Canada takes a stake in Cohere, the AI company rivaling OpenAI

On October 29, at the Mila research institute in Montreal, Canadian Prime Minister Mark Carney announced that the Canadian government would take a stake in a private artificial intelligence company. The target: Cohere, a Toronto-based firm that sells language models to businesses and government agencies. The check: up to C$1.6 billion (about US$1.1 billion), paid in stages.

That is only part of a larger funding round. Cohere is aiming for up to C$7 billion (about US$5.1 billion according to Dealroom), at a valuation of around C$35.7 billion. It would be by far the largest raise in Canadian tech history. And it is led by a German group: Schwarz, owner of Lidl and Kaufland.

Why the owner of Lidl is interested in Cohere

Schwarz is also a major shareholder in Aleph Alpha, the German AI startup. Cohere is now merging with Aleph Alpha, according to Canadian outlet BetaKit. The stated goal: to build a transatlantic alternative to the American giants. Schwarz had committed as early as April to lead this funding round as part of the tie-up, according to Dealroom.

For European customers, one concrete point stands out: Schwarz plans to host Cohere's models on STACKIT, its cloud marketed as sovereign. Cohere says it is open to computing power hosted in Europe. The announcement also came during the Canada-European Union summit, where Mark Carney was seeking to strengthen ties with Europe.

The other investors are Bell Ventures, Bullhound Capital (Luxembourg), Inovia Capital, NVIDIA and Prosperity7 Ventures, the fund of Saudi Aramco.

What Canada demands in return

The public money comes with conditions. Cohere must remain incorporated and based in Canada, invest at least C$1.7 billion in Canadian computing infrastructure by 2030 and create more than 1,000 technical jobs in the country. AI Minister Evan Solomon said the funding would be released in stages tied to job and revenue targets, without detailing the terms. The size of the government's equity stake has not been published.

Mark Carney justifies the move with an observation: Canada has often funded research whose benefits were reaped by others. He believes that concentrating AI in a few hands poses risks to costs, resilience and sovereignty.

Figures to take with caution

Cohere says its recurring revenue grew 165% year over year as of the end of September and that it has about 300 customers, twenty times more than a year earlier. These figures come from the company itself, and no revenue amount was disclosed. Another gray area: this is only a first close of the round. A spokesperson told BetaKit that most of it is secured, but The Logic notes that the amount actually committed has not been disclosed.

The gap with the Americans remains huge. According to The Logic, OpenAI raised $122 billion in March and Anthropic $65 billion in May. The head of Mistral recently called on Europe to build its own frontier models. The Cohere–Aleph Alpha tie-up is another answer, one that will have to be judged on the models and on the contracts.