December 7, 2020
ServiceNow, a growing software company from California, has announced their acquisition of Element AI in a deal set to close early next year. Element AI is a Montreal-based artificial intelligence start-up that was founded in 2016 with a view to making AI more accessible. They have set about accomplishing that goal by promoting ethical AI practices both within Canada and abroad. Their efforts in this field helped in bringing about the Toronto Declaration, a declaration on equitable AI practices widely endorsed by the human rights community. Following the purchase of Element AI, ServiceNow will seek to establish an AI innovation hub in Canada and expand its market presence north of the border.
While Element AI had early success advocating for policy change, they have experienced challenges with product rollout and commercialization of their technology. A 2019 report highlighted the company’s high operational costs, low revenue, and developmental difficulties. The company’s CEO, Jean-Francois Gagné, pointed to a variety of factors causing these setbacks, including IP issues, poor user proficiency, and the lack of a scalable AI business model. While Element AI has been hitting their financial targets consistently throughout the COVID-19 pandemic, they were forced to lay off 15% of their staff in May and will likely face a further “winding down” following the integration with ServiceNow.
The declining profitability of Element AI is reflected in the purchase price paid by ServiceNow under the acquisition agreement, which is reportedly less than $500 million. This comes roughly 15 months after Element AI was valued at $600-$700 million for the purposes of a Series B financing round which raised $200 million and was at the time one of the largest venture capital rounds in Canadian history. ServiceNow plans to turn the struggling business around by extracting the technical talent and AI capabilities of Element AI, while letting go of a majority of their corporate staff.
Along with the news of this acquisition, ServiceNow announced their intention to launch an AI innovation hub in Canada. The hub will reportedly act as a development center focused on fostering AI innovation in the customer-facing retail market. ServiceNow also hopes that this investment will expand engagement with their “Now Platform” which allows users to implement AI into their business work-streams and automate a variety of operational procedures. The announcement of this hub mirrors similar investments made by ServiceNow in cities across the US in an effort to expand their user base and accelerate technological development.
Author: Sasha Seeber