The current magic formula for capital fundraising is proven profitability with a dash of AI.
Venture capital is flowing toward companies able to demonstrate profitability, a new report finds, as investment volumes maintain a downward slope from their mid-Pandemic peak.
The 2023 “Canadian Tech Occupiers Guide” from Colliers explores the evolving intersection of Canadian tech and commercial real estate.
Combining Colliers Canada Research data with information from other reputable sources such as Pitchbook, the report found that the “venture capital landscape is shifting” as investors exercise renewed caution amid a backdrop of high interest rates and economic uncertainty.
The drop in investment volume is not a concern, the report posits, but rather “a return to normalcy” from aggressive growth tactics that ultimately saw many companies forced to reduce workforces following overzealous expansion plans.
“Investors seem to be more cautious due to prevailing economic uncertainties in a high-interest environment,” the report reads.
Investment is down overall, but not everywhere. AI and machine learning verticals are still attracting funding as the formerly niche technology rapidly acquires critical mass.
Last year, almost $2 billion was invested in AI throughout industry sub-sectors across more than 200 deals.
And three-quarters through 2023, “Canadian firms have secured over $1.7 billion this year to support their AI and machine learning technology and services,” according to Colliers’ Guide.
The clearest example hails from Toronto, where VC funding saw a 47% decline in investment volumes year-over-year—while AI & Machine Learning saw an uptick in capital raised, accounting for half of overall deal volume in 2023.
It’s not just private capital that is targeting AI, either.
The Government of Canada has committed hundreds of millions of dollars toward the development of AI-driven products, stating that AI “is one of the greatest technological advances of our generation and already has a significant impact on the daily lives of Canadians.”
Generative Artificial Intelligence appears shaped to impact virtually facet of Canada’s financial technology sector, from drab but important areas like insurance to the white-hot topic of real estate.
“Generative AI is activating innovations in real estate and property software,” Via Pant, Chief Data Scientist for PwC, said recently.
For example, predictive maintenance integrated with IoT systems “promises to revolutionize how we preempt and tackle potential issues within properties,” according to Pant.
“From predicting ongoing needs to offering insightful solutions before problems escalate, this technology forms the cornerstone of a proactive approach to property management,” he said.
Furthermore, a capacity to create tailored content for hardware enhances virtual experiences and drives engagement, “setting the stage for a new era of immersive interaction with properties—from tours to construction safety on-site,” Pant says.
As synergy between Gen AI and real estate unfolds, “the industry stands on the brink of a transformative journey, where efficiency, sustainability, and innovation converge to redefine the very fabric of how properties are built, managed, and transacted.”
Extrapolate that potential to all of global finance, and there’s little wonder left as to why Canadian capital—private and public alike—is travelling toward AI.