What is Element AI?

The Montreal startup will soon be worth $1 Billion

Technology startups that leverage artificial intelligence have an added hype factor when machine intelligence is becoming the hype of the 21st century. Outside of climate change, what other technological breakthrough is impacting the world, business and all aspects of human life to the same degree?

Element AI is a Montreal software startup that brings together the best in entrepreneurship, technology and academic ecosystems seeking to elevate the world’s collective wisdom by building an AI-first world.

While tech giants like Google and Amazon build and invest in a multitude of artificial intelligence applications to grow their businesses, Canada’s increasing AI talent pool is also spinning off into a few promising startups. Element AI has a lot of hype with its new round of funding.

Do “AI Startups” Have Unfair Access to Funding?

While Toronto is the start-up mecca of Canada, Element AI has its HQ in Montreal, Quebec.

Artificial-intelligence startup Element AI Inc. has closed one of the largest venture-capital financing rounds by a Canadian technology company, the second time in its three-year life that it has secured more than US$100 million in outside investment.

On September 13th, 2019 it announced a further 200 million Canadian dollars ($151.3 million) in funding, money that it plans to use to commercialize more of its products, as well as to continue working on R&D, specifically on new AI solutions.

Is Element AI Specialized Enough?

Element AI creates AI-powered products that leverage data to enable localized demand sensing, optimize execution, and augment dynamic merchandise planning for a better store and SKU-level profitability.

At Groceryshop 2019, the company will show how its AI-powered products for the grocery and CPG industries will provide data insights in real time to better segment their customers, optimize trade spend and enable better localized assortments.

More than just a PR announcement, tracking startups in the AI space is exciting also from a stock market perspective. While China has dozens if not hundreds of AI startups that are viable, in Canada these events don’t come around too often.

The Most Hyped Canadian Startup?

Founded in 2016 by a team of six partners, Element AI is putting Montreal on the map for AI-startups at a time when Toronto is becoming the Silicon Valley of Canada and Montreal and Vancouver are falling far behind.

The company did not disclose its valuation in the short statement announcing the funding, nor has it ever talked about it publicly, but PitchBook notes that as of its previous funding round of $102 million back in 2017, it had a post-money valuation of $300 million. Element AI is now likely close to the $700 million dollar mark and should break $1 billion by the early 2020s.

However, unlike most startups fortunate to attract that level of capital, the latest financing is not a mark of the Montreal-based company’s commercial success. Rather, it is driven by regional investors. The startup has not actually performed to expectations to indicate the hype is real.

A List of Suspect Regional Investors

The funding is being led by Caisse de dép?t et placement du Québec (CDPQ), along with participation from McKinsey & Company and its advanced analytics company QuantumBlack, and the Québec government. The truth is, in Canada, artificial intelligence funding is lackluster as Canada is falling behind the world in innovation and artificial intelligence, generally speaking.

In spite of significant talent pools, an strong academic history in AI and research, the startups have not manifested in Canada as recruitment by powerful tech firms have “stolen” the worthiest in a talent drain that’s the story of Montreal’s history for at least the last 30 years.

While a few of Toronto’s tech startups can and will scale, Montreal companies are having trouble learning how to grow their businesses beyond a certain point.

The financing comes two years after Element secured US$102 million from global investors months after its much-hyped launch by a group of Montrealers including deep learning pioneer Yoshua Bengio and Mr. Gagné. But hype alone is not good enough to truly build a company that will give value in AI to the rest of society and the world at large.

In its own words, Element AI “turns research and industry expertise into software solutions that exponentially learn and improve” and are adapted to specific industries with a primary focus on the financial services and supply chain sectors.

Previous investors DCVC (Data Collective), Hanwha Asset Management, BDC (Business Development Bank of Canada), Real Ventures and others also participated, with the total raised to date now at CAD$340 million ($257 million). Other strategic investors in the company have included Microsoft, Nvidia and Intel.

Canada Isn’t Investing in AI and Will Likely Fall Behind Globally

While you want a home-grown startup to succeed (I’m based in Montreal), you cannot help compare such AI startups to Chinese startups that have backing by a more centralized Chinese Government that has the resources to fast-track AI and innovation and makes Canada look rather inconsequential to the future of society and the world.

While Element AI made LinkedIn’s list of top Canadian startups, I would not be surprised if this startup failed completely in the next 5 to 10 years. When one of your investors is your provincial government, it’s to me highly suspect that this is truly an innovative company. Quebec is known to subsidize companies that ordinarily would fail in true market capitalism.

Companies with vague mission statements don’t tend to do well in the reality of business. The company bills itself as “a global AI company that develops AI software products at scale to help people work smarter.” That’s a mission statement worthy of nebulous Montrealers who have no idea how to build technology solutions that can scale.

The AI Hype is Real

In three short years the company “turns cutting-edge research and industry expertise into software solutions that continuously learn and improve.” So many AI startups don’t understand the product-market fit required to add value to the Cloud, enterprises and real-world systems.

Element AI was started under an interesting premise that goes something like this: AI is the next major transformational shift — not just in computing, but in how businesses operate.

But not every business is a technology business by DNA, and that creates a digital divide of sorts between the companies that can identify a problem that can be fixed by AI and build/invest in the technology to do that and those that cannot. Now in theory, I could agree that this is a good premise, but without having a specialty, it amounts to mere fluff. If I want an AI solution, I’m unlikely to run to Montreal to get it!

Is Element AI the Deep Mind of Canada?

Serious AI R&D is also extremely expensive. It’s not even viable for a startup without serious corporate support.

AI Element claims to be “focusing primarily on the financial services and supply chain sectors”, while providing end-to-end AI integration guidance throughout its customers’ AI journey — from advisory and enablement, to integration, deployment and support.

The company has nearly 500 employees, including more than 100 PhDs, working in five cities across North America, Europe, and Asia. Element AI maintains a strong connection to academia with an open, collaborative approach to research, and takes a leadership position in policy making around the impact of AI on society.

Google acquired DeepMind on January 26th, 2014, which was in many respects one of the best acquisitions of the history of AI in business. The question remains, who will acquire Element AI?

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