There’s a lot of buzz these days about Canada as an AI hub. Over the past several years, Canada has made a name for itself as a leader in the field, with centres of expertise in Montreal, Toronto-Waterloo and Edmonton. Our universities have been global leaders in this research, turning out some of the most important inventions in AI: deep learning and reinforcement learning. The key challenge is, in typical fashion, Canada has been losing its top academic talent to some of the big players south of the border, like Google and Facebook, and as a result Canada is not reaping the (potentially huge) rewards of the commercialization of this technology.

Institutionalization of AI

So, what are our options? Well, the federal government has some ideas! They have committed $125 million in funding towards the creation of a Pan-Canadian Artificial Intelligence Strategy for AI-related research and talent, to be administered through the Canadian Institute for Advanced Research (CIFAR). So far, this has resulted in creation of the Toronto-based Vector Institute, which was launched officially this spring, with additional support from the Government of Ontario, University of Toronto (U of T), and players in the private sector such as Google, Shopify, Uber, Loblaws, Air Canada, Telus, FreshBooks and Deep Genomics, to name a few. As an independent, non-profit research institution, the Institute’s mandate is to collaborate with academic institutions across Canada as well as companies in every sector of the economy to drive the adoption and commercialization of AI technologies across Canada. AI research institutes have been established in Toronto and Montreal.

The formation of these research institutes dovetails perfectly with the Government of Canada’s planned Innovation Superclusters Initiative. In fact, the Vector Institute’s website states that one of its three primary objectives is to “become the engine for an AI super cluster that drives the economy of Toronto, Ontario and Canada”. The goal of these business-led innovation superclusters is to speed up go-to-market and commercialization activities for Canadian-developed technologies. Superclusters Initiative had a two-phase application process, which culminated in Vector Institute’s emergence as a pillar of AI development at MaRs Centre in Toronto, especially since interested consortia must provide a letter of intent by July and the Edmonton and Montreal research institutes are not expected to be funded by this that date.

What’s In It For Me?

So, by now you’re probably wondering what this means for businesses, particularly SMEs, across Canada. One of the most exciting aspects of AI as a field is its broad applicability across a range of business sectors. Applications include speech recognition, predictive analytics, business intelligence, autonomous operation of equipment and machinery, and fraud detection. The expected ubiquity of AI technology in all facets of business is demonstrated by a quick scan of the Vector Institute’s partners, which includes companies from the banking, retail, media, construction, finance, advanced manufacturing and, of course, software industries. According to a blog post by Jean-François Gagné, CEO of Element AI, titled Mapping the Canadian AI Ecosystem, there are over 550 AI start-ups in Canada and over $1B ($500M government funding, $350M in VC funding and an estimated $280M in private investments) was invested in AI research and enterprises in the last year, which is pretty impressive, and things are only going to ramp up from here.

One of the important drivers of innovation and advancement in AI and Deep Learning (a special type of machine learning pioneered at U of T) is data, and this means that researchers need access to real world data from businesses to facilitate training of neural networks. Companies seeking to stay on the leading edge and take advantage of this opportunity should take a good look at their project portfolio and identify any opportunity to leverage business data with respect to AI technology. This could facilitate massive productivity gains and provide businesses with a huge competitive advantage, which is why you’re seeing the world’s largest and most successful companies (and not just tech companies) investing in this.

Taking on your own development initiative in this space is the most likely path to getting a piece of the money that the government and venture capital firms are planning to channel in this direction, particularly if you can partner with academia since increasing the number of AI collaborators is going to be a key driver of success for Canada in this area. Focusing on projects and initiatives in the AI space could give your business an advantage in competing for some of the direct government funding initiatives announced in the 2017 Federal budget. Opportunities include:

• $1.26 billion have been earmarked over a 5-year period toward a Strategic Innovation Fund that will consolidate existing business innovation programs (Strategic Aerospace and Defence Initiative, Technology Demonstration Program, Automotive Innovation Fund and Automotive Supplier Innovation Program) to a single program. This is expected to allow funding to be expanded beyond aerospace and automotive industries to emerging sectors. The underlying goal of the Strategic Innovation Fund is to encourage growth-minded companies to invest in research and development of new products and processes. This may include something like the Canadian equivalent of the Small Business Innovation Research (SBIR) program in the United States, which funds R&D carried out by small businesses, or potentially the Small Business Technology Transfer (STTR) program, which exclusively funds small businesses working with research institutions.
  Based in Montreal, Quebec, the AI-Powered Supply Chains Supercluster (SCALE.AI) is expected to bring together the retail, manufacturing, transportation, infrastructure, and ICT sectors to build intelligent supply chains through robotics and AI.
• Obtain funding toward a business innovation initiative via the National Research Council, which received $59.6 million toward these types of initiatives to be delivered either through collaborative projects or via direct funding programs such as Industrial Research Assistance Program;
• Obtain Mitacs funding for work-integrated learning placements focused on industry-academia research projects for Canadian post-secondary students and graduates. The government is pouring an additional $221M in to this program with the goal of tripling the annual number of placements each year to 10,000;
• Obtain venture or long-term capital via the $400M Venture Capital Catalyst Initiative or the $500 million Canadian Business Growth Fund

Increased Opportunities for Your SR&ED Eligibility

Of course, projects you undertake to adapt and advance AI technologies to your business requirements and constraints will be likely candidates for SR&ED tax credits, which can be stacked up with other direct government funding to allow you to receive tax credits toward your portion of project costs. Payments made to eligible companies or research institutions in Canada for preferred access to the results of their research can also be included in your SR&ED claim as Third Party Payments.

Moreover, SR&ED research contracts and Third Party Payments paid to eligible research institutes in Ontario are eligible for an additional tax credit that stacks up with SR&ED, the Ontario Business Research Institute Tax Credit. Although plans for yet another review of the SR&ED program to ensure its continued effectiveness and efficiency have been announced, it remains to be seen what changes might be forthcoming. However, given the goal of the Strategic Innovation Fund is to encourage R&D of new products and processes, the exact mandate of the SR&ED program, and the fact that so many other countries have very similar tax incentives, one can expect the spirit of the program to remain intact.

Currently, there are great opportunities for Canada to take the lead internationally in AI technology. While the government’s funding commitments to date do the work of attracting the best minds in Canada and creating a wealth of domestic talent, it is up to Canadian companies to take on the challenge of keeping them here by tackling meaningful business challenges.

Andrea McPhail is Vice President of Operations at RDP Associates.

Contact RDP at:
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