Canadian tech investors are aligned on the notion that generative artificial intelligence (AI) has radically changed the math of startup investing. But they differ on whether the investment hype around AI represents a growing bubble, and how much that matters.
“AI’s not going to change the world tomorrow, but we are at the beginning of a 10-year-plus journey.”
Emily Walsh,
Georgian Partners
Toronto firm Georgian Partners has relied on the same metrics to evaluate startups for the past 10 years, lead investor Emily Walsh said at RevStar Summit in Montréal. “This is the first time where we’ve started to rip it up.”
Walsh added that AI will rearchitect everything from compute to infrastructure to applications. All the investment poured in might end up going to zero, and some will create generational companies.
“I wouldn’t do anything differently if the bubble was coming in six or 12 months,” Walsh said. “AI’s not going to change the world tomorrow, but we are at the beginning of a 10-year-plus journey.”
As generative AI has exploded among consumers and become a staple of startup strategy, concerns have mounted about an investment bubble similar to the dot-com crash of the early 2000s. Bubbles are characterized by growing investment in overvalued companies that eventually burst, erasing gains. Even Bill Gates said this week that many of these AI investments will be “dead ends.”
At the heart of this is the unprecedented amount of money spent by AI companies on infrastructure and compute. Though Canada’s top AI companies are not spending at the scale of the United States’ big tech firms, domestic brands are just as tied up in the market, particularly those relying on commercial LLMs to build software products.
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Jim Texier, partner and CTO at Framework Venture Partners, argued during the panel that an AI market correction will happen sooner rather than later. He referenced overinflated expectations, touted by leaders at Google and OpenAI, that so-called artificial general intelligence (AGI) would arrive within a few years.
“We always overestimate at the beginning,” Texier said of tech capabilities. “I think the [market] correction will happen way sooner. Let’s talk again in three years from now.”
For Walsh, the bubble is less important than the exploding market AI is creating for new startups. She emphasized growth should be the main pursuit. “This is the time to land new customers,” she said.
Karamdeep Nijjar, partner at Inovia Capital, said on stage that now is a “terrifying” time to be a software or AI startup.
“There is someone else building a version of what you’re building, and the second you’re successful, there are 10 other people who will build a version of what you’re building,” he said. “Everything you were going to do a few years ago, you have to do it faster. This genie is never going back in the bottle.”
Despite the heated competition, Nijjar told BetaKit after the panel that he sees immense potential in startups building AI technology outside of large language models (LLMs)—the main technology powering ChatGPT, Gemini, and other consumer and commercial AI products.
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“We’ve been spending a lot of time looking at what comes after LLMs, that can tackle the sort of tasks that LLMs are not necessarily suited to tackle,” Nijjar said. “By no means has this race been run.”
He added that Canada should hone its advantage in this area because of its robust AI research community, including hubs like Mila in Montréal and the Alberta Machine Intelligence Institute. The hurdle, he said, is commercializing those discoveries.
The first edition of RevStar Summit, organized by go-to-market platform startup Vasco and Boreal Ventures, focused on commercialization and go-to-market strategies for Canadian startups. Guillaume Jacquet, Vasco CEO and former executive vice-president of product at Lightspeed, told BetaKit that it sought to address a gap in distribution knowledge for Canadian companies chasing global scale.
“With AI, we really have an opportunity to actually level the playing field and compete on a global scale,” Jacquet said. “But we have to seize it, and I would hate for Canada to miss it.”
Feature image courtesy Alexandre Belair for RevStar Summit.