Montrêal-based Element AI is set to be acquired by California software company ServiceNow.
ServiceNow announced the deal Monday, noting it has signed an agreement to acquire Element AI, which it expects to complete in early 2021.
Despite being seen as a leader in the Canadian AI sector, Element AI faced difficulties getting products to market.
Terms of the acquisition have not been disclosed. However, The Globe and Mail reports that Element AI sold for less than $500 million USD. This would place the purchase price well below the estimated valuation that the Montréal startup was said to have after its $200 million CAD Series B round in September 2019.
Element AI was founded in 2016 by CEO Jean-Francois Gagné, Anne Martel, Nicolas Chapados, Jean-Sebastien Cournoyer, Philippe Beaudoin, and godfather of AI Yoshua Bengio. It has raised a total of $340 million CAD ($257 million USD) to date, drawing the attention of investors like the Government of Quebec, pension fund Caisse de dépôt et placement du Québec (CDPQ), McKinsey & Company, DCVC (Data Collective), and Hanwha Asset Management.
In 2017, the startup raised what was then a historic $137.5 million Series A funding round from a group of notable investors including Intel, Microsoft, National Bank of Canada, Development Bank of Canada (BDC), NVIDIA, and Real Ventures. In December 2018, Element AI received a $5 million loan from the federal government through the Quebec Economic Development Program.
Its $200 million raise marked one of the largest venture capital rounds in Canadian history. At its height, Element AI had more than 500 employees, including 100 PhDs.
Element AI positioned itself as a global leader in AI, helping to further Quebec’s sector and working with the federal government and global organizations to promote ethical AI policies on an international stage. The startup helped bring about the Toronto Declaration in May 2018, setting international standards for ethical AI.
Despite being seen as a leader and a rising star in the Canadian AI sector, Element AI faced difficulties getting products to market. The Globe reported in 2019 that the startup faced high operational costs, minimal revenue, and setbacks on the development of two of its flagship products, causing it to lay off staff.
Speaking with BetaKit last year, Gagné discussed the difficulty Element AI had with commercialization, working with partners that were not using their data efficiently, and the lack of existing infrastructure to scale an AI model, as well as issues with IP.
“We have to build a lot of that stuff, so that took a lot of energy and time,” the CEO told BetaKit at the time. “It’s a key learning, and this is something that we haven’t solved yet.”
Over the last year, Element AI saw some success signing customers and launching a few of its own standalone products. It was reported that amid the early months of the COVID-19 pandemic, Element AI had hit all its targets and was executing “sharply” despite COVID-19 delaying some contracts.
However, 2020 also brought restructuring. In May, Element reportedly laid off 15 percent of staff, at the same time appointing its first chief financial officer and a chief revenue officer to support its go-to-market strategy. At the time, the Montréal startup was said to have around 350 employees.
According to TechCrunch, ServiceNow is making a full acquisition of Element AI and will retain “most” of its technical talent, though will be “winding down” its existing business following integration with ServiceNow.
ServiceNow also announced the acquisition will allow it to establish an AI Innovation Hub in Canada to accelerate customer-focused AI innovation of its Now Platform. Bengio is also set to serve as a technical advisor for ServiceNow.
“With Element AI’s powerful capabilities and world class talent, ServiceNow will empower employees and customers to focus on areas where only humans excel – creative thinking, customer interactions, and unpredictable work,” said ServiceNow chief AI officer Vijay Narayanan.
ServiceNow called its acquisition of Element AI its latest strategic investment to accelerate AI innovation in its Now Platform. In March, ServiceNow hired Narayanan and launched Now Intelligence with a set of AI capabilities. Element AI is ServiceNow’s fourth AI acquisition in 2020, following Loom Systems, Passage AI, and Sweagle.
“Element AI’s vision has always been to redefine how companies use AI to help people work smarter,” said Gagné. “ServiceNow is the clear partner for us to apply our talent and technology to the most significant challenges facing the enterprise today.”
Originally published on BetaKit : Original article