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University of Waterloo uses $5 million from endowment to launch VC fund

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October 18-20, 2023 / Tucson, AZ
The annual summit for research institution gap fund and accelerator programs, including proof of concept programs, startup accelerators, and university venture funds

The Story

The University of Waterloo is investing up to $5 million from its $800-million endowment to create a venture capital fund to invest in startups.

Led by general partners Ross Robinson and Akash Vaswani, Velocity Fund II (VFII) represents the first time that UWaterloo’s endowment will be used to invest in venture capital, according to the university.

Robinson told The Logic, the fund is looking to raise a total of $25 million USD with the aim to announce a first close in the first quarter of 2024. The fund will invest at the pre-seed and early seed stages, cutting cheques between $25,000 to $500,000.

Startups that were incubated in UWaterloo’s Velocity have collectively raised $4.5 billion.

The fund was spun out of UWaterloo’s Velocity startups incubator, with plans to invest in both Velocity and non-Velocity companies. Velocity previously launched a startup investment fund in 2019, which replaced the grant system used to sponsor the awards for the incubator’s tri-annual pitch competition at Waterloo.

Since its inception about 14 years ago, Velocity claims to have incubated over 400 companies, which have collectively raised $4.5 billion in funding to date.

Some of the companies that went through the Velocity incubator in the past include Faire, an online marketplace that connects retailers with wholesale brands. Last year, Faire reportedly had a valuation over $12 billion.

Another Velocity graduate is ApplyBoard, which helps international students apply to study abroad. When it raised $375 million CAD in Series D funding in 2021, the startup said it reached a post-money valuation of $4 billion CAD.

“Attracting financial support early on is the key to long-term success for deep tech startups in particular,” said Adrien Côté, executive director of Velocity. “We’ve seen this time and time again with our companies.”

UWaterloo’s endowment model follows an emerging trend with other universities south of the border.

Michael Ashmore, chair of the endowment’s finance and investment committee, told The Logic that UWaterloo was inspired by the VC funds backed by endowments and universities in the US, which he said has produced hefty returns for those schools.

Ashmore said his team consulted with The Engine, a venture fund led by the Massachusetts Institute of Technology, as well as The House Fund by the University of California, Berkeley. During the venture boom in 2021, MIT reported its fund gained 55.5%, or $9 billion.

Full story: University of Waterloo uses $5 million from endowment to launch VC fund

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