Data & Analysis

International Powerhouse Investors Bet Big On Canadian Tech

Real Ventures Photo

Why Asian Investors are Seeking Better Access to Canada’s Tech Market

When most startups and their investors talk about attracting outside capital, the U.S. usually comes to mind, or sometimes Europe or the U.K. Lately though, Canada’s technology startup ecosystem has been attracting investment from a new, emerging region of the world: Asia.

The geographical shift is being steered in part by Montreal-based Real Ventures through its involvement with Montreal-based Element AI, launched in the fall of 2016. Real Ventures, known for its role in helping to kick-start Canada’s tech renaissance over the past decade, has also been attracting more Asian investors for its own funds.

Element has attracted capital from Asian technology customers and investors, says Real Ventures Co-founder and Partner, Jean-Sebastien Cournoyer. They realize AI is going to be important and reached out to get involved in what Element was doing,” Cournoyer says.

After a handful of trips to Asia in the first half of 2017, Element announced at the end of Q2 that it had raised more than USD $100M in new funding from a number of high-profile tech investors and companies including Intel, Microsoft, Nvidia and Chinese Internet giant Tencent Holdings. Overall, a third of the $100M came from Asia, a third from Canada, and a third from the U.S.

The funding has helped to develop deep relationships with key investors in those markets,” says Cournoyer.

He says Asian investors, in particular, are seeking better access to the Canadian market, which has developed a strong reputation for its AI talent and technologies. They’re looking for more visibility on what’s happening here and future investment opportunities,” Cournoyer says.

The interest and opportunities have continued to grow. In mid-November, Element said it established a joint USD$45M fund with Korean conglomerates SK Telecom,Hyundai Motor Company, Hanwha targeting the most promising sectors of commercial AI applications and infrastructure.

In a separate deal announced at the end of November, Real Ventures unveiled CAD $180M in financing from investors for two new funds — one for $150M and the other for $30M — including backing from Tencent and Singapore sovereign wealth fund Temasek Holdings. About 15% of the $180M came from Asia.

Cournoyer says the interest from countries such as China, Singapore and South Korea is part of a growing policy commitment to invest more heavily in technology, especially AI, to drive innovation. Countries around the world are seeking to be more technologically competitive on the global stage across sectors ranging from financial services to manufacturing.

They see innovation as the only way to remain relevant,” Cournoyer says. They look at Canada as a country that got it right… Successful companies in the next five-to-10 years will need to use AI to make their business as productive as possible.”

Canada has received a lot of attention worldwide for its investment and talent in AI research and applications. There is a lot of hype in Canada around AI,” says Cournoyer. That’s enabling us to attract talent and investment dollars.”

Fostering Canadian Tech Growth

The next step for Canada, Cournoyer says, is to use that reputation to its advantage. We need to use it to build the rest of the ecosystem,” he says. There is a spotlight on Canadian tech right now. We need to use it to build massive, Canadian-owned companies in Canada. If we don’t end up building that, we’ll lose. We need to prove we can do it here. I’m convinced we can.”

Meantime, Cournoyer says startups should be fairly advanced if they’re looking to attract investors in Asia — and have a good story to tell.

What I’ve learned in the Asian market is that it’s important to have what I call super credibility.’ Investors from there were interested in Element in part because of the credibility of the people involved in it and its ability to attract talent. It was exciting,” he says. As a startup, if you want to do business there, it’s important to build a story that will inspire people. It’s not just about numbers and revenues.”

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