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What we learned after Velocity alumni raised $2.4B

Blog header announcing $2.4 billion raised by Velocity companies
Velocity companies collectively raised $2.4 billion USD so far.

Quick Summary

  • Velocity alumni and residents have collectively raised over $2.4 billion USD, a 40% increase from the $1.7 billion that were raised by the end of 2020.
  • While marketplaces and business services drove the majority of investments in dollar value, early investing trends in deep tech hint at how the 2030 Canadian tech sector will evolve.

A booming tech ecosystem

The recent announcements from Faire ($260M in Series F with a $7B valuation) and ApplyBoard ($375M in Series D with a $4B valuation) are proof that Canadian tech companies remain attractive to markets and investors and continue to create global impact. Indeed, according to CB Insights Q2 21 State of Venture Report, Canada funding in Q1 2021 jumped more than 2x 2020’s full year total. And, while large rounds  — series C and beyond — heavily contributed to the $2.4B tally, we are seeing an increase in numbers of deals as well. In the first half of 2021 Velocity companies have already raised 80% as many investment rounds as they did during the full year 2020.

“We continue to see the Velocity alumni scale companies that can reshape entire industries. Supporting the next generation of founders poised to build the next billion dollar companies is what we are focused on.”

Adrien Côté, Executive Director of Velocity

“We continue to see the Velocity alumni scale companies that can reshape entire industries,” said Adrien Côté, Executive Director of Velocity. “Supporting the next generation of founders poised to build the next billion dollar companies is what we are focused on”.

The Velocity team is proud to have played a part in the incredible journeys of several unicorns — like Faire, ApplyBoard, and Kik — as well as some of rising tech stars like Embark, Bridgit, Vidyard, and OpenPhone.

After a decade in operations, the Velocity team is adept at spotting talented teams with potential and setting them up for success. And the results speak for themselves.

Venturing into the unknown

While the majority (96%) of 2021 funding dollars (so far) went to Software & Services companies, we are seeing some interesting trends emerge in the Health, CleanTech and Food and Agriculture sectors. Venture capitalists typically make decade-long bets. The start-ups receiving funding now give us glimpses of what the 2030 Canadian tech landscape will look like. Velocity being one of the most prominent pre-Seed & Seed incubators in Canada, our current residents represent an important early indicator of which world-changing technologies will become commonplace within the next decade.

Current breakdown of Velocity residents:

50% SaaS

Business Services, Marketplaces, and Transactional Services

45% Deep Tech

24% Hardware, 22% Health Tech, and 14% Clean Tech

Examples of current technologies being developed by Velocity residents

Canada is bullish on Tech, specifically Deep Tech

In recent years, the Canadian tech ecosystem has been particularly interested in supporting Canadian companies with the potential to generate significantly differentiated and defensible intellectual property, particularly deep tech and transformational tech companies. 

According to Swati Chaturvedi, Newton Fund Partner, Founder of the MIT Angel Investor Fund, and CEO of Propel(x), “Deep technology companies are built on tangible scientific discoveries or engineering innovations. They are trying to solve big issues that really affect the world around them. For example, a new medical device or technique fighting cancer, data analytics to help farmers grow more food, or a clean energy solution trying to lessen the human impact on climate change.“ 

The Canadian governments created a variety of programs aimed to fund tech ventures, especially in deep tech fields, including Canada’s IP Strategy, with $85M allocated to support innovators, the Innovative Solutions program, the Autonomous Vehicle Investment Network program, the Pan-Canadian AI strategy, as well as a variety of research grants and tax credits like the Mitacs, SIF, and SR&ED programs. The Ontario government recently announced the creation of Invest Ontario, committing to invest $400M in ”the key sectors of advanced manufacturing, technology and life sciences”. 

The BDC, a Crown corporation, launched a $200M fund dedicated to early-stage deep tech companies, only 2 years after launching the $250 Million Industrial, Clean and Energy Technology (ICE) Venture Fund. MaRS and RBC recently launched a 12-month incubator program for women founders in Clean Tech

For deep tech companies, accelerating technology de-risking is now a key element of Velocity’s program. Founders can access resources at Velocity to turn deep technologies into products, accelerating their time to market.

Adrien Côté, Executive Director of Velocity

With increased support, risky ventures seem more doable to daring founders. Which is why the University of Waterloo, with its historically strong support for research and entrepreneurship, produced a large share of Canada’s tech founders. 19 per cent of Canada’s VC-backed founders having received undergraduate education at Waterloo and 474 University of Waterloo entrepreneurs having raised $12.9B (Pitchbook 2020).

Incubators are a key component of that support. As Arvind Gupta, partner at Mayfield, former founder and investor at Indie Bio, noted in a recent talk at Velocity, incubators “make the hard road an easier path. They help founders avoid pitfalls that have caused problems for others in the past and instead focus their creativity into solving more original problems; problems that are pertinent to their start-up that no one else has even run into before.”

“For deep tech companies, accelerating technology de-risking is now a key element of Velocity’s program. Founders can access resources at Velocity to turn deep technologies into products, accelerating their time to market,” continued Côté.   

Canada is investing into world-changing tech and the region of Waterloo, with its cluster of incubators, accelerators, research centers, universities, high density of tech talents, and access to support and capital is well positioned to be at the forefront of this emerging trend.

Kitchener-Waterloo: the tech world’s worst-kept-secret

The tech ecosystem has been exponentially growing in the region for a number of years. This past June, $1.1 billion was invested in the Waterloo region, doubling the amount previously invested in the region in just one month. CBRE ranked the Waterloo region as the #1 small tech talent market in North America, well ahead of larger cities like Chicago or Philadelphia. Larger tech organizations have been taking note. Google, Square, and Shopify all opened up offices in the region over the past 10 years and Google recently announced they plan to triple their footprint in the region, adding another 2,000 employees. And with recent shifts in immigration policies from our neighbours in the South, we have seen an increase of tech talent move to the region, putting Waterloo at #2 among the top-50 tech hubs in North America for tech talent growth rate and #4 for tech talent density.

And with the upcoming addition of the Innovation Arena, a 90,000 sq.ft space in the heart of the Kitchener-Waterloo’s Innovation District purposely-built to transform innovation into scalable start-ups, we expect Velocity and Kitchener-Waterloo to attract an even greater number of founders looking to generate value from their transformational technologies in the future. 
The Velocity incubator can help any strong founder teams looking to build an industry-defining solution, regardless of industry, as exemplified by recent successes like Embark (self-driving truck company which announced they would go public in a $5.2 SPAC deal later this year), Pebble (smartwatch company, acquired by FitBit and later Google), AvidBots (a company building robotic cleaners which raised $31.5M in Series B in 2019), Bartesian (a company building on-demand cocktail barware which raised $20M in a Series A and added Mila Kunis to their board), Float (a company working to improve corporate credit cards which announced a $5M Seed round earlier this month).

Joining Velocity

Velocity is still accepting applications for new start-ups for 2021. Companies selected will receive hands-on support from Velocity’s team of past-founders-turned-advisors, enjoy access to 35,000 sq.ft of offices and world-class lab space to turn prototypes into scalable technologies, and will receive $50K-$100K in investment from the Velocity fund. If you believe you can build the next world-changing solution, we want to hear from you. 

Velocity typically accepts companies in the Pre-Seed to Seed stages. We are looking for strong founding teams building solutions to pressing issues in very large markets and working on ways to improve the world. We review all applications we receive. We support entrepreneurs of all genders, races, and backgrounds and require all of our resident founders to learn about and take responsibility for challenging systemic oppression in innovation communities.

Apply to Join Velocity

Be a part of the journey

If you are not a start-up founder but would still like to play a role in growing the Canadian tech ecosystem, you can check our open positions or look at our current portfolio for investment opportunities. If you are excited to work with early companies and want to help redefine product support for startups, let’s talk. Velocity is currently looking for a new Director.

Contact us to discuss investment opportunities. You can also leave a mark and help shape the future of the Region by partnering with us to build the Innovation Arena.