[HN Gopher] Element AI sold for $230M, founders (Yoshua Bengio e...
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Element AI sold for $230M, founders (Yoshua Bengio et al.) wiped
out
Author : yazr
Score : 29 points
Date : 2020-12-21 19:53 UTC (3 hours ago)
(HTM) web link (www.theglobeandmail.com)
(TXT) w3m dump (www.theglobeandmail.com)
| legerdemain wrote:
| In Firefox, turning on the reader view and reloading the page
| gets through the paywall, as it does with many paywalled
| publications.
| ReDeiPirati wrote:
| Unlike Landing.ai and C3.ai, Element.ai was lacking of a solid
| go-to-market strategy from day 1.
| yourapostasy wrote:
| _> Unlike Landing.ai and C3.ai..._
|
| What do you believe the go-to-market strategy is of those two?
|
| For C3.ai, my interpretation was they're trying to become the
| Microsoft of ML, re-packaging the entire ML pipeline into a
| more consumable developer experience. They seem currently
| focused more upon the model analytics part of the pipeline than
| say, training data selection or ETL to ingest raw data (whether
| to train upon or run in production), or any number of other
| pieces of the pipeline.
|
| Landing.ai appears to be more tightly focusing their messaging
| on the operational aspects of the ML pipeline, though not so
| much the modeling part that C3 appears to emphasize. They also
| seem to very tightly narrow their focus on machine vision ML.
|
| I'm probably wildly off though, having had no access to the
| actual platforms and ever used them in anger.
| throwawayeai wrote:
| I worked at Element AI, and that was true from the inside to an
| extent that was borderline terrifying. On orientation we were
| told that EAI's strategy was to hire as many smart individuals
| as possible. There was no focus on delivering an actual
| product, it was demo after demo of semi-impressive DL models.
|
| It makes me sad thinking of all the brilliant colleagues I had
| that were simply wasting their talent.
| Barrin92 wrote:
| >Element AI invested heavily in hype and and earned international
| renown, largely due to its association with Dr. Bengio. It raised
| US$102-million in venture capital in 2017 just nine months after
| its founding, an unheard of amount for a new Canadian company,
| from international backers including Microsoft Corp., Intel
| Corp., Nvidia Corp., Tencent Holdings Ltd., Fidelity Investments,
| a Singaporean sovereign wealth fund and venture capital firms.
|
| This has been bothering me for a while. Ridiculous sums of money
| invested purely on name recognition, in particular in 'AI',
| rather than allocating capital to people who actually at least
| have a product.
| nrmitchi wrote:
| The actual title is "Element AI sold for $230-million as founders
| saw value _mostly_ wiped out ". This is an important difference,
| since the submitted title here implies they were entirely wiped
| out.
|
| It looks like this company raised ~$250M, and sold for $230M.
| This isn't any sort of nefarious "founders got wiped out"; they
| sold for less money than they raised and this is the typical
| outcome in that situation.
|
| Also, from the article:
|
| > As part of the deal - which will see ServiceNow keep Element
| AI's research scientists and patents and effectively abandon its
| business - the buyer has _agreed to pay US$10-million to key
| employees and consultants including Mr. Gagne and Dr. Bengio_ as
| part of a retention plan.
|
| This is the kind of "everyone got wiped out but the founders got
| an out-of-band parachute" that highlights an often-understated
| difference between "founders" and "just an employee". Even with a
| terrible outcome, founders and top executives can still manage to
| come out on top, and only employees _actually_ get wiped out.
| [deleted]
| dmix wrote:
| Yeah this is basically part of the deal when you take VC and
| raise hundreds of millions. Don't expect much in return if you
| fail to deliver, or really unless you skyrocket at least 10x as
| expected in such arrangements.
|
| This is the sort of middle ground where it's not a complete
| disaster but some value is still generated out of the entity.
| arolihas wrote:
| It also says ServiceNow agreed to hiring many of the employees
| in this deal so it's not that catastrophic. Although yes their
| options aren't even worth the paper they were printed on.
| rossjudson wrote:
| If preferred shareholders gain control, common shareholders are
| screwed (as in _zero_ value). I speak from personal experience.
| In our case, the founders and top executives absolutely went
| down with the ship and lost everything.
|
| Briefly, cash was needed and investors were found at an
| relatively early point. The agreement set a value (V) under
| which the proceeds would benefit the preferred shareholders
| (the new investors). After the agreement was signed, the new
| investors joined forces with another investor achieving
| control. A new entity was set up, controlled by the investors,
| and they used their control to force the sale of the company at
| V, instantly destroying all common shareholder value.
|
| All of this was announced (in a rather gloating manner) by the
| new head of the company. "You report to me now", basically.
|
| This did not sit well with the staff, who had been working hard
| for a while. I walked that day, and within a few days the
| entire engineering team did as well.
|
| For their $5 million, they got office desks, a bunch of PCs,
| and some half-built software they had no idea what to do with.
|
| I suppose that did not work out particularly well for anybody
| ;)
| musicale wrote:
| > For their $5 million, they got office desks, a bunch of
| PCs, and some half-built software they had no idea what to do
| with.
|
| Nice story. I suppose when they sold it off it was a nice set
| of cheap office equipment for some other startup.
| whoisjuan wrote:
| Well, nothing surprising here. Element AI raised about 260MM,
| failed to create a revenue trajectory so it sold itself on the
| merits of its IP to ServiceNow for 230MM. Of course the founders
| and employees will get wiped out. Investors are first in line to
| get paid.
|
| If you're a founder and you ever are doing a big round try to
| seek for secondary liquidity. It's fair for founders to have some
| way to build financial stability when they are sacrificing so
| much. Secondary liquidity terms are way common nowadays than they
| used to be.
|
| Element AI founders should have done that when they did their
| Series B and raised 150MM.
|
| I know there are some purists that think that giving founders
| secondary liquidity can remove certain accountability, but
| honestly if you're investing in a group of people and you believe
| giving them some reasonable path to partial liquidity pre-exit,
| you probably have some fundamental doubts on that investment and
| that group of people. I feel that nowadays that's basically a
| litmus test for investment strength.
| fierarul wrote:
| Not sure what the angle should be here. The founders didn't
| manage to raise the company; it was soon to be bankrupt. Of
| course the founders would be wiped out.
|
| Still, they have $300,000 worth of shares and "the buyer has
| agreed to pay US$10-million to key employees and consultants
| including Mr. Gagne and Dr. Bengio as part of a retention plan".
|
| Business doesn't always work out. Getting a cool $1M after trying
| and failing is not the worst thing that could happen.
| latenightcoding wrote:
| Anybody familiar with the matter knows if Bengio scaled down his
| academic duties while raising money for Element AI?
| mlthoughts2018 wrote:
| He did scale them down, but he forgot to subtract the mean
| first which is why his duties were biased and the outcome was
| not efficient.
| yazr wrote:
| Paywall copy from reddit
|
| https://old.reddit.com/r/MachineLearning/comments/khin4c/n_m...
| Bancakes wrote:
| You're the salt of the Earth
| ignoramous wrote:
| Also: https://archive.vn/evQgH
| agentofoblivion wrote:
| I don't know anything about this company. But I work at FAANG as
| an ML scientist and spent about 3 months this year working on a
| research project that demonstrated big performance improvements
| of a new tech. It got enough interest that it led to a new
| project that brings this to production.
|
| This has led to countless headaches. The skills needed to solve
| these challenges are very different. My more academically minded
| colleagues don't seem to have the intuition for seeing around
| this corner and understanding what it takes to build something
| that actually works.
|
| This is a long way of saying: if a company is founded by and ran
| by such academics, I can see how this would be a recipe for
| disaster when it came to actually building and shipping products.
| qeternity wrote:
| Really good insight. When I put engineering job posts up, we
| get loads of PhD applications...a staggering amount. And all of
| these people look great on paper. It's only when you start
| talking to them off script that you understand a career in
| academia has radically different incentive pressures than the
| private sector. We end up passing on most, not because they
| aren't brilliant, but because they're very one dimensional,
| which is what suits academia.
| mlthoughts2018 wrote:
| It's funny to see this around the same time as this other thread
| where people are going through so much mental gymnastics to avoid
| obvious conclusions of how horrible it is to work for a startup,
|
| https://news.ycombinator.com/item?id=25493646
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(page generated 2020-12-21 23:01 UTC)