Canadian startups weigh alternatives as AI model costs surge

The price of frontier AI models is forcing real decisions at startups that build on top of them. At AccelerateOTT on Thursday, founders from five Ottawa-based companies described how they manage those costs and where they look for relief.

Pluvo CFO and COO Vanessa Galarneau put the concern directly. "I think with OpenAI and Anthropic filing for their IPO and seeing the numbers, you can see that the [AI] prices are going to increase again," she said on stage. Compute is also getting tighter. The risk, she said, is that the business grinds to a halt: "We can't just have all of our productivity crash because we don't have compute or we need to pay Anthropic thousands of dollars."

The numbers behind that worry are concrete. Fellow CEO Aydin Mirzaee said his company pays Anthropic a seven-figure annual sum. Cursor, a coding tool that runs on AI models, costs a single developer up to $2,000 a month. Half of Fellow's engineering team uses it. Other AI tools add thousands more.

Fellow and Backboard.io have already switched models when a promotion or credit made a competitor cheaper. Other panelists said they are looking at non-frontier alternatives. Rewind CEO Mike Potter noted that open source models are closing the performance gap, making the switch less risky than it was a year ago.

The pricing pressure has a visible driver. Anthropic just released Fable, its newest model, at double the price of Opus 4.8, the previous top tier. Galarneau traced the upward path to operating margins that are "really, really terrible." The logic: both Anthropic and OpenAI need public-market capital, and higher prices are the quickest fix for their unit economics.

The pricing game might run in both directions. The Wall Street Journal reported this week that OpenAI is considering aggressive price cuts to pull users away from Anthropic. That move would likely trigger a matching cut from Anthropic. If that happens, the startups on the AccelerateOTT panel may not need to switch to open source after all.

The panel made clear that the switching cost is real but falling. Frontier models have lock-in from integration and performance. As open source catches up and the price gap widens, the calculus shifts. For now, the startups are shopping.