“They continued their research into neural networks and deep learning,” Cheng explains. “In 2012, there was a breakthrough moment at NIPS, a conference on neural information processing systems. Hinton made a presentation showing how they used image nets to categorize 10 million images into 10,000 categories. Then they reduced the classification error by 20%. Traditionally, improvement in AI is about 1% per year. So just within in 2012, they bypassed 20 years of research.”
“The Canadian government was very proud of that work and realized that there's a real opportunity for Canada to differentiate itself in the world economy,” says Cheng. “You've got Asia and America specializing in lots of things. AI was this topic that people had given up on for decades. Then suddenly, there was this breakthrough with great Canadian professors working on the research.”
As a result, the Canadian government—which has traditionally been generous in funding research and commercial initiatives—introduced a number of new programs and institutions supporting AI development.
Sowing the seeds of a “Silicon Valley of the North”
Cheng says his company has benefitted from two of the programs established in the wake of that breakthrough moment: IRAP, the Industrial Research Assistance Program, and SR&ED, the Scientific Research and Experimental Development tax credit.
“As a ballpark, we get approximately half a million dollars support a year from the government,” he says. “So if you think about how hard it is for startups to raise angel rounds and get a couple hundred thousand dollars, it has allowed us as a company to grow at the scale that we have, without taking on any investments, which is a quite a unique way to build the business. I think without government support that can be tricky.”
To qualify for IRAP funding, though, you must be developing breakthrough technology.
“You can't build an Instagram clone and apply for IRAP. You have to be developing something new,” says Cheng. “With SR&ED, the R&D must be done in Canada. So I can’t outsource our R&D to a different country and still expect to receive support from the government on that. Despite the pressure to relocate to a place like Silicon Valley—with its access to talent and capital—Canada as a country has provided a lot of incentives for teams like us to stay put.”
In 2018, Lumen5 won the Fundica Roadshow, which is a national startup competition, where they were recognized as the fastest growing early stage company in Canada. Then in 2019, the company won the New Ventures BC competition, which is a recognition of the fastest growing company in British Columbia.