OTTAWA — As cargo ships and lorries back up and factory lines slow around the world, Scale AI will next week launch nearly $80 million worth of projects to apply artificial intelligence to supply-chain challenges. The Montreal-based supercluster has been by far the slowest of the five federally backed organizations to spend its funding, documents obtained by The Logic show. But CEO Julien Billot says it’s now ready to ramp up. “We’re very confident that we have a very strong pipeline in terms of projects and that we’ll commit this money.”

Superclusters—or “supergrappes” in French—are publicly backed non-profits with members that include multinationals, large and small local firms, startups, and research institutions. Companies pitch projects to the superclusters, and typically commit to at least matching each project’s public funding. The Liberal government proposed the $950-million five-year initiative in its March 2017 budget. In December 2018, Prime Minister Justin Trudeau announced Scale would receive up to $230 million from the program. The Quebec government pledged an additional $60 million.

Following the batch of projects set to be announced next week, the AI supercluster will have yet to commit just under $100 million of its federal funding, Billot said. That’s the most money unallotted of any of the five superclusters, according to an internal tracker prepared by the team that oversees the program at Innovation, Science and Economic Development Canada (ISED). The Logic obtained the document via access-to-information request. 

Billot attributed the difference to Scale’s delayed start, specific project funding requirements and industry-support model. But he told The Logic the supercluster is now picking up the pace, with jammed global logistics networks increasing private-sector interest in its core focus. “Companies are more mature globally about AI,” Billot said. And they’re increasingly aware of the need to be “much better [at] supply-chain management than they used to be, because of [the] pandemic.” 

Problems that businesses have brought to Scale include choosing the best trucking routes and schedules amid driver shortages, efficiently shifting containers between different links in the network, and choosing where to send inventory to meet local demand. “We think we are going to commit a lot of money in the coming six months,” said Billot. 

While the Liberal government announced the five winning supercluster bids in February 2018, negotiations over the contracts between government and the superclusters took the rest of the year. Scale only began operating in May 2019, said Billot. “We should have been halfway [through] our mandate [by now], which we’re not,” he said. “So it’s relatively normal spending.”

Montreal-headquartered AlayaCare, which makes software for home health-care providers, has participated in two Scale-backed industry projects, but has also seen other proposals turned down. The more recent rejections suggest the supercluster is “not just shovelling money out the door to anyone who asks that’ll make them look good, [but] trying to strictly follow their mandate,” said CEO Adrian Schauer, noting that the scale-up is “clearly an innovative company [that’s] succeeding [and] doing AI.” 

AlayaCare became a member for the opportunity to access non-dilutive grant funding, and because the superclusters were designed to “force collaboration” between firms, Schauer said. “It gives you an excuse to talk to a prospective client or build a partnership that may [not] get over the line on a purely commercial basis.”

For industry projects, supercluster members pay costs up front, and the organization reimburses a share of certain expenses quarterly. Scale doesn’t typically cover hardware or buildings. “We just pay basically [for] software development,” so it takes “a lot of projects” to spend significant sums, said Bilot. “Our ramp-up is a bit slower than the other superclusters who fund factories.” 

Scale has also been “very hard with industry to ask them to commit more money” to projects, said Billot. The AI supercluster has kicked in $60 million and participating members $111 million across the 32 undertakings it’s approved, according to its 2020–21 annual report—or $1.83 in private capital for every public dollar. Across all five superclusters, the ratio was $1.55 as of May, according to the internal ISED tracker.

The superclusters initiative overall got off to a slow start; in October 2020, the parliamentary budget officer said ISED had paid out just $30 million of a budgeted $104 million through the first week of March that year. But the groups sped up in response to the pandemic, each launching a COVID-19 stream that dropped the fund-matching requirement for participating firms. While the next-generation manufacturing (NGen) and digital-technology superclusters allocated $60 million each, Scale spent only $12 million across 16 proposals.  

Scale had $140.5 million, or more than half of its $230-million federal allocation, still available as of May, according to ISED’s tracker. Billot said the real number at the time was likely $20 million lower, because the organization’s reporting to the department doesn’t count as committed unspent money set aside for uptake-based programs that subsidize accelerators and incubators to enroll AI supply-chain startups and workers to take training courses. 

But even Billot’s revised figures are significantly more than those for the other four superclusters combined. The document shows the St. John’s-based ocean and the Vancouver-headquartered digital-technology groups had left unspent $26.7 million and $1.30 million of their respective $153-million federal allotments as of May, while Hamilton, Ont.-based NGen was left with $7.1 million from Ottawa’s $230-million commitment. 

Following lobbying by three of the organizations—first reported by The Logic—the Liberals’ April budget included $60 million over two years to extend the program. NGen, the digital-technology supercluster and Regina-based Protein Industries Canada will split the new funding, said ISED spokesperson Hans Parmar. As for Scale AI, “since its inception, [it] has successfully maintained strong partner support through co-investment, including funding from the [Quebec government], which also resulted in less reliance on federal program funding at the onset.”

Billot said the AI supercluster did not seek any of the supercluster-initiative extension money. “We are exactly where we were supposed to be in the plan,” he said. Scale is now turning its attention to the end of the 2022–23 fiscal year, when its current contribution agreement with Ottawa is due to expire. 

The organization can’t spend federal cash past that point, potentially leaving projects approved later next year only partly funded. “Life is not ending for industry [at the] end of March 2023,” Billot said. So Scale will continue to “build the pipeline [to] take full advantage of a possible second mandate.”