Once an AI world leader, Canada is now losing the AI startup race
We certainly agree with the sentiment; however, the evidence to date points to our Canadian AI ecosystem being part of someone else's bulldozer.
Why? Three reasons.
First, while Canada is home to 10 per cent of the world's top-tier AI researchers and was ranked first in growth of AI talent in 2023, our talent is largely working for foreign corporations and startups. This counts as creating jobs in Canada, but we are exporting the intellectual property, job creation potential and profits.
A paltry 7 per cent of IP rights generated by the government's Pan-Canadian Artificial Intelligence Strategy are owned by Canadian private sector firms, according to the Council of Canadian Innovators. We cannot expect to build world-leading AI champions if the bulk of our public investment lands in the hands of others.
Second, Canada is falling behind in the race to build and scale its own AI-native startups. These are companies built from the ground up with AI technology at their core. The world's fastest growing AI-native startup ecosystems are Silicon Valley, Beijing, Seattle, Paris and Tel Aviv. They are being driven ahead by the rapid transition of their startup ecosystems to AI-native.
Over a decade of Startup Genome research has proven what consultant Michael Porter postulated about business clusters: The performance of a startup ecosystem grows with the number of startups it holds. So while in Tel Aviv and Paris, 22 per cent and 21 per cent of the respective startups formed in the last two years are considered AI-native, top Canadian ecosystems in Toronto, Calgary, and Montreal see just 12 per cent to 14 per cent.
Canadian CEOs are embracing generative AI's speed and efficiency. The impact on their employees is less certain
Success is far more likely to come to larger, more concentrated ecosystems and Canada is not currently set up to win on the global stage in this race.
Third, Canada has captured just 0.7 per cent of total global funding to AI-native startups formed in 2023 and 2024, with the bulk coming from U.S. investors. Canada's AI ecosystems, like the rest of its startup ecosystems, continue to be held back due to a lack of early-stage – notably angel and seed – funding.
Compare this with what's happening in the world's top AI ecosystems.
Startup Genome research highlights that approximately 90 per cent of venture funding to AI-native startups formed in 2023 and 2024 (therefore excluding Open AI) has flowed to startups formed in the U.S. and China, with Silicon Valley alone capturing 65 per cent.
Because larger ecosystems scale a higher proportion of startups, the writing is on the wall: These leading ecosystems will capture more than 90 per cent of job creation, IPOs and economic impact.
Recapturing the potential of Canada's head start in AI requires a new approach. The previous government's sovereign AI strategy committed over $2-billion towards the development of Canada's computing infrastructure as well as AI adoption and lab-to-market commercialization efforts.
While these are very valuable, Canada's next AI policies must prioritize significant support for the rapid growth of AI-native startup ecosystems as local, future-proof engines of job creation and economic growth. This means addressing Canada's significant gap in startup creation, seed-stage funding and support programs, as well as meaningfully supporting the 'lab-to-startup' translation of publicly funded intellectual property.
To build on Mr. Solomon's analogy, it's not enough to train drivers or employees for foreign bulldozer makers. It's time to build our own line of bulldozers – and capture the outsized profits it will bring. To do so, we need to act decisively to build globally leading AI-native startup ecosystems.
If we don't, we'll watch from the sidelines as AI-native startups concentrate in the U.S. and China, capturing the significant economic impacts created by AI and further eroding Canada's long-term economic and digital sovereignty.
JF Gauthier is the founder and CEO of Startup Genome, headquartered in San Francisco. Dan Herman, PhD, is a strategic adviser with Waterloo-based NorthGuide.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
CTV News
26 minutes ago
- CTV News
'Extremely happy with this victory': PQ MNA reacts after Arthabaska byelection
PQ MNA Pascal Paradis reacts to his party defeating the CAQ Monday in the Arthabaska byelection, after candidate Alex Boissonneault won the most votes.
National Post
26 minutes ago
- National Post
B.C. to appeal landmark Aboriginal title ruling over land in Metro Vancouver
VANCOUVER — On Monday, members of the Cowichan Nation praised elders and those who have gone before them as they celebrated victory in a years-long legal fight to reclaim land on the Fraser River used by their ancestors as a summer home in what is now the Metro Vancouver municipality of Richmond, B.C. Article content The trial had lasted 513 days, resulting in a ruling last week that is almost 280,000 words long. Article content Article content Article content Justice Barbara Young ruled that the Crown's grants of private property ownership rights over the lands 'unjustifiably infringe' on Cowichan Aboriginal title, and need to be negotiated, while titles and interests in the lands held by Canada and Richmond were 'defective and invalid.' Article content Article content But it soon became clear the conflict is not over, when B.C.'s Attorney General Niki Sharma promised to appeal the landmark decision that she said could have 'significant unintended consequences' over private property rights in the province. Article content Sharma said the government preferred resolving land claim issues through reconciliation rather than risking 'considerable uncertainty' through the courts. Article content 'Our government is committed to protecting and upholding private property rights while advancing the very important and critical work of reconciliation here in this province,' Sharma said. Article content Article content The nation had not sought to have the titles of privately held properties declared 'defective and invalid.' Article content Article content However, the ruling said B.C. owes a duty to the Cowichan 'to negotiate in good faith reconciliation of the Crown-granted fee simple interests held by third parties.' Article content The land at the heart of the case is on the south shore of Lulu Island in Richmond, which the Cowichan ancestors used as a summer home and fishing village. Article content While the nation's people had winter villages on Vancouver Island and other islands, the ruling says that every summer they would travel 'en masse' to a 'permanent post and beam village' on the Fraser River territory where they fished for salmon. Article content Cowichan Tribes Chief Cindy Daniels had told the news conference on Monday that Friday's decision goes toward the nation's goals to recover and restore the village and surrounding lands, re-establish a permanent residence and river access and re-establish cultural practices. Article content Daniels said the nation initially tried to get an agreement through the treaty process but there was 'no openness' to discuss the land, and so they went to court.
CBC
26 minutes ago
- CBC
Londoners protest Israeli military escalation and killing of Palestinian journalists
Londoners marched through the downtown core on Monday in protest of Israel's escalating military offensive in Gaza, and the deaths of six Palestinian journalists from an Israeli airstrike over the weekend. Demonstrators said they were also protesting Canada's failure to help Palestinian refugees and fully condemn the Israeli government's military actions, including its role in the worsening humanitarian crisis. Among them was Nabil Sultan, who described the last year-and-a-half as being "the most traumatic period of my life," with many family members being killed in Israeli military strikes. "My first cousin's entire family — her, her husband, her four children, and her father-in-law — were killed in their home," he said. "My family (is) currently in very difficult conditions. They're in tents in Gaza City. They're struggling to find water, and find bread and rice and just basic foods for survival." It's Gaza City that the Israeli government says it intends to take control of, a plan that has received fierce criticism at home and abroad. The foreign ministers of Canada, Austria, Australia, Germany, Italy, New Zealand, Norway and the United Kingdom said Saturday that the plan would worsen the humanitarian situation, endanger remaining Israeli hostages, and further the mass displacement of civilians. On Sunday, Israeli Prime Minister Benjamin Netanyahu defended the plan, saying Israel had "no choice but to finish the job and complete the defeat of Hamas," and called reports about the dire conditions in Gaza a "global campaign of lies." Sultan, a nephrologist with London Health Sciences Centre, tried to visit Gaza in September and participate in a medical mission, but was denied entry by Israel while crossing from Jordan, he said. "When I asked for the reason why I was denied entry, what I was told was that I had Palestinian origins," he said. He added there is little medicine in Gaza, and few medical facilities still operating, and accused Israel of committing a genocide. "It's a complete sense of helplessness on my end, and a complete sense of disappointment in the Canadian government stance, that has not ... clearly called for this genocide to end." Monday evening's demonstration began outside London city hall and at one point stopped outside the London Public Library and CBC London's offices. The Canadian Palestinian Social Association (CPSA) said the protest was called on Monday after six Palestinian journalists, including four from Al Jazeera, were killed on Sunday in an Israeli strike on a tent near Al Shifa Hospital. Israel's military said it targeted and killed Anas al-Sharif, alleging he had headed a Hamas militant cell, citing intelligence documents. CBC News has not seen the documents or otherwise verified the allegations, which Al Jazeera said were baseless, calling the strike a "targeted assassination." Canada condemned the killings in a post on X. Death of Al Jazeera journalists in Israeli airstrike widely condemned 1 hour ago International condemnation followed a deadly Israeli airstrike in Gaza that killed six journalists including a prominent Al Jazeera reporter that Israel's military claims was a Hamas operative. There was no justification for the strike, said Londoner Mustafa Turk, who has several family members in Gaza. Turk accused Israel of trying to silence Palestinian journalists. "They don't want Western media to see the truth of what people are sharing from inside Gaza." International news organizations have been barred by Israel from covering the war inside Gaza, aside from rare guided tours. On Sunday, Netanyahu said he had directed Israel's military to " bring in more foreign journalists." In a statement, CPSA accused the Canadian media of whitewashing a genocide, and called on Canadian MPs to demand an immediate and unconditional ceasefire, and press for an end to the aid blockade, and "the occupation of Palestinian lands." It also called on the government to suspend military trade and cooperation with Israel, following a recent CBC News report suggesting Canadian arms shipments are still flowing to Israel. "There must be something that we can do. There is more for Canada to do than just to recognize Palestine as a state with conditions. Where's the arms embargo?" said Samah Al-Sabbagh, CPSA's president. "That's not what Canada stands for. We stand for freedom, we stand for rights, and we see justice, but we can't call it out. Why? Why can't we call out this genocide?" Prime Minister Mark Carney has said Canada intends to recognize a Palestinian state at the UN General Assembly next month, so long as Hamas has no role in governance. On Friday, he repeated Canada's call for a ceasefire, and for the return of all Israeli hostages. Al-Sabbagh says she has several family members who have left Gaza but who are stuck in Egypt waiting to come to Canada. "Canada has not yet brought them over. Their application is there, we keep sending the government, but nothing is being gone. What do we do?" The federal government says more than 1,750 people who exited Gaza had passed security screenings and had been approved to come to Canada as of July 8. More than 860 have arrived in Canada.
