What to know
- Canada has launched its new “AI for All” strategy, aiming to create 250,000 AI-related jobs, generate $200 billion in economic growth, and increase AI adoption from 12 per cent to 60 per cent by 2034.
- One expert says Canada is already a global leader in AI research, but continues to lag in commercializing its innovations, with many successful startups eventually relocating or selling to foreign companies.
- Access to funding remains a major hurdle, as the expert argues Canada’s banking system and government funding programs are better suited to businesses with physical assets than AI and other technology companies.
- The loss of Canadian AI companies could mean losing talent and intellectual property, as founders increasingly seek investment opportunities outside the country to scale their businesses.
- The expert says the new strategy is a positive first step, but believes Canada will need stronger financial incentives, government procurement, and loan support to help domestic AI companies grow and compete internationally.
Canada has just launched a new AI strategy, but one tech entrepreneur says the country still has a long way to go before it can become a leader in the industry.
Canada’s AI ambitions
Last month, Prime Minister Mark Carney announced AI for All, a federal government strategy that aims to ensure AI is adopted responsibly in Canada, including new legislation, investment, and programs.
With this strategy, the government hopes to achieve $200 billion in economic growth and 250,000 new AI-related jobs over the next five years, increasing AI adoption from 12 per cent to 60 per cent by 2034.
In addition, the country is starting to see a rise in AI-related initiatives all across. Earlier this month, Meta announced its first Canadian AI data centre in Alberta. The development is part of a $13-billion investment and is expected to employ 3,000 construction workers, and support 300 jobs.
Despite the promising initiatives, Adam Froman, founder and CEO of global technology company Delvinia, said that the country needs to do more to become a leader in the industry.
Why Canada isn’t commercializing AI
According to Froman, Canada has already broken into the AI industry, but the country remains behind in terms of commercializing it.
“I’d say we’re world leaders and market leaders in terms of research in AI and that type of thing. I wouldn’t say we’re failing miserably, but [there is] a very missed opportunity in terms of really capitalizing on being a commercial leader of AI,” he told Now Toronto.
According to the entrepreneur, while Canada has been successful in helping new tech companies launch, there have not been enough incentives and opportunities for these companies to grow and thrive in the country.
Why AI startups are leaving
As explained by Froman, obtaining government funding for technology companies in Canada is extremely difficult, and this significant bureaucracy gets in the way of more companies being able to stay and grow.
For that reason, many successful companies end up transferring or selling to international groups in order to secure funds, which leads to a significant loss in intellectual property and industry talent.
“I ended up selling my operating businesses or two of my businesses to a U.S. group which is very common… Initially all the value of the company, which we call the intellectual property, goes with it and then eventually…the company doesn’t keep all the employees for the long term,” he said.
“[Founders] are digging deep to want to stay in Canada, but we’re starting to see chinks in that armor and we’re starting to see some of them say, ‘Maybe I don’t want to stay in Canada for the long run.’ And that’s a very dangerous thing for all of us.”
In addition, the entrepreneur said Canada’s banking system poses a major barrier, as it is not equipped to deal with digital business operations.
“If you are scaling a company and your company is taking off and you need capital, Canada has always been very good at lending against assets. If you have land or you have property or you have equipment, you can borrow money from the bank. If you are doing technology like AI… our banking system isn’t set up to fund these non-physical um businesses,” he explained.
According to Froman, as Canada’s largest potential technology customer, the Canadian government’s support is pivotal in guaranteeing the country’s AI market can thrive.
Becoming a leader in the market would encourage more founders and talent to remain in the country and generate a series of jobs and economic benefits.
What Canada needs to do to support growth
According to Froman, putting an AI strategy in place was a good first step, but now the government must “put [its] foot on the gas and get this going,” including prioritizing licensing for Canadian companies.
This could include similar programs to the Short-Term Compensation Fund (STCF) and tax credit allowances to support Canadian audiovisual productions during and after the COVID-19 pandemic.
“If they can create loan guarantees for and find some way to create a value to the companies wanting it where you can go in the bank and because the bank is hesitant to fund um intellectual property versus physical assets,” he explained.
“That’s important because the alternatives are very high interest rates when you want to borrow money. If you can’t borrow from our major commercial banks at say five per cent. You have to go and go with a secondary lender and borrow at 12 [or] 15 per cent.”
