Early-Stage Startups Need More than Tech to Impress Investors

TechPortfolio interviewed investors, financiers, and academics and asked them what they look for in early stage startups – and how they define success. Here are their answers.

It’s Sales and Growth. But Also the Product

Chris Arsenault, managing partner at iNovia Capital, says that the most successful companies he has backed early-on have made sales and growth a priority: “It’s often easier for a startup to be 100% focused on the product, while sales take a back seat.” One of the biggest barriers facing startups is lack of sales-focused management teams, he says.

However, he stresses, the product roadmap needs to incorporate upgrades and new features according to customer needs. The best practice is to find your customers and then develop your product in the early stages with their feedback.

“You can fill faster and iterate better by leveraging customers early in the startup process,” says Dr. Sean Wise, Associate Professor, Entrepreneurship, Ted Rogers School of Management at Ryerson University.

The university Wise was speaking for has since changed its name. Ryerson University became Toronto Metropolitan University in 2022, according to Wikipedia.

Why Technical Founders Struggle With Sales

Arsenault’s point is a familiar one to anyone who has worked with early-stage companies. Many startups are founded by people who are excellent at building things, and building is comfortable: there’s always one more feature to add before the product feels ready. Selling means hearing “no” from strangers, and it’s easy to put off.

The trouble is that investors can’t see a product’s potential from its features alone. Paying customers, and the growth in their number, are the clearest evidence that a startup has found something people want. That’s why a team with nobody focused on sales can look risky, however strong the technology is.

Working with customers early also protects a startup from building the wrong thing. Each conversation with a real buyer tests an assumption about what they need and what they’ll pay for, and it’s much cheaper to change course after ten conversations than after a year of development.

It’s the Journey. But Also the Destination

“Success for me is not necessarily the same as what an entrepreneur defines as success,” says Matt Roberts, associate director at the IT Venture Fund at Business Development Bank of Canada. His aim is to build all the internal processes to allow the company to grow up and then get it set up to access series A funding.

“I want my companies to have the wherewithal to attract other outside capital, to continue to grow, and execute on the business,” he says.

Michelle McBane, investment director at MaRS Investment Accelerator Fund, agrees. When the companies leave the stage of working on their key product and customers “then our companies are graduated, so that means they’ve passed the baton to the series A/B investors. That’s success for us.”

What “Series A” Means

Startup funding usually comes in stages. Early money, sometimes called pre-seed and seed, pays for a startup to build its product and find its first customers. A Series A is typically the first large round from professional venture capital firms, and it’s meant to fund growth once a company has shown its product works and people will pay for it. Series B and later rounds follow as the company scales.

Early-stage investors like those quoted here measure their own success by whether their companies make it to that next stage. A seed investor who backs a company that never raises a Series A has usually lost the bet, even if the company keeps going.

That handoff has become harder to make. In 2025, investment in Canadian startups at the Series A through D stages stayed below 2024 levels, while pre-seed and seed investment held roughly steady, according to the Canadian Venture Capital and Private Equity Association. Its data director, David Kornacki, said that in Canada this shows up “as slower progression from company formation to scale and liquidity.” In other words, more companies are getting started than are moving up to the stage these investors call graduation.

Your Team, and the People Around Your Team

“Diversity helps ensure there are different perspectives around the table, driving better decision making that will ultimately lead to better long term performance,” says Will Hutchins, Managing Director of Espresso Capital. “I believe this is true at all stages of a company’s growth–from startups to mature companies.”

Espresso Capital is a lender rather than an equity investor. It provides venture debt and growth financing, which lets companies borrow against their growth instead of selling more shares, and it says it has worked with more than 300 companies and their investors since 2009. That kind of financing has grown in popularity: the CVCA reported that venture debt in Canada reached its highest recorded annual level in 2025, at CAD $1.40 billion across 69 deals.

“Startups have more needs than they have resources. Leveraging your community allows you to leverage what little resources you have,” says Dr. Sean Wise. A dense community offers cheaper and easier talent acquisition and, of course, more investors.

What It Means for Founders

Put together, the investors’ answers describe a startup that sells early, builds with its customers, has a team with different strengths and backgrounds, and is plugged into a local community. Each of those makes the company easier to fund at the next stage, which is how the people writing the early cheques define success.

With later-stage money harder to come by than it was, the practical advice is to plan for that next round from the start. Know what a Series A investor will want to see, such as revenue, growth and a team that can scale, and use the early funding to get there.