Silicon Valley firm buys Montreal-based Element AI
The federal government says it scrapped a funding agreement with Montreal-based artificial-intelligence firm Element AI Inc. after it was announced that the Canadian tech darling is being acquired by a Silicon Valley software company.
Santa Clara, Calif.-based Servicenow Inc. announced on Monday that it is buying Element AI — which has “powerful capabilities and world class talent,” according to Servicenow's chief AI officer — for an undisclosed sum. The transaction is expected to close in early 2021. While only four years old, Element AI has garnered support from provincial and federal governments, as well as a number of notable investors. The company's prospects were rosy enough to earn a $5-million repayable contribution from the federal government in December 2018, which the feds said would create around 900 new jobs and help the company hire specialists and buy computer equipment.
A spokesperson to Innovation, Science and Industry Minister Navdeep Bains said Monday that the federal Strategic Innovation Fund had also executed a contribution agreement with Element AI on June 10 of this year. Under that agreement, “a conditionally repayable contribution” of $20 million was authorized to be made to the company over five years, aiding a $124-million project.
However, none of that money had been paid to Element AI yet. And now, the government says, it never will. “The agreement was terminated following the announcement of the acquisition,” spokesperson John Power said in an email. “This acquisition would result in Element AI not meeting key contractual commitments in the Strategic Innovation Fund agreement. The Strategic Innovation Fund has goals which include securing (intellectual property) and growing firms in Canada.”
The federal government's decision to drop the funding deal with Element AI comes after the firm had been embraced by it.
In 2018, the government called Element AI “a world leader in artificial intelligence,” and Prime Minister Justin Trudeau delivered a speech to mark the opening of Element AI'S headquarters in Singapore, a moment involving “a Canadian company that isn't celebrating that it got bought out by a big multi-national ...,” the PM said.
The federal government has also been trying to prime the engine of Canadian innovation for some time now, such as with efforts like the Strategic Innovation Fund.
Element AI seemed to fit nicely with those ambitions, as the company was founded in 2016 by a group that includes Yoshua Bengio, one of the “godfathers” of modern artificial intelligence. Bengio is a professor at the Université de Montréal and a winner of the A.M. Turing Award, the socalled “Nobel Prize of computing.”
In September 2019, Element AI announced another fundraising round that included the likes of the Quebec government and the Caisse de dépôt et placement du Québec pension fund. At that point, it said it had raised approximately $340 million from investors.
“Element AI'S vision has always been to redefine how companies use AI to help people work smarter,” Element AI founder and chief executive Jean-francois Gagné said in a press release on Monday. “Servicenow is the clear partner for us to apply our talent and technology to the most significant challenges facing the enterprise today.”
Still, having a company that was both a point of national pride and a recipient of public funds being acquired by a U.S. company could sting just a bit more. The Business Council of Canada also noted recently that “too many promising companies” leave the country.
“From a public policy perspective, I think it certainly shows the shortcomings of our innovation ecosystem,” said Robert Asselin, the council's senior vice-president, policy, of the Element AI deal.
The acquisition of Element AI is subject to court approval of a proposed plan of arrangement between Element AI and Servicenow's Canadian subsidiary, a spokesperson said. Servicenow says its acquisition of Element AI will also come with the creation of an ” AI Innovation Hub” in Canada.
“The new AI Innovation Hub deepens Servicenow's commitment to the Canadian market, which has long been a leader in AI research and innovation with the world's first-ever national AI strategy,” spokesperson Sara Day said in an email. “Our investment in Canada not only brings us closer to top talent, but also to many of our customers headquartered in the country.”