There’s An AI Revolution Underway And It’s Happening In Canada
Watch out U.S.—there’s a new startup hotbed in town and it’s coming from our neighbors to the north. I recently spent a week in Toronto and Montreal working with new startups and can’t believe the passion and energy I felt there. The DNA of Canadian entrepreneurs is charged with technical competency, commitment to creating value and a drive to make a difference.
Unfortunately the Canadian startup scene has been plagued with a lack of investment dollars and experience, resulting in few mergers and acquisitions and major IPOs. The conditions to create the next unicorn have never been met. Canada, a place where education in subjects like math has always been strong, hasn’t seen the startup success of other countries. Canada has historically been light on the presence of major VCs and the investments that do happen are low, so most startups are forced to sell early and cheap rather than grow and increase in value. Consider, for example, that the investment dollars from 2011 to 2015 was flat – running around $2B. This does not make for a recipe of success.
Luckily things are massively changing in Canada. The country is creating its own recipe for startup success and it’s one that is sure to soon have the money pouring in and hot new startups pouring out. The country’s success boils down to three ingredients:
One: Artificial Intelligence (AI). This is critical to Canada becoming the next technology hub and I believe the country is primed to become a leader in AI technology. You see, Canada has recognized that any new generation of startups will require some level of AI. Thus Canadian universities are lining up to produce graduates with degrees in computer science and analyticals—foundational skills for AI.
In Toronto, the recently announced Vector Institute aims to produce more deep learning grads than any other institution in the world. Not only did the institute get a more than $100 million boost from the government as part of Canada’s Pan-Canadian Artificial Intelligence Strategy, more than 30 companies invested over $80 million to support Vector’s success. Vector joins other already strong institutions in Toronto, including Waterloo and Hamilton.
Montreal already had bragging rights as the home of one of the three “co-fathers” of deep learning technology, Yoshua Bengio. His work at the Université de Montréal gave birth to an AI ecosystem that is unrivalled. It includes the Montreal Institute for Learning Algorithms (MILA), the Institute for Data Valorisation (IVADO) and the recently launched Element AI (an artificial intelligence startup factory). These combined resources have made companies, including Google and Microsoft, take note and begin setting up shop in the northern city.
Two: VCs. VCs are starting to show startups the money in Canada. 2016 saw VC investments of $3.2 billion, the highest year on record since 2001. The average deal size at $6.1 million was the highest its been since 1999. The top cities for deals were Toronto, Montreal and Vancouver. As companies including Microsoft and Google have turned their sights on Canada (Alphabet, Facebook, Microsoft are all have R&D office in Toronto and Montreal), so VCs are following suit. They are heading to the northern country to get in on the ground floor of the newest generation of startups. The top active VCs in Canada include Real Venture, Cycle Capital Managementand Relay Venture. BDC is also active in direct investment and co-investment strategies in many technology sectors in Canada.
Three: Leadership. He’s young, he’s hip and he’s into coding. Canadian Prime Minister Justin Trudeau has shown great leadership in a number of areas, not the least of which is boosting STEM talent and supporting entrepreneurialsism. Not long ago, he participated in a Code.org conference where kids learn how to code. He broadcasted his attendance live on Facebook as he learned to code along with other school kids. That is leadership. He has also been very vocal welcoming entrepreneurs to Canada, as well as in supporting programs to help existing startups grow. From slashing the time it takes to process visa applications to investing in grants and interest-free loans for students, he is creating a business-friendly environment and a welcoming place for startups.
If you think of the Canadian technology and innovation sector as a startup company, then Prime Minister Trudeau is the CEO, major universities and incubators are the R&D centers and AI is the business plan. With these three ingredients, the country stands a great chance of creating the right conditions for the birth of a unicorn. The only thing missing is a mega fund to support the birth of new ideas; a large private fund to invest in seed and early stage companies. This government should take the lead in encouraging the creation of this fund. If the vision and business plan to expand Canada’s technology hub is right, major tech companies and VCs will start pouring in the money. With these elements, Canada will be the future hotbed for startups and AI will be the country’s secret weapon.