Entrepreneur Sumit Ajwani has a simple philosophy around when it’s time to raise money: wait until it hurts.
For the founder and CEO of Toronto-based MakeOS, an AI-enabled production-management system, waiting buys time to learn from customers and sharpen your business case. It also means giving away less of the company when the round finally comes.
“We are not always the largest cheque in a round. But if we are doing our job, we are most useful at the moment when a company is still early enough to be misunderstood, but real enough that conviction can change its path.”
“Investors are fundamentally underwriting risk,” said Ajwani, drawing from his own recent experience. “The more proof you can bring to the table, the stronger your position becomes.”
The MaRS Investment Accelerator Fund has heard similar stories from several founders it backed early. The fund, one of the most active early-stage investors supporting promising Ontario startups, asked them to share what their financing rounds taught them. Each had a different path to funding, but they all arrived at the same conclusion: investors are intrigued by ambition, but they want proof the business is real, a clear understanding of who the customer is, and evidence that early traction can turn into growth.
For William Ma, IAF’s managing director, that’s where early financial backing can improve a startup’s chances, especially in today’s environment, where founders are navigating conflicting pressures. AI hype has raised valuation and growth expectations, even as investors demand clear proof of demand, disciplined spending and a credible path to profitability.
But “the more useful questions are usually much closer to the business itself,” Ma said. “What have you learned, what still needs to be proven, and what would capital unlock right now?”
Investors want proof
For Josh Guttman, co-founder and CEO of SELLIT9, a tech re-commerce platform, the signal to raise came directly from customers.
Guttman was closing every merchant, adding resale partners, and running every enterprise deal himself. But the company had outgrown what one person could handle, and customers were asking for product features Guttman had planned to build later. New funding would let SELLIT9 accelerate that work.
“When your customers are pulling the roadmap out of you, and the only thing in the way is resources, that’s the time,” he said.
But during investor meetings, he realized his deck didn’t have enough detail on how the demand he was seeing would turn into a larger business.
One investor stopped him mid-update with a challenge: “The math is breaking for me a little bit… that projection is 100x where you are today,” Guttman recalled.
As an early backer, IAF worked with Guttman to sharpen his strategy for investor conversations. He had someone to prepare for calls, talk through term sheets, and make sense of what investors were seeing in the market.
“Nobody wrote a cheque because of my massive top-down market slide,” he said. The real interest came when he walked investors through the business from the ground up. “Transparency is what built the trust that closed the round.”
The selling point
Ajwani spent a decade working with production teams before starting MakeOS, but investor meetings showed him that experience did not speak for itself.
“The question I got more than any other was, ‘Who exactly are you selling to?’” he said. “Knowing the customer and explaining the customer are two very different things.”
That changed how he thought about the raise. Looking back, said Ajwani, he would’ve spent less time on his own story and more time on the customer’s story: who the buyer is and the problem they are trying to solve.
Cyder faced that challenge from the market side. The Toronto FinTech startup helps credit unions build loyalty programs for their members, a space co-founder and CTO William Christodoulou knew well. But investors needed help understanding the size of the addressable market and how much of it Cyder could realistically serve.
Once the company had real business results to point to, the raise became easier.
“We had real contracts, real ARR (Annual Recurring Revenue), and real traction when we raised,” he said.
That kind of proof also gave Cyder a more direct way to talk about what comes next that resonates with investors. Christodoulou said the company had “clear metrics to strive for and a path to profitability,” which helped keep the conversation grounded in the business.
In Ma’s view, these are some of the deeper tests founders face when raising early funding rounds, and they aren’t always expected. Investors need to understand a company’s potential, but they’re also trying to gauge whether the founder sees something others don’t, and understands the opportunity well enough to win.
“The question is not only, ‘How big is the market?’ but ‘Why does this insight belong to you, and can you make others see it as clearly as you do?’”
A hot market is not enough
That need for clarity extends to how founders position AI in the pitch. Ma said positioning a company heavily around AI—and the Anthropic-level growth everyone is now benchmarked against—can help attract attention and support a higher valuation, but it can also create assumptions a startup may not be able to live up to.
“The risk is not raising on a hot narrative,” he said. “The risk is not being able to meet the expectations it creates.”
With that in mind, Ajwani was careful not to make AI the centre of MakeOS’s pitch. “AI wasn’t our story; it was just part of our story.”
SELLIT9 took a similar approach. Like MakeOS, the company uses AI, but Guttman knew investors would still judge it on customer demand, revenue, and a credible plan for expansion. He was also wary of raising at a valuation the company might struggle to justify later.
“Think hard about what that hot valuation actually costs you,” Guttman said. “Sure, you’ll get a great number today. But is that sustainable growth without the proof points underneath it?”
Christodoulou also kept the conversation anchored in the company he had already built. Cyder’s contracts, recurring revenue, and path to profitability gave investors a basis for valuing the business without relying on a broader market trend.
“Don’t use hype and buzzwords to fake your way through a raise,” Christodoulou advised. “Have a business model, make money, and solve a real problem. Then the money will come.”
Why the first backer matters
By the time a round closes, founders should have a clear sense of what investors need to see. Getting there, however, often depends on having someone willing to believe in the company before the case is fully proven.
That’s why the IAF was created. The fund is one of the province’s most active early-stage investors. It backs Ontario founders from day zero through seed stage, pairing its cheques with the guidance, networks, and customer access a young company needs to compete globally. To date, IAF has invested in more than 200 startups and deployed more than $100 million since 2008 across sectors, including enterprise software, healthtech, cleantech and deeptech. Its portfolio includes notable exits like drone technology company Aeryon Labs, acquired by FLIR Systems for approximately US$200 million in 2019, and medical technology company Profound Medical, now publicly traded on both the TSX and Nasdaq.
For Ajwani, that first ‘yes’ from the IAF changed the way the whole fundraising process felt.
“Before that, every ‘no’ felt existential,” he said.
That’s where Ma believes an early investor can make the biggest difference.
“We are not always the largest cheque in a round,” he said. “But if we are doing our job, we are most useful at the moment when a company is still early enough to be misunderstood, but real enough that conviction can change its path.”
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MaRS Investment Accelerator Fund (IAF) is actively investing in high-potential startups. If you’re interested in learning more or exploring whether IAF could be the right investment partner for your company, visit marsiaf.com to learn more and pitch us.
Feature image courtesy MaRS.