This entry is part [part not set] of 15 in the series Closing the deal

Closing the deal

How entrepreneurs sabotage their shot at securing venture capital

Warren Bergen

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The venture capital (VC) landscape remains fiercely competitive, with only a small fraction of startups securing funding. Some entrepreneurs face quick dismissals after brief pitches, while others navigate multiple meetings before hearing a final “no.”

VCs are searching for reasons not to invest, aiming to eliminate weak prospects quickly and focus on promising opportunities. Canadian entrepreneurs must understand how VCs spot weak deals and where many pitches fall short.

The idea that only one in every 100 deals secures funding is a common industry principle. Recent data show that in the first half of 2024, VC investments totalled nearly $3.6 billion across 279 deals. Despite an 85 per cent jump in dollars invested from the first to the second quarter, according to the Canadian Venture Capital and Private Equity Association (CVCA), VCs remain highly selective. Deals fail not just because of market competition but because entrepreneurs often display clear warning signs.

Artificial intelligence (AI) is now a major factor in how VCs assess pitches. Investors use AI tools to screen applications, identify market gaps, and evaluate financial models. Entrepreneurs who submit poorly structured or vague pitch materials risk early rejection. Weak deals often feature unrealistic projections, overinflated market sizes, or poorly defined customer segments that AI tools flag as high risk. Using tools such as LivePlan or Canadian-based ForecastAI can help entrepreneurs refine their financial models with evidence-based forecasts.

How entrepreneurs sabotage their shot at securing venture capital and how to avoid startup funding mistakes

Look for these signs that your startup pitch is weak.
Photo by Austin Distel
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Toronto-based Radical Ventures, which raised nearly $800 million in 2024 for its third institutional fund focused on growth-stage AI startups, exemplifies how investors prioritize clarity and innovation. Entrepreneurs who fail to demonstrate how their technology aligns with market needs or lacks competitive differentiation are quickly passed over.

Sector alignment is another key filter for VCs. In the first half of 2024, the information and communication technology (ICT) sector led with $2 billion invested across 136 deals, driven by the closing of two mega-deals. Cleantech raised $589 million from 25 deals, with a 133 per cent rise in dollars invested during the second quarter. Entrepreneurs outside these high-growth sectors who fail to justify their market potential are seen as weak prospects. VCs want to know why your company will succeed in today’s market, not yesterday’s trends.

Lack of traction kills more deals than any other factor. VCs expect measurable progress toward product-market fit, such as user acquisition, customer retention, or revenue milestones. A weak deal lacks proof of concept—no minimum viable product (MVP), no paying customers, and no demonstrated demand. Entrepreneurs who cannot show third-party validation from platforms like BetaKit or TechTO, which spotlight Canadian startups gaining real traction, face quick rejection.

Even strong concepts fail when the team lacks experience. VCs place more weight on the leadership team than the idea itself. Weak deals often involve founders with no operational experience, unclear roles, or teams with overlapping skill sets but no complementary strengths. Conversely, alumni from programs such as Next Canada and Creative Destruction Lab are viewed favourably because they come with proven experience in scaling ventures and navigating business challenges.

The pitch itself is often a litmus test. Entrepreneurs who cannot communicate their business clearly in a remote setting lose out. Digital fundraising platforms such as AngelList Canada and FrontFundr expand access to investors, but weak pitches on these platforms stand out for all the wrong reasons—unfocused storytelling, a lack of compelling metrics, or a failure to address competitive risks.

Poor funding strategy is another red flag. While SAFE notes have become a standard early-stage investment tool for their simplicity, VCs grow wary when entrepreneurs rely solely on such instruments without a clear equity plan. Similarly, revenue-based financing through firms such as TIMIA Capital can be a good alternative, but using it as a crutch without a path to sustainable growth signals risk. Entrepreneurs who fail to leverage equity crowdfunding on platforms such as FrontFundr to build community support may miss an opportunity, but more critically, it may reveal a lack of investor confidence.

Once funded, transparency issues sink companies quickly. VCs expect regular, concise updates, and entrepreneurs who cannot produce clear performance metrics signal trouble. Tools such as Wave, a Toronto-based accounting platform, or ChartMogul for tracking SaaS metrics are standard for real-time reporting. VCs lose confidence when reporting is inconsistent, key metrics are hidden, or updates focus on vanity metrics over meaningful outcomes.

Failing to leverage available resources also signals weakness. Canada offers a rich ecosystem of government support programs, including the Industrial Research Assistance Program (IRAP), scientific research and experimental development (SR&ED) tax credits, and provincial innovation organizations that foster research and commercialization. These organizations include:

Weak deals often ignore or underutilize these programs, demonstrating a lack of resourcefulness. Since 2016, the federal government has invested over $4.4 billion to support AI and digital research infrastructure. Entrepreneurs who cannot show how they’ve leveraged available support are seen as unprepared and less credible.

Finally, the implementation plan—or lack thereof—is where most weak deals collapse. VCs expect not only forecasts but also a roadmap for achieving them. Entrepreneurs who present big numbers without a clear, step-by-step plan to reach them raise immediate doubts. A robust implementation plan should outline specific targets for marketing, sales, and operations, with quarterly milestones and performance metrics that define success.

For example, if an entrepreneur claims they will increase sales from $100,000 to $250,000, VCs want to see exactly how much will be invested in marketing, how many leads are expected, and what conversion rates are needed to reach the target. Entrepreneurs who cannot break down their projections into actionable steps appear unprepared and unrealistic.

The Canadian venture capital market is competitive, but deals fail not because the market is harsh—it is because VCs spot warning signs. Unrealistic projections, vague pitches, inexperienced teams, poor traction, and unclear paths to execution are all indicators of a weak deal. Entrepreneurs who address these weaknesses head-on, communicate clearly and demonstrate measurable progress are far more likely to earn investor confidence.

In the end, it is not about convincing VCs that you are brilliant—it is about removing every reason for them to say “no.”

Warren Bergen is the author of Swagger & Sweat, A Start-up Capital Boot Camp. 

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