AI is changing startup math

Lovable co-founder Anton Osika recently posted that his Swedish vibe coding startup had grown from $1 million to $100 million ARR in just eight months. It is the latest claim of rapid AI revenue growth pointing to a reset in the foundational assumptions of how companies scale.

Lovable and its ilk aren’t outliers: new data from mega VC a16z shows the median enterprise company now reaches $2 million ARR in its first year. Best-in-class performance from the pre-AI era would now put a startup on the low end of the benchmark.

Now, there is a vast difference between annual recurring revenue and annualized run rate. Ripple Ventures’ Matt Cohen, who also has portfolio companies making eye-popping revenue claims, confirmed that AI has helped shift the default SaaS calculation to tallying one’s monthly revenue and multiplying by 12. Tech is now beset with young AI startups replacing one type of ARR with another.

Sanjana Basu of AI firm Radical Ventures agreed that the last 12-18 months have changed how VCs look at companies as “traditional benchmarks have totally gone down the drain.” Both she and Cohen pointed to net revenue retention as an important metric to help separate AI startup traction from hallucination.

“At Radical, we don’t spray and pray,” Basu said, noting the firm performs “individual evaluation each time on the customer base and the quality of revenue” for every startup.

The speed and scale of revenue growth aren’t the only ways AI startups differ from their SaaS predecessors. Traditional SaaS companies typically expect 80-90 percent gross margins, as serving more customers negligibly impacts costs. Conversely, AI companies face hard compute costs that some argue will never decrease with customer growth because technological efficiencies will only spur greater use.

I wanted to ask Basu during our call about how AI companies might navigate thin margins, but I ran out of time; she had another meeting with a startup that had just scaled from zero to $2 million in revenue.

Douglas Soltys
Editor-in-chief

Northern Ireland is attracting a growing list of high-profile international tech companies.

Firms such as Fujitsu, SAP, Microsoft, Qualcomm, Nvidia, Rapid7, and Whitehat Security are already operating in Northern Ireland. It’s also home to 35 Canadian businesses, as well as being Europe’s leading location for new software development projects.

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Trade war uncertainty drags on for Canadian tech as US hikes tariffs, changes duty rules

Canadian tech firms face continued economic uncertainty and logistical challenges after the US escalated its trade war with Canada through tariff hikes and changes to key import policies.

The tariff back-and-forth has impacted Paperplane Therapeutics, a Montréal-based medtech company whose software is programmed into a hardware device and sold to clients in the US. Logistical challenges and additional costs from hiring an import-export agency have eaten into key metrics, CEO Jean-Simon Fortin told BetaKit.

“It takes longer to recoup the cost of onboarding a customer than it used to,” Fortin said.

Fortin and Kyle Feigenbaum, CEO of gourmet dog food startup Healthybud, said the looming threat of CUSMA being up for renegotiation next year further complicates long-term business plans.

“It feels like everything is hanging by a thread,” Feigenbaum said.

Yaletown Partners raises $100 million in first close for third Innovation Growth Fund

Yaletown’s eighth fund overall, IGF III is aiming for a final close of $250 million, or about $50 million more than its predecessor.

Yaletown partner Michael Sfalcin told BetaKit that IGF III LPs include BMO Capital Partners, InBC, Export Development Canada, Farm Credit Canada Capital, an undisclosed Canadian pension fund, and unnamed Canadian family offices.

Amid tough fundraising market conditions, Sfalcin claimed Yaletown secured this first close in six months thanks to IGF II’s performance.

Lightspeed beats outlook in fiscal Q1 to tepid market response

Montréal-based Lightspeed Commerce posted nearly $305 million USD in revenue and more than $129 million in gross profit during the first quarter of fiscal 2026. With 15 percent revenue growth and 19 percent gross profit growth year-over-year, the point-of-sale and commerce technology company surpassed its previously-established outlook for both metrics.

In an interview with BetaKit, Lightspeed founder and CEO Dax Dasilva argued that fiscal Q1 demonstrates that Lightspeed can grow and increase profitability simultaneously. He attributed the firm’s earnings beat to its focus on its best-performing markets and a “fluid” but “supportive” macroeconomic environment in fiscal Q1.

Growcer snaps up assets of bankrupt US rival Freight Farms

Vertical farming company Freight Farms declared bankruptcy in April after 13 years of operation. Three months later, Ottawa-based Growcer co-founder and CEO Corey Ellis won a bidding battle to acquire the assets of Freight, his startup’s American competitor.

The $3.6-million CAD purchase adds a lot more than container-grown leafy greens to Growcer’s plate. The startup now has about 600 new customers (including municipalities, food banks, and other community food organizations) and farm containers across 30 different countries, as well as use of Freight’s proprietary software.

Ellis and Growcer chief of staff Florent Schmal spoke with BetaKit after officially “getting the keys” and said they feel a sense of responsibility to keep “a pioneer of the industry” alive.

AI bookkeeping startup Ceedar is turning customers into investors

While running a tech solutions agency, husband-and-wife team Connor Turland and Pegah Vaezi grew frustrated with their bookkeeping options. So the pair decided to launch their own AI-powered software platform called Ceedar to meet the needs of business owners.

Ceedar, which hopes to succeed where Bench struggled, aims to be “the last bookkeeper you’ll need to hire.” The startup has secured $275,000 CAD in funding from Vancouver-based, Andrew Wilkinson-linked Metalab Ventures and turned multiple customers into angel investors.

Cohere to access Canadian AI infrastructure and new clients through partnership with Bell

Toronto-based LLM developer Cohere has struck a partnership with telecommunications giant Bell Canada to make use of Bell’s AI infrastructure and sell AI solutions to its suite of Canadian government and enterprise customers.

Cohere’s LLMs and agentic AI platform North will be integrated into the AI services Bell provides to its Canadian customers. The telco said it will also deploy North within Bell to allow employees to create and manage AI agents to perform tasks on their behalf.

Marc-Antoine Cantin to lead Anges Québec as CEO Stéphane Drouin steps down

Stéphane Drouin told BetaKit he is stepping down as CEO of Anges Québec nearly a year after assuming leadership of the provincial angel investor network for personal reasons.

In an interview with BetaKit, Board director and Anges Québec member Marc-Antoine Cantin said he is taking over as CEO next week after a two-month transition period and shared his vision for the organization going forward.

Enabled Talent is using AI to make every job disability-inclusive

Enabled Talent co-founder Amandipp Singh didn’t realize he was conducting market research when he started working on his PhD application. Born with partial vision, Singh wanted to be an academic and study how tech could be used to improve inclusion in employment by identifying the pain points of inclusion initiatives for both employers and employees.

Singh came up with a hypothetical centralized platform that could address those pain points by matching disabled employees with job listings that were accessible to them, and vice versa for employers. But the people Singh spoke with about the idea kept telling him to explore it himself.

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The BetaKit Podcast – The living history of Canadian tech

“History never stops. It’s a living reality.”

In celebration of Startupfest’s 15th anniversary, founder Phil Telio joins to discuss the origins of the international tech festival, its connection to the broader Canadian tech ecosystem, and how community evolves with each generation. Ambition, government support of tech, and the state of Québec tech also came up before the grandma judges kicked us out of their booth. Recorded live at Startupfest.

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Featured image courtesy Anton Osika via X.

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