Canadian venture capital firm Framework Venture Partners launches $115 million AI startup fund

Image Credit: Shutterstock/Songquan Deng

Canada’s artificial intelligence (AI) startup scene is certifiably red hot. Companies like Element AI, Rubikloud, Interset, Mnubo, and Maropost have collectively raised close to $200 million alone, and in the second quarter of 2018, Canadian AI startups attracted $169 million (CAD $222 million) in venture capital financing — up 104 percent year over year. That’s coming off of a record 2017, when venture investment hit $400 million.

Some folks — like those at the new Canada-focused venture capital firm Framework Venture Partners — are predicting even stronger growth in the months ahead.

Toward that end, Framework, a BDC Capital spinout cofounded by Peter Misek and Andrew Lugsdin, who previously led BDC’s Information Technology Venture Fund in Toronto and Vancouver, today announced the first close of a roughly $115 million (CAD $150 million) fund AI and financial tech fund with commitments from Cadillac Fairview, Royal Bank of Canada, BC Tech Fund, and BDC. It’s the first step toward a targeted $210 (CAD $275 million) in assets under management.

“The current venture funding landscape in Canada has been very successful in producing a critical mass of early-stage companies over the last several years,” Misek said. “All of this investment has fueled opportunities in later stage companies looking to raise larger rounds to support continued growth. [Framework will] tap into this unmet investment need and help fulfill the promise of the Canadian technology industry.”

Framework is part of a staged restructuring for BDC’s venture capital division, an early investor in companies like Trulioo, Wattpad, Elastic Path, and TouchBistro and the largest funder of Canada’s multibillion-dollar tech sector. BDC, which puts roughly $200 million a year toward startups and venture funds, intends with Framework to support “rapidly scaling” later-stage companies — principally those with AI-driven financial services products — in the software-as-a-service space. It’ll continue to manage a number of BDC’s existing IT investments, and future commitments will average about $8 million per deal, Misek said, with syndicated transactions of up to $50 million.

“Royal Bank of Canada is a champion of Canadian innovation, and we believe supporting the growth of Canadian firms that develop transformational technologies will help drive the future prosperity and economic success of Canada,” Mike Dobbins, chief strategy and corporate development officer at Royal Bank of Canada, said. “With its focus on Fintech 2.0, investing in and partnering with [the firm] and the companies it funds will also support our ambition of creating solutions that go beyond banking to bring unique value to our clients and help us build relationships with more Canadians.”

BDC’s timing is opportune. In December at the G7 conference AI in Montreal, Canadian Prime Minister Justin Trudeau and the Québec government announced investments of nearly $230 million and $60 million, respectively, in Scale.AI, a business-led consortium that expects to create close to 16,000 jobs and add $16 billion to the Canadian economy by tapping AI to build “next-generation” supply chain solutions. (Their pledges came two years after the launch of the Canadian government’s $125 Pan-Canadian AI Strategy for research and talent.) Meanwhile, Ontario set aside $15 million over the next three years for NextAI, an entrepreneurial AI program operated by nonprofit talent incubator Next Canada. And in 2017, the Vector Institute — a $170 million research center backed by the Ontario and Canadian governments through the Pan-Canadian AI Strategy and by industry sponsors like Google, Air Canada, and others — opened its doors in Toronto, with AI luminary Geoffrey Hinton as its chief scientific advisor.

There’s been plenty of momentum in Canada’s private sector, too. Google subsidiary DeepMind — the British firm responsible for creating AlphaGo, the AI system that defeated world champions at chess and shogi — recently established its first lab outside of the U.K. in Edmonton, Alberta. in 2016, General Motors hired close to 1,000 engineers and developers at its Canadian research facilities near Toronto, and this past summer opened a new tech center in Ontario. Not to be outdone, Thomson Reuters’ Toronto center for “cognitive computing” currently employs hundreds of AI researchers.

“We believe there is great opportunity for later-stage investment in Canadian technology companies,” Jérôme Nycz, executive vice president at BDC Capital, said. “The Canadian venture capital industry has come a long way in the past 10 years, and an important part of the strategy we launched almost a decade ago was to build and deploy new, high-performing funds into the Canadian market. We are achieving this goal with our investment in Framework and we look forward to partnering with them to pursue this opportunity and support the venture ecosystem in Canada.”

Canada has the third-highest concentration of AI researchers of any country in the world, according to Montreal-based Element AI, behind the U.S. and the U.K.

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