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Velocity pitch competition winners worth $1 billion: Now it is time for an investment fund

Seven years of Velocity Fund pitch competition has led to 91 grant-winning startups that are now valued at over $1 billion. Velocity Fund Finals will transform the competition to include investments in startups and expanded eligibility.

The startup ecosystem in the Waterloo-Toronto Corridor has changed and grown significantly since 2011, when Ted Livingston took the unprecedented, bold and incredibly generous step to donate $1 million to the University of Waterloo (UWaterloo). This enabled Velocity to support up to 12 emerging startups a year with very-early-stage funding, $25,000, to help founders turn their ideas into commercial reality. Thus, the Velocity Fund Finals (VFF) was born.

At the time, access to very-early-stage funding (often first money) was far more limited than today. There were fewer angel investors, pitch competitions, grant programs and pre-seed venture capitalists (VCs). Our ecosystem and Velocity itself simply didn’t have the track-record or data to support a credible investment thesis that UWaterloo students and recent alumni could forge startups and grow them into highly valued enterprises. This uncertainty made it perfect for a bold philanthropic move, as Ted kicked-off, and as Mike Stork continued with another $1 million donation in 2014, enabling the continuation of Velocity Fund Finals after Ted’s original million was fully spent. Fast forward to today and we have a robust track-record developed through running 23 Velocity pitch competitions that have granted over $2M to a total of 91 competition-winning startups. Here’s a size-up of how that portfolio of 91 startups is doing:

  • 67 (74%) startups are still active and have an estimated combined value of over $1 billion
    • Some of the most valuable startups in the VFF portfolio include: North (formerly Thalmic Labs), Embark Trucks, Mappedin, Reebee, ExVivo Labs, Kira Talent
  • 26 (29%) have been selected to join world class accelerators, including 21 startups to Y-Combinator
  • 8 (9%) startups have exited via acquisition
    • Notable exits include Maluuba (9-figure acquisition by Microsoft) and BufferBox (8-figure acquisition by Google)

Based on this performance, it seems fair to say that what was considered highly unknown and risky (the thesis that recent grads could build successful startups) in 2011 is less so today [4]. In parallel, Velocity has continued to push the boundaries to support more founders and larger entrepreneurial ambitions, building on our powerful community of entrepreneurs with in-house advisory expertise and unique infrastructure (e.g., biological and chemical laboratories, hardware workshop, etc) that enables deep-tech startups to exist and tackle technically complex products. At the same time the broader Waterloo-Toronto startup ecosystem has added a lot of muscle, we have a stronger Canadian investor base, we’re globally recognized for producing high performing startups with top tier global VCs and accelerators (e.g. Velocity startups’ acceptance rate into Y-Combinator is 10x the average) more engaged than ever before, and we’re seeing experienced successful founders investing their capital and/or starting their N+1th companies. With all this momentum, we’ve been thinking about what’s next…

“It has always been my vision for the program to become a self sufficient-fund, so I am excited for us to be taking this next step. This is just the beginning for Waterloo.” – Ted Livington, Founder & CEO of Kik Interactive

Starting this March, VF $25K winning startups will receive investments instead of grant funding. Winning startups will receive a minimum investment of $25,000 [1] on standard, simple & friendly terms [2] via an AngelList powered venture fund specifically created to fund VF winners. Almost everything else about the VFF process will remain the same, with the exception that the final competition event will occur off-campus. The VF $5K competition will continue to be held on UWaterloo campus and be a grant pitch competition solely focused on UWaterloo students. “Eight years ago, I made a million-dollar bet on the potential of Waterloo. One billion dollars of value creation later, that bet has proven a winner,” said Ted Livingston, Founder & CEO of Kik. “It has always been my vision for the program to become a self-sufficient fund, so I am excited for us to be taking this next step. This is just the beginning for Waterloo.”

In addition to switching from the $25K grant program to an investment, eligibility will be expanded [3] to include any startup (with or without an academic UWaterloo affiliation) at the Velocity Garage incubator and/or any UWaterloo grad who convocated in the last 10 years. This expanded eligibility serves two purposes: a) find/help/fund the best entrepreneurs regardless to their University background and b) match the depth of experience of applicants with the depth of the support system at the Velocity Garage (we can support more experienced, more technical founders).

We’re really excited about this change. This allows us to continue and expand VFF’s impact leveraging private-investor dollars while we pursue high-impact/risk initiatives that support even greater startup/entrepreneurial which are only possible through bold philanthropic support (just as VF was back in 2011). As always, we will be looking for further ways to tweak, retool, and evolve how we can best support entrepreneurial ambition in the pursuit of massive economic and social impact.

For more information about the revised pitch competition see velocityfundfinals.com

For more information about the AngelList-powered Velocity venture investment fund contact velocity.director@uwaterloo.ca.


[1] There are a lot of moving parts to booting up a venture investment fund and in true Velocity spirit we’re implementing this without skipping a beat in the VFF cadence. Our goal is to raise enough capital to double the funding we can provide (from $25K grant to $50K investment) but for directional guidance to applicants we’re advising that it will be at least the same as the current amount.

[2] The investment will be on an MFN post-money SAFE.

[3] For years, the Velocity Garage incubator has been open to any startup, regardless of affiliation to UWaterloo. We’ve been fortunate to have companies like Bridgit or Enpowered be part of our community. We’ve also increasingly supported startups whose founders aren’t recent grads and instead are building their company with a significant depth of commercial or academic experience, companies such as AvidBots, Sortable, Faire, or Adhawk Microsystems. We want these types of founders/startups to have access to very-early-stage funding VF provides.

[4] ~$2.3M capital deployed over 7 years on the terms above would suggest the portfolio’s positions would now be worth over $6M.  More granularly, estimated hypothetical returns looking at VFF structured as a series of 3-year-investment-period funds* looks like:

Untitled presentation*17-19 not reported given recency

Example data is for illustration. Past performance is not indicative of future results. Investing in early-stage companies involves substantial risks and many early-stage investments will be unsuccessful, making it an investment class suitable for a diversified portfolio of such investments.


FAQ

Can I invest in the fund?

If you meet the accredited investor criteria (See AngelList Canada FAQ), feel free visit the Velocity Fund AngelList page (note: access requires AngelList registration). If you have questions or are looking for additional information you can contact velocity.director@uwaterloo.ca.

What’s changing?

VF 25K is moving from a grant pitch competition to an investment pitch competition. Eligibility will be expanded to include any startup at Velocity Garage incubator and/or UWaterloo graduates up to 10 years post-graduation. The VF 25K final pitch event will occur separate from VF 5K.

What’s not changing?

VF 25K process is staying roughly the same (application, interview, pitch competition). VF 5K is remaining the same (continues to be grant and focused exclusively on students).

Why are things changing?

So much has changed within the startup ecosystem and at Velocity. The new structure ensures that Velocity has maximum leverage on various resources and sources of funds at its disposal to rally them towards supporting entrepreneurs

But, isn’t an investment worse for a startup than a grant?

Strictly from the startup perspective, yes, a grant is more favourable than an investment. Through the standardization of the investment terms and the terms themselves, the investment is still highly favorable and friendly to startups. Moreover, this format gives us an opportunity to provide funds greater than the $25,000 as allotted in the previous format. The additional benefit is that in this new format VFF funding can be sourced from private investors ensuring it is a long-term component of the Velocity program portfolio while allowing us to leverage philanthropic dollars for even bolder initiatives that support startups and entrepreneurs in new ways.

When is the next Velocity Fund Finals competition?

The final competition is March 27 @ The Tannery. The event is open to the public, look out for event registration late February.

Applications to compete for Velocity Fund 25K (Startup Investment) open on Jan 28th.

Applications to compete for Velocity Fund 5K (Student grant) open on Jan 21th.