Interview with Pavel Konečný about the future of NSW

We are delighted to bring you an insightful interview with Pavel Konečný on the future of NSW, as featured on the CzechCrunch portal.

Out of 1,092 applicants, how many companies received support in total?

Seventy-five companies from all over Europe were selected, and we assume that most of them managed to conclude the contract. Only one of them was from the Czech Republic and that was Neuron Soundware. For more information, please see here.

What business KPIs do you track?
In the past, the primary goal was acquiring data. That’s why we’ve undertaken many projects not only on a commercial basis but also on a partnership basis. Currently, we are focused on the business potential with our distribution partners and, newly, with OEM manufacturers. Developing our partnership network enables us to transcend continental boundaries and provide essential on-site support.

The quality of customers is significantly higher than when we started. Equally important is the fact that they are renewing and expanding their contracts. Currently, we have installations in the USA, Japan, Southeast Asia, and, of course, in Europe.

You were planning to open Series B. Did it eventually happen?
The next financial round is still ahead of us. We are preparing the necessary documentation and aim to conclude it this year. The total investment is planned at 6 million EUR. We have already initiated discussions with funds that focus on AI and IoT.
Instead, did you opt to secure funding through the EU Horizon and the Technological Agency of the Czech Republic (TAČR)?

The entire process took over a year, from drafting the initial version of the application to the contract’s conclusion. The secured grant financing means that the company’s equity isn’t diluted. We highly value the financial support from the European Innovation Council (EIC), as it specifically targets deep tech companies. It’s a prestigious recognition, and in recent years, we are the only Czech company that has succeeded with the EIC.

In what form is this support provided? Grant, loan, equity investment, or a combination?
The EIC has approved what’s known as blended financing. This entails a grant for technology and business development. Beyond that, they have offered us equity financing up to 50% of the next round. This helps mitigate the risk for traditional investors who, due to supply chain issues, tend to avoid startups with hardware components.
Your goal a year ago was to reach an annual revenue of one million euros. In the financial report, I can see that the figure for the period from January to September ended up being 4 million crowns (for the year 2021, it was 9.5 million; I understand that you changed your fiscal year). It appears that you're not succeeding in meeting your business targets. What possible explanation is there?

The disruptions in the supply chains forced us to redesign some of our hardware technology. We had to postpone a number of projects. We focused on improving our technology, where we made significant steps forward, enabling us to compete with the top AI companies in the world.
Simultaneously, we have started to build a global partnership network that, reflecting our ambition to become a respected international player in the field of AI, machine learning and IoT solutions.

Our strategy lies in providing know-how to leading global OEM manufacturers in the development of new technologies and products. This focus is beginning to bring the expected results. Currently, we are engaging in discussions about close collaborations with some world leaders in the fields of robotics, transportation, energy, and other interesting industrial sectors.

On the other hand, you reduced the loss from 53 million Czech koruna in 2020 to 16 million for the first 9 months of 2022. How do you explain this?

In 2020, we dedicated significant effort to the development of our nGuard software platform. In addition to our internal team, we engaged a number of subcontractors. We continue to invest in the ongoing enhancement of our solution, but we completed the majority of the initial development by the fall of 2021. This led to a reduction in overall costs compared to previous years.

What results do you expect for this year?
We believe that we will surpass our previous ambitions. For us, the key factors now are the contracts, some of which are in the range of tens to hundreds of millions of Czech koruna, and which will generate a long-term stable income for our company.
One of your investors, Inven Capital, left the company. If I have the correct information, did the other partners buy out their share?

Inven Capital opened a new, larger investment fund and strategically decided to focus on supporting companies in later stages of development. After mutual agreement, one of our investors bought out their stake. They still have an interest in our success, including business collaboration within the ČEZ group.

Is there anything else you would like to mention?

I’m glad that media attention has returned to AI, whose social impact will be greater than any global events in recent years. I’ve been following the development of AI for a long time, and the current progress was foreseeable. The evolution of AI is a gradual and iterative process, with small or large leaps forward. It took OpenAI over 6 years and billions of dollars to create a language model that captivated the public.

It’s crucial to realize that this process won’t just end here. AI will not only write captivating children’s books, create computer games, or drive cars. It will design houses, invent new materials, and more. Soon, we will have superintelligence, and likely even with its own consciousness. Over the summer, I wrote an essay pondering whether we will employ it or it will employ us (read in English).

Our position as human beings as masters of creation will likely change dramatically. Evolution has brought us to a certain stage of development, but a silicon brain, unlike a human one, knows no limits. No one will be able to read as many books in their lifetime as AI can in a few hours.

I had an illustrative image generated by AI on the topic of humanity’s position relative to AI superintelligence. So, let’s keep our fingers crossed for a favorable outcome for all of us.

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