Days after announcing a new initiative to build tech startups into Series A funded companies, Canada's top technology hub has taken the wraps off its $30-million-plus HYPERDRIVE program, which launches today.
Communitech, the team that supports the large and fast-growing tech cluster in Waterloo Region, Ontario, is placing itself among the world's leading startup incubators with HYPERDRIVE, a comprehensive program backed by leading venture capital firms, angel investors and tech companies.
The program will put startups through a three-month sprint similar to those at Y Combinator and TechStars in the United States, but offer more seed money, a stint in New York City and up to two years of in-house mentorship and access to the Communitech network of advisers.
"If you really want to build global, billion-dollar businesses, then it takes a much bigger investment," said Iain Klugman, Communitech's CEO. "[HYPERDRIVE is] very much a reflection of our lifecycle approach to building great companies; it focuses on building a strong entrepreneurial culture and then backs the companies throughout the lifecycle."
HYPERDRIVE is the culmination of Communitech's 15 years of experience in helping companies to start, grow and succeed within Waterloo Region's uniquely collaborative and mutually supportive tech ecosystem, Klugman said.
It's an ecosystem that now boasts 800 companies including about 400 active startups, with new ones emerging at a rate of one a day. Many hope to follow the hometown success of such global players as Research In Motion (BlackBerry), OpenText and Desire2Learn, which all began as local startups.
"We're at that stage in our evolution as a technology community where we need to have a program that's not just competitive with other jurisdictions, but raises the bar," Klugman said. "It's another signal of this community emerging as a major tech hub in North America. We're taking our rightful spot."
HYPERDRIVE will target 90 high-potential companies over three years and bring them in 10 at a time, in three intakes per year. On entry, each company will receive a $55,000 investment. Companies that graduate from the three-month sprint to demo day will receive a further $150,000 in convertible debt to continue building for up to 24 months. During that time, entrepreneurs will do a brief stint in Manhattan and have full access to Communitech's far-reaching network of mentors and entrepreneurs.
At four-month intervals during this build-out period, companies will have the chance to pitch for up to $500,000 more from a slate of top-tier investors, including OMERS Ventures, iNovia Capital, Rho Canada Ventures and Business Development Bank of Canada (BDC).
Jim Estill, partner with New York-based Canrock Ventures, has pledged millions over three years to cover the entry investments in each of HYPERDRIVE's 90 companies.
"I have deep roots in Waterloo and a love of Waterloo," said Estill, who started selling computers out of the trunk of his car in 1979 as a third-year University of Waterloo student. He eventually built EMJ Data Systems into a $350-million company and went on to build SYNEX to over $ 2 billion in revenue.
"I also think that Communitech and what they have -- the network, the setup, the mentors, the volunteers behind it -- is really second to none in the world," he said.
HYPERDRIVE's Manhattan soft-landing component takes shrewd advantage of New York's relative proximity to Waterloo Region and shares its time zone, making it easier for investors and entrepreneurs to meet, he said.
"The other advantage of Waterloo is that overheads are still pretty low in comparison to New York or Silicon Valley," Estill said. "You want access to talent and Waterloo has that, and you want some reasonable costs, and Waterloo has that."
Sid Paquette, senior associate with OMERS Ventures, lauded HYPERDRIVE's commitment to work with companies over a longer term than other accelerators, which aligns with his firm's investment approach.
"Our goal is to build big technology companies in Canada and be part of the next Research in Motion or the next OpenText," Paquette said. "I think we would all like to see, as Canadians, more of these technology companies built here and kept here in Canada."
The product of four years of discussion and 18 months of planning, HYPERDRIVE marks an important milestone for Waterloo Region's technology community, said Steve Currie, Communitech's Vice-President, Venture Services.
"It's a recognition of the calibre and the quality of programming, not only with Communitech, but overall with what the local ecosystem, including the Accelerator Centre and VeloCity, have been able to establish and accomplish here in the region," Currie said.
"I think it speaks to the whole notion of the Waterloo Region model of collaboration; of barn-building, of the ecosystem approach where we're able to bring in a number of high-quality partners who want to be part of this," he said.