Key Takeaways
- • University of Waterloo's Board of Governors approved an investment of up to $5 million from its endowment into Velocity Fund II (VFII), marking Canada's first instance of a post-secondary institution investing endowment capital into a venture capital fund.
- • The investment reflects the emerging "ecosystem capital" strategy, where capital sources fund early-stage startups within their own geographic or institutional ecosystem, benefiting both the local economy and participating startups.
- • Velocity has demonstrated 14 years of proven financial success in early-stage venture capital, with the fund targeting $1.2–$1.8 million total and intending to double initial commitments.
- • Canada ranks sixth among G7 nations and 15th globally in the World Intellectual Property Organization's 2022 innovation index, with documented gaps in pre-seed and seed-stage funding that this investment aims to address.
- • The endowment investment positions Waterloo as Canada's leading tech startup university and responds to donor requests for more active endowment participation in supporting local startup ecosystems, particularly Velocity-backed companies.
Summary
The University of Waterloo made a strategic decision to deploy capital from its $800 million endowment into early-stage venture investing by committing up to $5 million to Velocity Fund II. The Finance & Investment Committee supported this move based on the emerging practice of "ecosystem capital," where institutional and capital sources invest directly in startups within their geographic or operational spheres, creating mutual benefit for both the ecosystem and participating entrepreneurs. Michael Ashmore, chair of the Finance & Investment Committee, emphasized that university donors have advocated for more active endowment deployment in outstanding Waterloo startups and framed this initial investment as potentially the beginning of expanded venture participation.
This investment addresses well-documented structural gaps in Canada's innovation and early-stage funding landscape. Canada ranks sixth among G7 nations and 15th globally in the World Intellectual Property Organization's 2022 global innovation index. More critically, pre-seed and seed-stage investment has been significantly lacking in Canada's R&D pipeline, with AngelList data showing high excess valuation markup rates for Waterloo startups—a signal of funding constraints that have depressed early-stage valuations. Velocity's 14-year track record in early-stage venture capital made it an attractive initial vehicle for this endowment deployment. The fund is targeting $1.2–$1.8 million total capital and plans to double initial check sizes, positioning it to address the documented funding gap for Canadian early-stage entrepreneurs. By investing endowment capital directly, Waterloo signals institutional confidence in the Velocity model while responding to donor expectations that the university leverage its position as a startup ecosystem anchor.
This investment addresses well-documented structural gaps in Canada's innovation and early-stage funding landscape. Canada ranks sixth among G7 nations and 15th globally in the World Intellectual Property Organization's 2022 global innovation index. More critically, pre-seed and seed-stage investment has been significantly lacking in Canada's R&D pipeline, with AngelList data showing high excess valuation markup rates for Waterloo startups—a signal of funding constraints that have depressed early-stage valuations. Velocity's 14-year track record in early-stage venture capital made it an attractive initial vehicle for this endowment deployment. The fund is targeting $1.2–$1.8 million total capital and plans to double initial check sizes, positioning it to address the documented funding gap for Canadian early-stage entrepreneurs. By investing endowment capital directly, Waterloo signals institutional confidence in the Velocity model while responding to donor expectations that the university leverage its position as a startup ecosystem anchor.
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