Canada’s investment in Cohere won’t be the last time the government takes an equity position in a domestic tech company, as it looks to bolster capacity in AI and other strategic industries.
The news: Prime Minister Mark Carney announced today in Montréal that the federal government will invest up to $1.6 billion CAD in Toronto AI developer Cohere, as part of a larger Series E funding round. The federal government said the investment will be made in stages, with regular reporting from Cohere about jobs and investments made in Canada.
In an interview, AI and digital innovation minister Evan Solomon told BetaKit that while thise equity funding was negotiated through the Canada Development Investment Corporation, a Crown corporation that manages government assets, a forthcoming tech fund from the feds will also be designed to allow the feds to invest in companies. First announced in the AI strategy, the $500-million Canadian Tech Growth Fund is meant to provide “flexible growth capital” to promising AI companies and sometimes take equity stakes in them.
From the source: The Canadian Tech Growth Fund “will be designed to have various facilities, but yes, to take equity positions in small and medium-sized companies to instill growth and to crowd in capital,” Solomon told BetaKit.
“We believe Canadians have made a good, valuable investment in an important company that gives us a seat at the table to control and build this technology,” he added about the Cohere deal.
The context: Government funding into Canadian tech companies is nothing new, but it has traditionally come through arm’s-length Crown corporations like the Business Development Bank of Canada or through various federal programs offering loans, grants, non-repayable contributions, and equity. For example, the Strategic Response Fund (a successor to the Strategic Innovation Fund) recently authorized nearly $200 million CAD for quantum company Xanadu in repayable funds.
But the Cohere deal, three times the size of the proposed Canadian Tech Growth Fund, likely represents the largest single Canadian government equity commitment ever made to a tech company. The federal government has been uplifting Cohere as Canada’s de facto entrant into the AI race for more than a year. At the industry conference ALL IN last year, industry minister Mélanie Joly declared that the government would make Cohere “a Canadian champion.”
Final thought: Government ownership of private companies is on the rise globally; under President Donald Trump, the US bought 10 percent of chip maker Intel. Canada is no exception: this summer, the feds announced their intention to buy a $400-million stake in critical minerals company Teck Resources.
Though Teck and Cohere are in vastly different fields, critical minerals and emerging technologies were both identified as top priorities in the feds’ new national security strategy today.
Feature image courtesy Evan Solomon via X.