The co-founder and former co-CEO of Layer 6 said he expects a pullback in artificial intelligence investments, separating the “pretenders” from real technical winners in Canada’s rapidly-growing AI scene.

Jordan Jacobs, who sold the Toronto-based AI startup to Toronto-Dominion Bank in January 2018, is now managing partner of Radical Ventures. The investment firm launched an AI-focused US$350 million fund on Tuesday backed by some of the country’s largest institutions, including TD Bank and the Canada Pension Plan Investment Board.

“There’s been a tremendous amount of hype and it’s caused a flood of funds to come in and invest in companies that are not really AI companies,” Jacobs told BNN Bloomberg’s Jon Erlichman and Amber Kanwar Tuesday.

“Ultimately, you’re going to see bit of a pullback over the next little while … of the pretenders. Those who came in because of the hype will drop out as those companies can’t raise the next round.”

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Jacobs – who also co-founded the Vector Institute for Artificial Intelligence with Turing Award winner and Google’s AI research team leader Geoffrey Hinton – said that unlike other funds, Radical’s experience with AI helps it see “technically what’s real and what’s not” in startups.

With the “explosion of AI in Toronto,” Jacobs said he hopes Radical can help AI startups in the country scale up into “very good Canadian companies.”

“We want to keep them Canadian, independent and help them grow to their full potential,” Jacobs said.

The new fund is also backed by Montreal’s Public Sector Pension Investment Board and the billionaire Weston family’s Wittington Investments Ltd. 

Radical also announced it’s added former TD chairman and CEO Ed Clark as a partner, as well as former McKinsey & Co. global managing director Dominic Barton as senior advisor. Clark and Barton will provide startups with mentorship and access to global networks, the firm said.