We all know that fundraising in Canada isn’t for the faint of heart. Cheques are still being written, yet investors are more selective and far more thorough. Across Canadian venture reports and daily conversations with investors, one truth keeps showing up: founders need to be far more prepared, organized, and financially disciplined than they used to be, before they ask for a dollar.
This article brings together what Janelle Douthwright from Pulse Law LLP and our Managing Partner, Lauren Valliere, shared in the recent webinar session: Raising Your First Round: What VCs Want & How To Stretch it with SR&ED Tax Credits. It outlines what Canadian investors look for in 2026, the structural issues that stall rounds, and why non-dilutive funding like SR&ED is now a baseline expectation rather than a nice-to-have.
The 2026 Canadian Fundraising Landscape
Despite all of the dreary news about raising funds in Canada, there are deals flowing. At GrowWise, we work with lots of founders who have recently raised funds through Canadian VCs, and the biggest difference we are hearing is that investors are no longer comfortable with the “we will figure it out later” mentality. Companies need to be organized. Months of preparation are required before asking for your first dollar.
Founders who proactively prepare their business, their books and their strategy with these points in mind will benefit, while the unorganized companies will struggle to find a dollar. If your structure is tight, no messy cap tables, your books are organized, and you have a clear non-dilutive and capital funding strategy, you will shine.
The Foundation: Getting Your House in Order Before You Raise
One of the biggest themes Janelle from Pulse Law covered in the webinar is how many rounds run into preventable delays because basic corporate documents are incomplete or inconsistent. Investors need to see that your company is legally sound, well-organized, and free from hidden risks.
The lack of essential corporate documents, together with their unorganized structure, causes funding rounds to fail and get prolonged. Your company needs to show its legal status by creating an organized structure which proves investors do not face any financial risks.
This starts with your corporate structure. Your articles, bylaws, shareholder resolutions, and board approvals must line up. Every share issuance should be documented. If your documents are scattered across old email chains or poorly documented verbal agreements, investors can spot them immediately. These red flags are avoidable if addressed in advance, but hard to come back from if they are discovered during due diligence with an investor.
Your company needs to present perfectly aligned incorporation documents and bylaws and board approvals, and past share issuance records. Any form of document inconsistency indicates poor organization, which makes investors hesitant to take on your business.
Employment and contractor agreements are another area where there are tons of potential red flags that can come up. Investors want to see that every single person who has touched, developed or worked on your IP has assigned that IP to the company. If early co-founders or offshore developers slip through the cracks on this, that can be a huge issue. It is crucial to do this due diligence before the investor gets there, as this can seriously delay rounds.
The Canadian technology sector continues to experience difficulties because contractors receive incorrect employee status. The combination of employee-like work behaviour with contractor payment methods results in many problems. Contractor misclassification can cause huge legal and tax implications. Best to talk to a lawyer sooner rather than later to understand how to classify employees/contractors.
On that note as well, from an SR&ED perspective, it is much more lucrative to have employees paid a salary vs paying a contractor. Businesses receive nearly twice as much SR&ED funding for a salaried employee vs a contractor doing the same work.
Investors also look closely at your commercial agreements. Early customer contracts, pilot project arrangements, or vendor agreements can create unexpected legal obligations or uncertainties. For example, if there is a large client of yours with a “void without cause” clause, that agreement and future revenue are considered uncertain. You may need to go back and review agreements and update them if the original terms were too uncertain for an investors liking.
All in all, your company needs strong financial hygiene. Clean and descriptive books, deeply understood burn rates, and timely remittances. It is better to spend a few months pre-raise to do this work than soil your company’s name due to messy financial data during your round.
Investors talk to each other… A lot. So make sure you do the work to eliminate any issues before they come up in these conversations.
Execution Matters: Show Real Technical Progress and Grit
Once the “boring stuff” is out of the way, it’s time to dive into the real stuff: what you are building, how you are building it and why you are building it. Founders often forget that last part, but it is probably the most crucial component.
Investors need to see why solving this problem is so important, and why you are the right team to do so.
You need to show that you have learned from your mistakes. A perfect story about how there have been no problems, no pivots, no changes of direction, only shows that you haven’t faced true adversity. Explain the challenges, the lessons learned and how you handled those challenges. Investors gain confidence in your operational abilities through your documentation of experiments and prototypes, and failed attempts.
These investors are investing in you as founders, so make them believe in you. The ability of your team to execute stands as the primary factor investors use to evaluate your company.
Your solution needs to prove two essential points to investors: it solves the identified problem, and the problem actually exists in the market. The Canadian investment market now places greater emphasis on client interviews, surveys and poll data collection for pre-launch companies. Your product launch requires evidence that users find value in your solution and return multiple times.
Why Non-Dilutive Funding Matters So Much in 2026
One thing we hear from every investor is that before you ask for a single investor dollar, you need to exhaust all non-dilutive funding options. Programs like SR&ED and IRAP are the backbones of the Canadian innovation economy, and investors want to see you taking full advantage.
All Canadian investors agree that companies which maximize their capital resources will achieve better results. These programs prove to investors that founders have financial awareness and efficiency.
Non-dilutive funding reduces your burn, extends your runway, and helps you achieve more before raising your next round. It also gives investors confidence that you understand how to manage capital. In a 2026 capital market where discipline is prized, this matters.
SR&ED is without a doubt the most critical of these funding programs since it is annual, predictable and funds innovation, which is what investors want to see. The founders who integrate SR&ED into their cash flow planning and maintain strong technical documentation stand out immediately.
Runway in Practice: A Simple Example with SR&ED Funding
In the webinar, we walked through a concrete example. A company hiring two technical employees in Ontario at a combined salary of $200K per year ($100K each) could receive an estimated $132K back annually through SR&ED. That means the actual cost of those employees is $68K, rather than the full $200K
Scenario | Annual Salary Cost | SR&ED Refund | Net Cost |
Without SR&ED | $200,000 | $0 | $200,000 |
With SR&ED | $200,000 | $132,000 | $68,000 |
Over five years, that is $1M spent on salaries and $660K refunded through SR&ED, reducing the true cost to $340K. This means that with the same $1M investment, the company actually realizes $1.66M in usable cash flow.
This kind of financial leverage is exactly why investors ask about non-dilutive funding during diligence. It changes how far your money goes and signals that you are building responsibly.
Final Thoughts on Raising VC Money in 2026
Investors do not expect perfection, but they do expect preparation. The fundraising process in 2026 will require more structure and preparation from founders to show operational, financial and technical efficiency.
Your company will experience faster and more productive investor conversations when you maintain clean legal documentation and protected IP rights and accurate financial reports, and establish a strong non-dilutive funding strategy.
