—by such experiments, he says. “At the moment I don’t think we have enough evidence to assess the real significance of the idea, although I believe it has a lot of promise.”

The GLOM test model inputs are ten ellipses that form a sheep or a face.
LAURA CULP

Some of Hinton’s colleagues at Google Research in Toronto are in the very early stages of investigating GLOM experimentally. Laura Culp, a software engineer who implements novel neural net architectures, is using a computer simulation to test whether GLOM can produce Hinton’s islands of agreement in understanding parts and wholes of an object, even when the input parts are ambiguous. In the experiments, the parts are 10 ellipses, ovals of varying sizes, that can be arranged to form either a face or a sheep.

With random inputs of one ellipse or another, the model should be able to make predictions, Culp says, and “deal with the uncertainty of whether or not the ellipse is part of a face or a sheep, and whether it is the leg of a sheep, or the head of a sheep.” Confronted with any perturbations, the model should be able to correct itself as well. A next step is establishing a baseline, indicating whether a standard deep-learning neural net would get befuddled by such a task. As yet, GLOM is highly supervised—Culp creates and labels the data, prompting and pressuring the model to find correct predictions and succeed over time. (The unsupervised version is named GLUM—“It’s a joke,” Hinton says.)

At this preliminary state, it’s too soon to draw any big conclusions. Culp is waiting for more numbers. Hinton is already impressed nonetheless. “A simple version of GLOM can look at 10 ellipses and see a face and a sheep based on the spatial relationships between the ellipses,” he says. “This is tricky, because an individual ellipse conveys nothing about which type of object it belongs to or which part of that object it is.”

And overall, Hinton is happy with the feedback. “I just wanted to put it out there for the community, so anybody who likes can try it out,” he says. “Or try some sub-combination of these ideas. And then that will turn philosophy into science.”

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Pakistan temporarily blocks social media

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Pakistan has temporarily blocked several social media services in the South Asian nation, according to users and a government-issued notice reviewed by TechCrunch.

In an order titled “Complete Blocking of Social Media Platforms,” the Pakistani government ordered Pakistan Telecommunication Authority to block social media platforms including Twitter, Facebook, WhatsApp, YouTube, and Telegram from 11am to 3pm local time (06.00am to 10.00am GMT) Friday.

The move comes as Pakistan looks to crackdown against a violent terrorist group and prevent troublemakers from disrupting Friday prayers congregations following days of violent protests.

Earlier this week Pakistan banned the Islamist group Tehrik-i-Labaik Pakistan after arresting its leader, which prompted protests, according to local media reports.

An entrepreneur based in Pakistan told TechCrunch that even though the order is supposed to expire at 3pm local time, similar past moves by the government suggests that the disruption will likely last for longer.

Though Pakistan, like its neighbor India, has temporarily cut phone calls access in the nation in the past, this is the first time Islamabad has issued a blanket ban on social media in the country.

Pakistan has explored ways to assume more control over content on digital services operating in the country in recent years. Some activists said the country was taking extreme measures without much explanations.

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