CVCA H1 Quarterly Exclusive: Top VC Deal Profile – Element AI
This article is part of a new series, CVCA Quarterly Exclusive, written and published by the Canadian Venture Capital and Private Equity Association. This series provides an analysis of the CVCA’s most recently published VC & PE Canadian Market Overviewthrough expert commentary and perspectives.
Element AI Jumpstarts Canada’s AI Game
Canada is capitalizing on the opportunity to position itself at the top of the global artificial intelligence contest. Home to leading AI academics, notably Dr.Yoshua Bengio, renowned computer scientist, professor, and head of the MILA, who is helping advance Canada’s standing in the tech sector; specifically, in machine learning and artificial intelligence.
One of the biggest, if not THE biggest story of H12017 on the venture capital side, was the historic size of the series A for Montreal-based Element AI. Element AI is incorporating expertise in artificial intelligence to develop future systems and techniques while offering immediate products and services for clients.
It was partially Dr. Bengio’s involvement with Element AI that had investors chomping at the bit to get the historic series A sealed.
BDC Capital co-invested in the Series A with Real Ventures. The co-investment was one of nine players in the syndicate, led by California-based Data Collective and including an investment from another CVCA member, National Bank Financial.
Karl Reckziegel, Vice President Funds and Co-investments, BDC Capital, helped paint the picture of why interest in Element was at fever pitch levels.
“We’ve been following [the AI] space for quite a while. We’ve got a lot of investments that had an AI component in them,” Reckziegel points out. “Particularly, Dr. Bengio’s involvement, Jean Francois Gagne’s vision (Element’s CEO) and our shared belief that Canada has the right components to become a global AI powerhouse, making Element.ai a very attractive investment on a strategic basis. This, on top the international traction that the firm quickly garnered, attracted us to the investment in Element AI.”
The participation of Data Collective, a firm that specializes in the AI sector helped to establish the global pull. What’s more, BDC’s longstanding relationship with the team at Real Ventures helped broker introductions to key players in Asia through BDC’s Alison Nankivell, VP Global Scaling.
Reckziegel notes that while there was significant spotlight on Element, the process of carefully examining the investment wasn’t thrown on the wayside.
“That said, like in any deal, as a disciplined investor we cannot let hype or rapid pace get in the way of proper due diligence and the fundamentals of a transaction. BDC Capital’s coinvestment team was able to take the time necessary to ensure we got comfortable with the deal before committing to the investment.”
AI INVESTMENT SKYROCKETING
Last summer, Tractica, a market intelligence firm that provides in-depth analysis of global market opportunities, released a report forecasting exponential investment growth in the sector – to $36.8 billion by 2025.
Of course, Element AI isn’t the only player in the sector. However, its fluid business model is possibly their most defining characteristic. As Reckziegel notes, they seem to have found a particular operational sweet spot.
“What sets them apart is the extent of the AI community inclusiveness that they have embedded in their business model. Rather than shelter and bunker a proprietary AI team to develop proprietary solutions to take to market, they have very much essentially “open sourced” their approach by establishing a Faculty Fellow Network led by Dr. Bengio where academics can maintain their academic standing while affiliating themselves with Element AI. This gives them access to real-world problems and real-world datasets to test their solutions. It’s very much a win-win and it feels very much like a classic Canadian approach.”
Element AI has some big named competition including Amazon, Facebook, IBM and Google. Reckziegel says he doesn’t see one dominant winner in the market and, in his opinion, views AI as very much a team sport.
“Element AI is a nimble, innovative startup. It’s well financed, with access to a deep talent base and has many of the right components to be successful. But let’s not kid ourselves, this is still venture investing — but in [BDC’s] opinion, the potential reward both financially and the positive impact on Canada far outweighs the risks.”
To read more about venture capital activity in the first half of 2017, read the full CVCA H12017 VC & PE Canadian Market Overview here.