With spring officially here, BetaKit’s most-read stories for the month of March highlight a season of transition for Canadian tech, with ongoing frustrations and challenges met by long-term optimism and an immediate need to reconcile with AI disruption.
The fall of Silicon Valley Bank essentially kicked off the month, foreshadowing new challenges for startups already struggling. After the pressing question of ‘what happens next’ came longer-term competition concerns, with Maverix Private Equity managing partner John Ruffolo noting that a lack of an international pace-setter in Canada’s venture debt market could lead to worse financing options for startups.
Layoffs continued across the country, with FreshBooks, Wattpad, Rewind, Symend, and Sonder all making reductions in forces, for the most part due to slowed growth or as part of a ‘pathway to profitability’. But home-grown staff cuts simply reflect a global trend as large companies like Amazon and Meta continue to reduce staff worldwide. The impact of Big Tech cuts in Canada? Too soon to tell, as corporate comms teams keep mum on how the current state of play affects past commitments, but five-year hiring plans seem about as far away as the metaverse.
“The long-term health and optimism is very high.”
– John Ruffolo, Maverix Private Equity
March also saw more insolvencies, with Canada Drives restructuring its business and RenoRun filing for creditor protection. RenoRun is a particularly sad example of the challenges Canadian startups face with inflated valuations and investors pulling back due to LP pressure, which BetaKit first broke news on in January; RenoRun made four separate attempts to secure additional financing to keep the lights on—all ultimately unsuccessful.
As one venture capitalist said of the Montréal-based startup’s fundraising struggles: “Rationality quickly turned to fear and fear took over.”
That said, there are still signs of positivity as Canadian tech companies continue to raise funding rounds. A significant portion is coming from the early stages—Birdseye and Realsage are two recent examples—but some notable Series A extensions and Series B rounds stand out like Operto Guest Technologies and Cohere—the former to expand to new markets, and the latter one of the first investments from Salesforce’s new $250 million AI fund.
Ruffolo’s take: “The long-term health and optimism is very high.”
Short-term is where he has concerns, but speaking on the BetaKit Podcast this month, the Maverix founder indicated that the switch-up in the availability of capital is more of a market correction than calamity. “We’ve gone through three years of this overexuberance and these declarations of unicorns, 98 percent of which never really existed, and the impact of those decisions are going to be felt over the next few years,” he said.
Long-term optimism aside, concerns of short-term pain have some innovation stakeholders asking the federal government to inject more liquidity into the market—$700 million in fact.
Whether or not that ask will be answered, and more specifically, whether it will be answered on time, is an open question. With March punctuated by the federal budget, interest in government-promised programs, and the speed at which they are being deployed, was a key issue.
Open banking continues to see no tangible progress, to the lament of FinTech startups like Borrowell and its investors. Meanwhile, the lack of news on the status of the proposed SR&ED review has become its own self-referential joke among the country’s innovation policy wonks.
After the Canadian Innovation and Investment Agency was revealed in February, architect Dan Breznitz reminded us that it takes time to both build new organizations of this nature and even longer to see the impacts. Of course, in his typical deadpan, the co-director of the University of Toronto’s Innovation Policy Lab was also willing to call a spade a spade. “Let’s be blunt about it: we as a country are extremely good at invention … we’re horrible at innovation.”
While many are wondering why government programs are taking so long, when it comes to AI the concern seems to be that things are moving too fast. Yoshua Bengio, the co-founder of Montréal-based Mila, was one of several hundred AI signatories hoping for a pause on trying systems to give time for AI regulation to be implemented.
And the status of Canada’s Artificial Intelligence and Data Act (as part of Bill C-27)? Stalled in the House. As a looking glass into what might come in the months ahead, it seems some government entities aren’t waiting to act on AI: the Canadian privacy commissioner recently launched an investigation into ChatGPT after Italy’s regulatory counterpart banned the tool outright.
Feature image courtesy Flickr.
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