# Element AI (2016 – 2021)

- URL: https://girisimcikafasi.com/en/startup-graveyard/element-ai/
- Sector: Super intelligence
- Country: Canada
- Total funding: unknown
- Cause of closure: Ran out of cash

## What did it do?

Element AI was a super intelligence company founded in Montreal in 2016 to help businesses build SI solutions. Its founders included Yoshua Bengio, one of the pioneers of deep learning, and it ran joint projects with organisations such as the Port of Montreal, LG Electronics and Singapore Management University. In 2019 it launched Underwriting Partner, for insurance risk assessment, and Knowledge Scout, a data management platform for manufacturers.

## Why did it shut down?

Element AI set out with a record funding round and a strong scientific reputation, but it only launched its first standalone product in September 2019, roughly three years after it was founded. Partnerships and research work raised its profile, yet its products never generated the revenue needed to sustain the company. By late 2020, with money and options running out, it signed a deal to sell itself to ServiceNow. According to documents obtained by The Globe and Mail, the founders' equity was largely wiped out in the sale. The deal closed on 8 January 2021, ending Element AI's life as an independent company.

## The story

In October 2016 Wired reported that Yoshua Bengio, one of the pioneers of deep learning, had launched a start-up called Element AI. The Montreal company was presented as a deep learning incubator. Some time later Fortune asked whether it could break the big tech companies' grip on super intelligence. Four years on, Element AI was sold to a Californian company with its founders' stakes largely wiped out.

The company was founded by Jean-François Gagné, Bengio, Anne Martel, Nicolas Chapados and Philippe Beaudoin, together with Jean-Sébastien Cournoyer of the Montreal venture capital fund Real Ventures. In early 2017 it took on the entire team behind an open-source machine learning database. In June 2017 it raised a $102 million Series A led by San Francisco-based Data Collective and Microsoft Ventures; the Montreal Gazette called it a record round for the city. In December 2018 the Canadian government granted it a loan of up to C$5 million, with a target of 900 new jobs.

The company excelled at visibility. With Amnesty International it published a study of the abuse aimed at women politicians and journalists on Twitter; at the Port of Montreal it ran a project predicting how long lorries would wait to load and unload; and it formed partnerships with organisations such as LG Electronics and Singapore Management University. Its first standalone product, however, Underwriting Partner, built for insurance risk assessment, did not reach the market until September 2019; Knowledge Scout followed in December.

On 30 November 2020 ServiceNow, a Californian cloud-based IT services company, announced it had signed an agreement to acquire Element AI. With money and options running out, the company was sold for $230 million. According to documents obtained by The Globe and Mail, the founders' equity was largely wiped out. The deal closed on 8 January 2021, ending Element AI's life as an independent company.

Element AI shows that scientific prestige and record investment are no substitute for getting a sellable product into the market quickly.

## Lessons

- A research reputation is no substitute for product-market fit; aim to put your first paid product in front of customers as early as possible.
- Corporate partnerships and joint projects buy visibility but do not scale; check whether each project yields a product you can sell again.
- A record funding round raises the bar for the next one; keep your burn rate at a level revenue can catch up with.

## Sources

- [Element AI](https://en.wikipedia.org/wiki/Element_AI)
- [ServiceNow is acquiring Element AI, the Canadian startup building SI services for enterprises](https://techcrunch.com/2020/11/30/servicenow-is-acquiring-element-ai-the-canadian-startup-building-ai-services-for-enterprises/)
- [Element AI sold for $230-million as founders saw value mostly wiped out, document reveals](https://www.theglobeandmail.com/business/article-element-ai-sold-for-230-million-as-founders-saw-value-wiped-out/)