Skip to main content
Complete Olympic Games coverage at your fingertips
Your inside track on the Olympic Games
Enjoy unlimited digital access
$1.99
per week for 24 weeks
Complete Olympic Games coverage at your fingertips
Your inside track onthe Olympics Games
$1.99
per week
for 24 weeks
// //

The University of Waterloo’s Velocity program had six companies go through the YC’s accelerator in 2014, but has none this year.

Tim Fraser/The Globe and Mail

For the first time in five years the University of Waterloo's entrepreneurship program, Velocity, doesn't have a company in the multibillion-dollar startup bootcamp known as Y Combinator.

Following a year in which six companies that participated in the Velocity program went through the Palo Alto, Calif.-based accelerator, Y Combinator's summer 2015 cohort has none. Of the 13 companies with links to Velocity that participated in Y Combinator (YC), several have received funding and there was at least one acquisition.

"There were five Velocity companies in the summer of 2014 program, and there was only one in the winter one," said Mike Kirkup, the director of Velocity program. "When I talked to Sam Altman [president of Y Combinator] he said, 'Don't take this as a trend.' It just happened that we hit a jackpot with five. On average, we have between one and two in every batch."

Story continues below advertisement

Some of the bigger names in Waterloo region tech – Thalmic Labs, Vidyard and Pebble Inc. – reached their heights thanks in part to attending the hottest tech accelerator in the world. Companies that have come through Y Combinator are estimated to be worth more than $50-billion and include some truly global companies, including Reddit, Stripe, Airbnb and Dropbox.

Y Combinator's model is deceptively simple: Companies get three months to work on their product with support from veteran Silicon Valley executives and investors, then at the end the companies pitch some of the world's most successful tech investors in a bonanza event called Demo Day.

The process for application is shrouded in secrecy and there is an incredible competition level – the winter 2014 cohort saw 5,600 companies compete for 114 slots.

But the terms of YC participation should also give Canadian startups pause. The standard agreement is YC takes 7 per cent for about $120,000 (U.S.), a potentially very lucrative stake for the accelerator.

"You're selling these guys a huge chunk for a very small amount of money," said Mr. Kirkup, though he contrasts that with a belief YC adds significant value.

"What they are doing is Black Swan farming, and there is an elephant graveyard of companies [that] have been through YC," says Michael Litt, chief executive of Vidyard, who attended YC in 2011. "Only seven of 60 companies in our batch got to Series B funding, which is a massive number, but then there's a huge drop-off."

Recently, Mr. Altman, who now runs the company since Paul Graham, the accelerator's co-founder, stepped away, told The New York Times that his own alma mater Stanford wasn't as high on his list of impressive schools as Waterloo, at least when it comes to entrepreneurs whose ideas are ready to take flight.

Story continues below advertisement

"There's this old saying: Harvard doesn't make the best people, they just let in all the best people and take all the credit. Right now, the Harvard of accelerators is Y Com," says Ted Livingston, the CEO of Waterloo-based chat app Kik. "They are helpful, but they have a brand, and so any other accelerator is always going to get worse-quality candidates than that."

He never applied for the program.

For Nathan Blecharczyk, chief technology officer and co-founder of Airbnb, his company might not have disrupted the global hospitality industry if it were not for YC.

"We were seriously on the verge of quitting," Mr. Blecharczyk said. "We'd been paying for the company out of pocket, so we were in debt and the [2008-09] financial recession had just begun, the fact that we had gotten into Y Combinator for 6 per cent, we didn't even think to negotiate that." These days, that stake is worth at least $1.5-billion, as Airbnb (which helps people rent their homes on a casual basis) is now worth more than $25-billion by some estimates.

"It was a turning point for our company, as it wasn't until during Y Com that the business actually started to take off … prior to that there had been no real growth and it was, frankly, trending down," Mr. Blecharczyk said. "In retrospect, was it a good deal [for YC]? Of course it was, but what were our reasonable alternatives? There weren't really [any]."

The university's own guidebook quotes Mr. Graham, saying, "Something is going on in Waterloo because the applications we get from Waterloo students are better than those we get from students of any other university."

Story continues below advertisement

The initial response by Kitchener's Communitech – which tries to stoke the local startup scene – to Y Combinator inducting local startups into its California network was to set up its own incubator.

"The reason we started Hyperdrive is that too many companies were being accepted into accelerators in the U.S. and not coming home," says Iain Klugman, CEO of Communitech. "And it was when one company [Eric Migicovsky's Pebble] said, 'Yep, we just got accepted into Y Combinator,' that I thought we've gotta do something because they are not coming home. They go down there, they raise money and they don't come home."

Around the same time, another Velocity company, Couple, also relocated to San Francisco.

Just three years later, Hyperdrive was shuttered, without producing the kind of hit company Communitech hoped for. But more importantly, it shut down because the premise was faulty: After Pebble, most Y Combinator companies from Waterloo did come back, starting with Mr. Litt and Vidyard.

"You've got to credit Michael for being the pack leader here: [He] went and then came back. This is what they all do now," Google's Waterloo site director Steven Woods said. "You make a big impression down there, and then have to get back to Waterloo and hire some people that are great."

Mr. Litt's view on the value of Y Combinator is one of access. "YC helps this community in the same way the university does, and Velocity and Communitech. We have a [Silicon] Valley network because of YC. We have SV investors [including Bessemer Venture Partners, which led Vidyard's January $18-million fundraising] because of our time in that program."

Story continues below advertisement

Mr. Kirkup says that when Velocity companies participate in YC and return, it creates positive incentives for newcomers to his program.

"Basically all the time we have two or three companies from YC sitting in here," Mr. Kirkup said, gesturing to the Velocity Garage workspace in downtown Kitchener. "That just tends to reinforce the same cycle – people wanting to go into YC … because they go, 'Hey, those guys are doing really well. I want to be like them.'"

Velocity startups and Y Combinator

Some of the best-known startups from the Waterloo region reached their heights thanks in part to joining up with the hottest tech accelerator in the world. Y Combinator is known for fostering the development of such mega-startups as Airbnb, Dropbox and Reddit. Here are the Velocity companies that have gone through its program.

Winter 2011

Pebble

  • What they do: Makes the Pebble smartwatch
  • CEO: Eric Migicovsky
  • Funding: $46-million through venture capital and crowdfunding
  • Current location: Palo Alto, Calif.
Summer 2011

Vidyard

  • What they do: A YouTube-like product for marketing and training videos
  • CEO: Michael Litt
  • Funding: $25-million raised so far
  • Current location: Kitchener and Mountain View, Calif.
Winter 2012

Couple

  • What they do: Makes an app for couples to share messages and photos
  • CEO: Oleg Kostour
  • Current location: San Francisco
Summer 2012

BufferBox

  • What they do: Made lockers for package deliveries
  • Bought by Google in 2012
Winter 2013

Thalmic Labs

  • What they do: Makes the gesture-control armband Myo
  • CEO: Stephen Lake
  • Funding: $15-million in venture capital
  • Location: Kitchener
Summer 2013

reebee

  • What they do: An app that serves up local flyers
  • Funding: None announced, with undisclosed revenues
  • Location: Kitchener
Winter 2014

Piinpoint

  • What they do: Provides retail location data to businesses (ex. verifies if a particular corner is good for Starbucks)
  • Funding: None announced
  • Location: Kitchener
Summer 2014

GamePress

  • What they do: An app that lets users make their own games without knowing how to code
  • Funding: None announced
  • Location: London, Ont.

Hive

  • What they do: A product that offers marketing services and fan data collection to artists and performers
  • Location: Waterloo, San Francisco and Los Angeles

MetricWire

  • What they do: Mobile app that lets researchers collect data from study participants
  • CEO: Stephen Lake
  • Funding: $120,000
  • Location: Kitchener

Neverfrost

  • What they do: A nanotech company focused on windshield coatings that stop frost from forming and block some heat from the sun
  • Funding: None announced
  • Location: Waterloo

Tinker

  • What they do: Trading platform for Bitcoin
  • One of co-founder Gareth MacLeod's many ventures since his days in the Velocity residence
  • Location: San Francisco
Winter 2015

Perceptiv Labs

  • What they do: Robotic remote control platform for video cameras that makes drone footage easier to shoot
  • Plans to ship production units in the fall
  • Funding: $500,000
  • Location: Kitchener

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies