Ryerson University is the sole owner of a startup accelerator and has the potential for significant financial gain.
Ryerson Futures Inc. (RFI) is a for-profit company that was established approximately five years ago to run an accelerator program that works closely with startups.
Should RFI stumble upon the next big app, for example, Ryerson could sell it and benefit significantly. But how that money would be distributed is not clear.
“We haven’t exited any companies yet so at the time of liquidity with one of these assets we would sit down with the board of directors and decide what happens with that cash,” said Matt Saunders, president of RFI.
“Exit” is venture-capital jargon for selling a startup at a profit. Saunders added that RFI has helped a number of companies build significant value. However that value is still “paper-based,” meaning they haven’t sold any companies yet.
The university owns 100 per cent of RFI and retains a percentage of equity stake in each startup that completes the program.
The precise equity stake in each company varies, depending what stage the company is in.
“We are building a portfolio of equity with all of these companies,” said Saunders.
Despite several requests, neither Ryerson nor RFI would disclose how much the university’s initial investment in RFI was. Nor would either party describe if RFI continues to receive operational funding from the university.
Apart from Ryerson’s initial investment, seed funding for the startups was raised by Saunders and Alan Lysne, chief operating officer and a managing partner.
The seed money was raised from financial institutions and high-net-worth individuals.
The initial investment amount in the fund could not be disclosed as RFI is a privately held company and the fund is separate from the university.
Despite being the sole shareholder, Ryerson is not an investor in the seed fund.
“The operating entity is RFI, the fund is a separate entity,” said Saunders.
The seed fund selectively invests in companies that are participating in the accelerator program, and helps the accelerator attract high-potential startups.
“We selectively invest through the fund but that’s a different vehicle. That’s not connected to Ryerson,” said Saunders.
RFI does not have investment caps, and they don’t hand cheques over up front. Startups can stay anywhere from a few months to a year, possibly more, if RFI sees fit.
“We focus on getting traction,” said Saunders.
RFI sets milestones for startups to hit throughout the program to help track progress. At each stage RFI re-evaluates whether the investment makes sense for the fund moving forward.
As early-stage investors, RFI is often the first money in for companies they invest in. A syndicated round between RFI and other individuals will run, but for RFI their process is largely based on evaluating the team, the technology, and the market early on.
As with any early-stage company, investments come at a high risk. However the high-risk, high-reward approach fits the model of RFI’s portfolio.
According to Saunders, benefits of ownership of RFI for Ryerson University span from monetary gain to opportunities for Ryerson alumni and reputational benefits.
Certain companies that have gone through the accelerator program, such as Figure1, have been created by Ryerson students, graduates and faculty. Other companies that are not affiliated with Ryerson have hired students from the university.
“We connect in with the Ryerson ecosystem. Obviously not all of our companies have a connection to Ryerson, but if there is a connection to Ryerson that’s great,” said Saunders.
By Holly Walker