Waterloo hits terminal velocity with investment

Mike Stork, a Canada-based entrepreneur and angel investor, has donated C$1m ($1m) to local University of Waterloo’s Velocity fund.

The fund is managed by the university’s startup incubator, to support entrepreneurs emerging from the academic institution.

Stork, a member of Waterloo’s board of governors and a volunteer for Velocity, said: “The University of Waterloo has adopted an unconventional approach to entrepreneurship that I strongly support.

“Velocity is one of the most exciting and important elements of the university’s vision for entrepreneurship and it’s produced businesses that Waterloo region can be proud of.”

Feridun Hamdullahpur, president and vice-chancellor of Waterloo, added: “Mike is one of the most successful angel investors in Waterloo Region with close ties to the University of Waterloo and, in particular, Velocity.

“We are delighted with this gift that will provide additional funds for young entrepreneurs and early-stage startups.”

The Velocity fund has awarded more than C$750,000 in grants through holding competitions three times a year since its inception in 2011 following a C$1m donation from former Velocity resident and Kik founder Ted Livingston.

Velocity takes no intellectual property rights or equity in return but it has seen its incubees raise more than $100m in funding in the five years since the incubator was launched, excluding acquisitions, news provider Waterloo Stories said in January.

Previous recipients of the Velocity Fund include BufferBox (acquired by search engine provider Google), Kira Talent, MappedIn, Reebee, Thalmic Labs, Vetica, Voltera and Weston Expressions, while other startups, such as Kik and Pebble have also passed through the Velocity incubator.

Watchmaker Pebble was the first Velocity team to crowdfund on Kickstarter and raised more than $10m with almost 70,000 pre-orders, while, in January, Palette raised more than $150,000 on Kickstarter for its freeform interface that offers hands-on controls for software.

The most recent winners from the November competition, now operating at the Velocity Garage workspace, include PiinPoint, LightBot, MetricWire and uMentioned.

Earlier this year, PiinPoint, a location analytics startup that previously won $25,000 at the VeloCity Fund Finals became the seventh company from Velocity to participate in Silicon Valley-based accelerator Y Combinator. Previous Velocity startups to participate in Y Combinator include Reebee, Thalmic Labs, BufferBox, Couple, Vidyard and Pebble.

A complete list of past Velocity Fund winners and the list of the 35 startups currently operating at Velocity Garage are available on the Velocity website. 

The incubator and grants fund are regarded as having helped the Waterloo region develop its technology startup ecosystem.

In January, capital markets firm Osler Guides said: “Once upon a time, Canada had a vibrant technology sector anchored by household names like ATI, Creo, Cognos, Corel, JDS Fitel, Newbridge, Nortel and PMC. The bursting of the dot.com bubble signalled, in part, the end of an era for that sector of the Canadian business economy. Over time, these Canadian technology industry titans were acquired by foreign companies or were otherwise diminished.

“Fortunately, … even in a world that features the demise of Nortel and the ongoing BlackBerry saga, the Canadian technology landscape has witnessed a significant transformation over the last three years and, with the emergence of a new generation of exciting companies, we are ready for a new golden age….

“Canadian universities have also been active contributors to Canada’s technology renaissance. The Next 36, which was developed in conjunction with the University of Toronto’s School of Continuing Studies, has built a program that is designed to nurture and foster the next generation of Canadian entrepreneurs.

“The program is currently working with its fourth cohort and companies such as Kira Talent, Seamless Mobile + Health and Bridgit have emerged as viable businesses that are winning customers and have completed seed investment rounds. Professor Ajay Agrawal, at the Rotman School of Business, led the Rotman efforts to create the Creative Destruction Lab to facilitate the growth and creation of massively-scalable technology-based companies that are based on technology developed within the Canadian university community, many of which (including Thalmic Labs, Bionym and Weston Expressions) have closed seed finance rounds since (or in some cases during) participation in the program. Similarly, the University of Waterloo established VeloCity to foster entrepreneurship with its students by providing seed funding, free workspace, workshops, networking opportunities and access to mentors. Kik Interactive, one of the world’s largest electronic messaging services with approximately 100 million users, and BufferBox, which was sold to Google in late 2012 after being in business for only 18 months, are both graduates of that program.

“For many in the industry, October 2011 marked an inflection point. OMERS, one of Canada’s largest pension plans, launched its own venture capital arm – OMERS Ventures – to address one of the largest issues plaguing Canada’s venture capital industry – a shortage of steady and patient capital, especially for companies requiring larger amounts of growth capital. Prior to OMERS Ventures, Canadian growth-stage technology companies typically had to seek expansion round/growth funding from foreign investors (predominantly in the United States, which often led to the company moving south) or consider a sale as the only other viable alternative. Since its inception, OMERS Ventures has completed almost one investment per month and has been involved in some of the largest venture capital investments made in software companies in Canadian history, including the $80m investment (teaming with NEA) in Kitchener-Waterloo’s Desire2Learn and the $165m investment (teaming with Insight and Accel) in Vancouver’s HootSuite.< /p>

“Trying to emulate the success of U.S.-based technology accelerators such as Y Combinator and Techstars, Canada has seen a proliferation of accelerators from coast to coast – most notably Extreme Startups in Toronto, GrowLab in Vancouver, FounderFuel in Montreal and Hyperdrive in Kitchener-Waterloo. In each case, the accelerator provides office space, mentorship and a small amount of seed capital. In addition, the Business Development Bank of Canada provides further funding to each successful accelerator graduate in the form a $150,000 convertible note.

“The federal government has demonstrated its strong commitment to the sector by announcing (as part of the 2012 budget) that it would set aside $400 million for investment in Canadian venture capital funds. The Ontario government demonstrated a similar commitment by announcing in March 2013 that it would set aside $50 million for a new Ontario venture capital fund. In addition, the Ontario government continues to be an active direct investor through initiatives such as the Ontario Capital Growth Corporation (which matches investments made by qualified investors) and MaRS Innovation Accelerator Fund (which provides seed investments of up to $500,000 to promising Ontario-based start-ups).”