Back to Blog List

Strategies for Raising Funds for Tech Startups: What Works Best and Why?

  • Date : March 13, 2025
  • Added By : CAD IT Solutions
  • Reading Time : 5 Minutes

tech company in oakville, tech company in Toronto, tech company in canada

The process of  creating a tech startup is fun, but funding is one of the biggest challenges in starting a business.  If you are a tech company based in Oakville or Toronto or any other tech company in Canada and  planning to grow, then proper funding is important for growth and existence.

This blog aims to help startups  understand the different ways of raising funds and the pros and cons of each to help navigate through Canada’s  tech funding landscape.

  1. Bootstrapping: Self-Funding Your Startup

Using your own money  or the earnings that you get from your business is called bootstrapping. Many great tech companies have  been bootstrapped in this manner since it enables the owners to keep full control of the business.

 Advantages:

Lowers the risk of diluting ownership and control of the business

There is no  need to share equity with investors

Promotes financial health and sustainability

Challenges:

Sometimes, lack  of funds can hinder business growth

The risks are high because the personal finances are at risk

 Slower growth compared to firms that have raised their capital from other sources

Bootstrapping is most useful  for tech startups in Oakville and other regions of Canada in the initial phase when the costs are not  very high and product market fit is still unknown.

  1. Angel Investors: Early-Stage Funding with  Expertise

An angel investor is a rich citizen or a business person who provides an equity or debt  investment. They are usually former entrepreneurs or people from the same industry who can provide advice and contacts.

 Advantages:

Bring in advisory services and industry contacts

Less bureaucratic process than venture capital funding

More  flexible investment terms

Challenges:

Shares dilution and sharing of control with others

Has lower funds  than those of venture capital firms

It may take time to find the right investor

If your startup  is based in Toronto or Oakville and you are in search of early stage funding, then angel investor  networks like Maple Leaf Angels or Angel One Investor Network could be a good place to start.

  1. Venture Capital: Your Ticket to Rapid Startup Growth

Venture capital (VC) firms provide large amounts  of funding to startups with high growth potential in exchange for ownership stakes. Many currently prominent tech companies including  Shopify and Wealthsimple have been backed by VC funding at the initial stage.

Advantages:

Provides the  necessary capital to expand rapidly

Provides directional guidance by investors

Enhances the company’s reputation in the  market

Challenges:

Dilution of control as result of investor influence

Demands for rapid  growth and return on investment

Competitive and quite difficult to get funding

For a tech company in  Canada, the best strategy is to approach VC firms that have an interest in technology ventures, such as  Real Ventures or Golden Ventures.

  1. Government Grants and Loans: Non-Dilutive Funding

The  Canadian government has many programs that assist tech startups with grants, loans, and tax incentives. Programs like  the Scientific Research and Experimental Development (SR&ED) tax credit, the Industrial Research Assistance Program  (IRAP), and the Canada Small Business Financing Program (CSBFP) offer financial help without  diluting equity.

Advantages:

This type of funding is not dilutive (that is, there is  no dilution of equity)

Encourages research and development

Provides authenticity and approval

Challenges:

 Longer time for the application to be processed

There are strict rules which have to be met  in order for a company to be eligible

Funding can take a long time to be received.

 If you are a tech company in Oakville or any other part of Canada, you can make government  grants a part of your strategy to develop new products without giving away equity.

  1. Crowdfunding:  Community Capital for Community Projects

Crowdfunding is the process of raising money from a number of people in  small amounts through platforms like Kickstarter, Indiegogo or even equity based platforms like FrontFundr.

 Advantages:

Helps in market identification before the product is launched in the market

There is no  equity dilution (in the case of reward based crowdfunding)

It helps in creating a loyal customer base

 Challenges:

Marketers are required to try and make their campaigns as appealing as possible

Not  all the campaigns that are launched are successful in meeting their target

It is only successful if the public  is interested in the project

Startups in Toronto and other cities in Canada can use crowdfunding as a  way of testing the market, fund their ideas and get early customers before raising from other sources.

  1. Corporate Partners and Strategic Investments

Engaging with big companies can offer funding, facilities and access to  the market. Many big companies invest in startups in order to create new trends and develop their structure.

 Advantages:

Can help to gain access to corporate resources and knowledge

Can lead to long term partnership  agreement

Can lead to acquisition plans

Challenges:

There are often restrictions such as exclusivity or  other terms that are sometimes offered by the company

There is a risk of losing autonomy

It can  be difficult to get favourable terms

For a tech company in Canada, it is important to build partnership  with corporations in areas like fintech, AI or cybersecurity as this gives the company an edge.

  1. Bank Loans and Other Financing Options

Startups can get capital from traditional bank loans and other alternative  lending institutions without sacrificing ownership. Specialized loans for tech companies are offered by financial institutions such as the  BDC (Business Development Bank of Canada).

Advantages:

Allows the company to keep full control and  decision making authority

Has a set of conditions for the repayment of the loan

Can provide a large  amount of capital

Challenges:

It requires good credit and collateral

Interest rates and terms of the  loan

Debt can become a problem if the revenue is not certain

For a tech company in  Oakville or any other city in Canada, business loans with flexible repayment terms can be a good strategy  for funding, especially for companies with recurring revenue.

  1. Revenue-Based Financing: A Flexible Alternative

 Revenue based financing (RBF) is a funding model where startups receive funds in exchange for a share  of their future revenue until a certain return is achieved.

Advantages:

Does not involve the dilution  of equity

Repayment is linked to the growth of the revenue

Provides faster access to the capital  than other forms of funding.

Challenges:

Needs to have a stable revenue generation

Higher overall costs  than traditional loans

Limited availability in Canada

Tech firms in Toronto and other cities in Canada with steady  revenues can consider RBF as a form of flexible funding.

Final Thoughts

One of the most important  aspects of starting a tech company in Canada is to raise funds. Whether you are a tech company in  Oakville, a tech company in Toronto or any other city in Canada, this article will help you  make the right decision regarding your financial choices.

Thus, with the help of proper funding strategies, it  is possible to leverage innovation, growth, and leadership in Canada’s tech sector. Select the funding method  that suits your business objectives and do everything that is necessary to ensure the financial stability of your  startup.

Let's chat on WhatsApp
Cad IT Solutions

How can I help you? :)

06:44