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“$327 million [fundraising round] from a Canadian perspective, you look and you say ‘wow, this is huge,’ but from a Silicon Valley perspective, this is routine.”
Louis Tetu, CEO and founder of AI company Coveo, is fresh off the heels of a $200+ million fundraise for the Montreal-based organization. And he’s a bit angry. Well, not angry; passionate. He’s happy for his company and for what the fundraise will help them do, but he doesn’t think that his raise is the big win that some think it is.
Coveo does for websites what Amazon does for e-commerce. Using AI technology, Coveo tracks usage patterns on customer websites in order to deliver a personalized experience to each user. For example: Person A may care a lot about pricing and quickly navigate to the pricing page of a website. Person B may navigate right to that company’s blog to see what insights the company shared. If the company was using Coveo, then Person A would go to the site and pricing might pop up right on the homepage. Person B would go to the site and see the blog first.
As Tetu put it, AI enables companies to deliver “a million experiences to a million people.”
The founder of Taleo, an applicant tracking system acquired by Oracle for over a billion dollars, Tetu knows what it takes to build a real company (with real revenue, real customers, and a real product in-market). And after founding Coveo, his second major company, he shared his opinions with Tech Daily on AI, Canada luring American tech giants, wealth creation, and Canadian companies opening international offices.
… on AI and commercialization
Canada frequently touts on the world-stage that we have some of the best AI researchers in the world. They use examples like Uber’s AI lab in Toronto or reference the slew of Canadian AI companies raising millions of dollars.
For Tetu, this is useless without commercialization. It’s fantastic that Canada has research, but that’s not how you build wealth, said Tetu. He even took shots at another prominent Montreal-based AI organization known for its extensive government lobbying, saying he’s “tired of people talking about it as a company” because the organization has “a bunch of subsidies, but it has no customers.”
For Tetu, the only thing that matters in the business AI ecosystem is customers. If you don’t have that, you don’t have much.
“You’ve got a bunch of innovation, but you’re not getting any return on that investment because you’re not creating real businesses,” said Tetu.
… on Canada luring foreign companies in
“20 years ago it was already a problem that a lot of foreign companies were coming to hire our talent,” said Tetu. “We weren’t competitive in hiring our own talent that we educated with our tax dollars in Canada. Now, 20 years later, it’s even worse.”
When it comes to the question of luring foreign companies to Canada, Tetu’s opinion is a solid “no thank you.” He said that foreign companies got offered subsidies that Canadian companies didn’t get, furthering the disparity in hiring abilities and creating a “shortage of talent – and in the meantime we’re exporting all of the value add and economic leverage.”
When this double whammy happens – not competitively bidding to keep talent in Canada and luring foreign companies into Canada with incentives not offered to Canadian companies – the result is scarcity. While we may not be able to match Silicon Valley salaries in Toronto or Montreal (yet), Tetu believes the first step to leveling the playing field is simple: stop paying foreign companies to come to Canada. Let them come if they want, but on their own dime.
“Amazon, Ubisoft, Google, and Electronic Arts are not going to pay for the next school or hospital and are not going to create prosperity in this country,” said Tetu. “Canada needs to stop being the low-cost engineering branch of the world… we’re exporting value creation to foreign shareholders and in the meantime those resources are not used to digitize [Canadian companies], and that’s a big problem.
… on wealth creation
Luring foreign companies into a country may provide employment, which offers income to individuals, but it rarely creates wealth.
Tetu’s opinion is that to be a winner in the tech space – and he stressed that in any industry disrupted by technology, there’s only room for one winner – Canadians need to own the capital, not just possess a job.
To illustrate this example, he talked about Mexico. Tetu said that in the 1970s and 1980s, Mexico opened up some tax free zones for American electronics manufacturers to open plants right near the border in Tijuana and Monterrey.
“They thought they were in the semiconductor and electronics business,” said Tetu. “Until the Americans backed up the trucks at the beginning of the 2000’s and said ‘sorry, we’re moving everything to Malaysia.’ And there was nothing left.”
“These cities are now more poor than they were before,” Tetu continued. “Then you fly to Palo Alto and realize they created [billions of dollars] in capital gain because they were the owners.”
He does not want to see this happen to Canada, which is why he urges Canadian companies to sell wherever you need to (Coveo does over 90% of their business outside of Canada according to Tetu), but to keep ownership in Canada. That means workforce (Tetu said 85% of Coveo’s workforce is in Canada) and investment (Tetu said 75% of Coveo’s investors are Canadian).
… on international offices
Despite a fervent desire to keep capital in Canada, Tetu also realizes the importance of going where your customers are. To that end, Coveo has offices in New York City (Brooklyn), San Francisco, and London, UK. But they are small, and all focused on one thing: serving customers so that the whole company – Canadian-owned capital – can grow.
“What’s important is the Canadian identity, the Canadian ownership, [and] the wealth creation here,” said Tetu. “We just financed the company at [a valuation of] $1.4 billion. So it essentially means a billion dollars of capital gains. We think that’s what’s going to pay for the next school and the next hospital.”