Element AI's ownership is headed across the border and into U.S. hands after years of being touted as one of Canada's most promising technology companies.
The Montreal-based firm that creates artificial intelligence solutions for large organizations announced Monday that it has signed a deal to be purchased by ServiceNow, a Santa Clara, Calif., company that offers a cloud‑based workflow technology.
The companies did not disclose the financial terms of their agreement, and expect the acquisition to close next year.
"Element AI's vision has always been to redefine how companies use AI to help people work smarter," said Element AI founder and chief executive Jean‑Francois Gagne in a statement. "ServiceNow is the clear partner for us to apply our talent and technology to the most significant challenges facing the enterprise today."
Though ServiceNow said the acquisition will help it create a Canadian hub for consumer-focused innovation, the deal will see one of Montreal's most prized AI companies put into the control of Americans.
Monday's acquisition should serve as "another cautionary tale" for Canadian politicians because it comes just after Waterloo, Ont., smart glasses company North was sold to Google in the summer, said Jim Balsillie, the former BlackBerry Ltd. co-chief executive and current chairman of the Council of Canadian Innovators.
"Canada actually has market-proven AI companies with entrepreneurs building successful businesses, and it's high time they receive the attention they earned," he said in an email to The Canadian Press.
Element AI was founded in Montreal in 2016 by Gagne, Anne Martel, Nicolas Chapados, Jean‑Sebastien Cournoyer, Philippe Beaudoin and one of the godfathers of AI, Yoshua Bengio.
The company quickly became a pioneer in AI after it raised a Series A funding round of $135 million in its first seven months and opened five offices across North America, Europe and Asia.
It got a $5-million loan from the federal government two years later, which it planned to use to expand the company further.
Then more cash arrived last year from the Quebec government, pension fund Caisse de depot et placement du Quebec, and McKinsey and Company.
The investors handed over $200 million in a Series B round of funding.
Pierre Fitzgibbon, Quebec's minister of economy and innovation, said Monday's deal means that Element AI's business model ultimately did not work, but he was relieved the government still managed to break even with its investments in the company.
"The bad news is that the Quebec shareholder is no longer what it was, which is sad," he said.
He was, however, pleased that at least ServiceNow has found value in Element AI.
Before the acquisition, ServiceNow was on a spending spree, buying Israeli AI company Loom Systems, U.S. translation technology firm Passage AI and Belgian data management platform Sweagle in 2020.
It also created technology development centres in India, Chicago, Washington, San Diego and Silicon Valley.
Then it turned its attention to Element AI and Canada.
"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 in a statement.
The two companies will have to wait for approvals before their deal can close, but expect that to happen in early 2021.
They say Bengio, who won the 2018 Turing Award with Geoffrey Hinton and Yann LeCun and runs a Quebec-based AI research institute, will serve as a technical adviser for ServiceNow.
-- with files from Julien Arsenault in Montreal