Communitech Hub startup Vidyard is gearing up for a major expansion after securing $1.65 million in funding from some of Silicon Valley’s hottest investors, including YouTube co-founder Jawed Karim.

The funding not only means more jobs for Waterloo’s tech sector, but a boost in profile for the region’s startup scene in the Valley, a key source of capital for young companies.

“Vidyard currently employs nine and is hiring aggressively to match demand” for its products, which enable businesses to better deploy video through their websites and online social networks, co-founder and CEO Michael Litt said today.

“Having a footprint in Waterloo is vital to our growth,” Litt told Communitech. “We're solving some very complex issues with online video and we need the best engineers in the world to solve these problems. The best engineers and computer scientists in the world come from the University of Waterloo.”

Born out of UW’s VeloCity incubator program, Vidyard connected with Communitech in April of 2010 and subsequently moved into the Hub. After a fruitless week seeking investment in California last February, the company returned to Silicon Valley in the summer after it was accepted to Y Combinator’s exclusive accelerator program.

Of the 63 companies that graduated from Y Combinator in August, Vidyard was listed second among five startups to watch by San Francisco-based tech blog GigaOM, and was featured on TechCrunch, The Next Web and Forbes that same week.

“Vidyard has worked extremely hard to get to this point and is one of only a handful of startups to raise this level of funding at their stage of growth,” said Steve Currie, Communitech’s Vice-President, Venture Services. “The amount of funding and calibre of funders is a testament to the Vidyard team and how far they’ve progressed in a short period of time.”

In addition to YouTube co-founder Jawed Karim – who, incidentally, has relatives in Kitchener - funders named in today’s announcement include Softech VC, Y Combinator, SV Angel, Andreessen Horowitz (a large fund co-founded by Marc Andreessen, a Netscape co-founder), iNovia Capital (a Canadian seed- and early-stage fund), Paul Buchheit (Y Combinator partner and creator of Gmail), Vivi Nevo (Israeli investor and major Time Warner shareholder), Dennis Kavelman (former Research In Motion COO), David Nikzad and others.

Vidyard, which has set up offices in San Jose, will base its research and development headquarters in Waterloo Region to retain access to top engineering talent.

While Waterloo is already well-known in Silicon Valley for turning out the best engineers, its burgeoning startup scene, with more than 350 early-stage companies, has yet to appear on many investors’ radar.

Vidyard’s success at Y Combinator, followed by today’s funding announcement, could play a crucial role in changing that, and in helping other Waterloo Region startups obtain venture capital, Vidyard co-founder Devon Galloway told Communitech.

“I think the barriers are coming down,” Galloway said, adding that Vidyard will now be able to introduce other Waterloo companies to top investors. “It just takes time, and it does take a couple of big deals to go down.”

He credited efforts by Canadian entities such as Communitech and the C100 with “bringing some focus to what’s going on in Canada” for California VC firms.

In addition, Galloway said he knows of five other Waterloo startups that have caught the interest of Y Combinator – which has a three-per-cent admission rate –    and “I would be stunned if at least two of them didn’t get in, and I hope more.”

Litt encouraged other Waterloo startups to take advantage of Canadian connections in the Valley, regardless of where they plan to build out their companies.

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