The University of Waterloo's incubator program for young businesses is making a big change to their funding model.
Previously, Velocity gave $25,000 grants in pitch competitions held three times a year.
The idea is to change that number to $50,000, but the money will now be in equity stakes from investors.
That means that young businesses are going to be invested in right out of the gate, according to Velocity Director Jay Shah.
"That's what the change is all about," said Shah. "It's about moving from a pitch competition that rewards grants to a pitch competition that's actually issuing investments -- funded by the investment community -- at that really early stage."
Shah said that what used to be philanthropy will now function as a more business-centric funding system, which is a win-win for the startups and angel investors.
Velocity said that, in the majority of startups that won grants in the pitch competitions between 2011 and 2013, hypothetical equity investments would have earned 57 per cent annualized returns.
Shah said that this track record should be enough to hook investors.
"That pool of 91 startups is now worth over $1 billion," claims Shah. "That track record has led us to this 2019 ecosystem, which is where we have the data to show that it can make financial investment sense."
Velocity hopes to raise the necessary money -- more than $1 million -- in an investment fund slated to launch in March.