At 9:59 am ET on Thursday, the main story in Canadian tech was that domestic VC activity had fallen back to early 2020 COVID-19 levels.
By 10:00, enterprise AI firm Cohere announced it had secured $500 million USD, co-led by Canadian investors Radical Ventures and Inovia Capital.
This massive funding round for Cohere highlights a point made in Inovia’s State of Software report: AI companies seem shielded from the downturn in VC funding, as AI’s growth in revenue and valuations continues.
Featuring Canadian leads—and notably, Canadian pension funds—Cohere’s funding has been praised as a significant win for Canada. However, it’s an exception: RBCx director John Rikhtegar noted that deals over $50 million are on pace to hit their lowest number since 2015. Canadian VCs privately expressed concerns about competing with their US counterparts, who dominate later-stage rounds.
Rikhtegar stated, “It’s keeping Canada meaningfully on the cap table for our breakout companies.”
With the acquisitions of Untether.AI and CentML, and Tenstorrent relocating to the US, Cohere stands as Canada’s primary foundational AI hope. Operating with less capital than international competitors, Cohere targets large, security-focused enterprises. Gradient Ventures’ Zach Bratun-Glennon noted Cohere’s provision of a sovereign, non-US AI offering helps it stand out.
However, one company or deal can’t sustain a sector. AI minister Evan Solomon stated that Canada is in a “crisis moment” and needs to address AI talent and intellectual property retention to protect its economic sovereignty.
Those domestic investment figures reveal another crisis. Cohere’s success shows Canadian VCs can still support homegrown breakout companies, but early-stage funding remains scarce. If Canadian VCs can’t secure positions across all funding stages, who will support the next Cohere?
Madison McLauchlan
Reporter, Montréal
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