Why do most Toronto HealthTech startups stall after their pilot phase?

Despite having world-class research institutions, a diverse population ideal for clinical trials, and growing investment interest, most healthtech startups in Toronto fail to scale beyond their initial pilot projects. This phenomenon isn't just frustrating for founders—it represents a systemic failure that costs our healthcare system access to potentially transformative technologies.

• Most Toronto HealthTech startups find it difficult to move beyond successful pilots due to a fragmented regulatory landscape, insufficient early-stage funding, and procurement cycles that are incompatible with startup timelines.

• Companies that have been successful have broken the pilot cycle by designing revenue-generating pilots from day one, building cross-provincial expansion strategies early, and creating parallel U.S. market entry plans.

• The economic impact of stalled HealthTech innovation in Toronto results in a weakened ecosystem and talent exodus, despite the region's world-class research facilities and diverse population base.

• Recent geopolitical shifts are creating new opportunities for Toronto HealthTech startups as investors show renewed interest in Canadian companies and founders increasingly choose to build locally.

• Implementing strategic operational frameworks that balance product quality, team capacity, and regulatory compliance is essential for scaling beyond pilot phase without burning out teams.

As someone who has mentored numerous HealthTech firms through this crucial phase, I've personally seen how exciting innovations consistently encounter the same roadblocks when trying to expand. The pattern is disappointingly familiar: a startup creates an innovative product, lands a pilot with a hospital or healthcare institution, shows promising outcomes—then finds itself in a limbo of lengthy assessments, procurement talks, and funding issues that sap resources and destroy momentum.

In this piece, we delve into why healthtech startups are unable to make the leap from a successful pilot to sustainable scaling, and offer a practical guide for founders who are trying to traverse this perilous landscape. We will use real-world examples, tactical strategies, and models from companies that have successfully made this transition to discuss how to expand capacity without overworking teams or sacrificing product quality, ultimately creating healthtech companies that can fulfill their promise of revolutionizing healthcare.

The Toronto HealthTech Pilot Paradox: Why Promising HealthTech Startups Stall?

The pilot phase paradox in Toronto's HealthTech sector represents a uniquely frustrating challenge: startups can secure initial validation through pilots but struggle to convert these successes into sustainable business operations. Healthcare institutions eagerly embrace innovative pilots, often subsidized by grants or offered at reduced costs, yet balk at implementing these same technologies at scale when real budgets and organizational change enter the equation.

The statistics are clear and they are not encouraging: despite the fact that Toronto is one of the top five HealthTech hubs in North America for early-stage innovation, with more than 400 active startups, less than 15% manage to scale beyond their initial pilot implementations. This creates an ecosystem where there is an abundance of innovation, but commercialization is hard to come by. This situation is not beneficial for founders, investors, or the healthcare system.

These numbers represent actual companies with promising technologies that simply run out of resources while trying to navigate the complex transition from pilot to scale. One founder described their experience as "death by pilot"—a situation where their company successfully implemented eight different pilot projects across Ontario hospitals, all showing positive results, yet couldn't secure a single full commercial contract before exhausting their funding.

What's Stopping Toronto HealthTech From Scaling Up?

To grasp why healthtech startups can't scale, we need to look at the unique structural barriers within Toronto's healthcare innovation ecosystem. These barriers aren't just annoyances—they represent basic misalignments between how startups work and how healthcare systems buy and use new technologies.

Implementation is Slowed by a Fragmented Regulatory Landscape

HealthTech startups in Toronto are confronted with a regulatory obstacle course that is virtually unparalleled in other sectors. They must not only deal with federal regulations through Health Canada, but they must also grapple with provincial healthcare governance and the requirements of individual institutions. This three-tiered regulatory approach means that even if a startup has completed a successful pilot at one institution, it often has to go back to the drawing board and restart much of the approval process when it approaches new customers.

Regulations aren't just about getting approvals. Issues around data governance, particularly where personal health information is concerned, add extra layers of complexity that can lengthen timelines and raise costs. These protections are critical, of course, but they're often applied in different ways at different institutions, which means startups can't develop one compliance strategy that scales—they have to develop several.

A founder from Toronto revealed that the approval process for their straightforward digital health solution took 18 months longer in Canada than in similar European markets, even though they started the processes at the same time. This regulatory delay means that healthtech startups in Toronto often see their global competitors capturing a considerable market share while they are still mired in compliance processes.

Insufficient Initial Funding Results in Cash Flow Issues

There is a significant funding gap in Toronto's HealthTech ecosystem that particularly affects companies making the shift from pilot to scale. There is seed funding for promising ideas and more and more funding for established businesses in the later stages, but the all-important Series A stage, which usually requires $5-15 million, is underfunded compared to other major healthtech hubs in North America.

It's a vicious cycle: startups need capital to grow beyond the pilot phase, but investors want to see evidence that the business can scale before they commit more money. The result is that many promising startups find themselves in a financial grey area - too advanced for early-stage funding, but not commercially successful enough to secure growth capital.

Recent industry reports show that healthtech companies in Toronto raise about 60% less Series A funding than similar companies in Boston or San Francisco. This lack of funding directly affects their ability to build sales teams, improve their products, and create the infrastructure they need to grow beyond their initial implementations.

Healthcare Procurement Cycles Kill Momentum

Perhaps the most significant barrier facing Toronto HealthTech startups is the fundamental mismatch between startup timelines and healthcare procurement cycles. While startups operate with 12-18 month runways between funding rounds, hospital procurement processes routinely stretch beyond 24 months from initial discussions to signed contracts.

Startups, which are often limited in resources, find themselves in a nearly impossible situation due to this timeline discrepancy. Pilot projects usually last 3-6 months, and after that, healthcare organizations often need another 6-12 months of evaluation before they even begin formal procurement discussions. By the time a startup gets through this whole process, they've often run out of money and can't capitalize on their hard-earned success.

Procurement obstacles go beyond just timeline issues. Health care institutions usually need a lot of proof of ROI, integration capabilities, and ongoing support before they commit to purchases. These are requirements that are especially hard for early-stage companies to show without the contracts they're looking for. This makes a circular problem where startups need contracts to show their scalability but can't get contracts without showing scale.

Difficulties in Retaining Talent as Pilots Drag On

Healthcare procurement's prolonged timelines cause serious difficulties in retaining talent for Toronto HealthTech startups. When startups are trapped in seemingly never-ending pilot phases without clear paths to growth and success, retaining top technical and commercial talent, which is already in high demand across Toronto's broader technology sector, becomes a challenge.

Healthtech startups need people who understand both technology and healthcare. These people are in high demand in the tech industry, which makes it even harder for startups to keep them if they can't show that they're growing and making progress.

A talent drain can lead to a vicious cycle: as essential team members leave, the company loses institutional knowledge and the ability to grow. One healthtech CEO in Toronto mentioned that they lost three key technical leaders during a long 18-month pilot-to-procurement process with a large hospital network, which greatly hindered their ability to execute when they finally got the contract.

How Successful Toronto HealthTech Companies Stand Out

While these obstacles are daunting, some Toronto HealthTech companies have successfully made the leap from pilot to scale. These companies have certain strategies in common that set them apart from those that have stalled. Their success is not a fluke—it comes from intentional strategies designed to tackle the structural barriers of the ecosystem.

Successful businesses usually view pilots not as isolated validation exercises, but as strategic elements of a larger commercialization plan. They understand that while technical validation is crucial, it's just as important to develop repeatable implementation processes, collect specific types of evidence, and establish relationships with multiple stakeholders within healthcare organizations. These are all equally important results of early deployments.

The common denominator among successful companies is their ability to maintain a balance between innovation and pragmatism. They keep their focus on sustainable business principles even during exploratory pilot phases. This balanced approach is a stark contrast to companies that prioritize technological advancement over commercial viability. These companies often find themselves with impressive solutions that healthcare systems admire but won't purchase.

How Braze Mobility Entered the U.S. Market

Braze Mobility, a Toronto-based company, provides a great example of strategic market expansion. They created sensor systems that turn regular wheelchairs into smart mobility devices. However, they encountered the usual procurement obstacles within Canadian healthcare institutions. Instead of getting stuck in long evaluation cycles, Braze adopted a dual-market strategy. They pursued Canadian pilots while also creating plans to enter the U.S. market.

The firm intelligently used Canadian pilots for fine-tuning and confirmation while speeding up commercial discussions with U.S. rehab centers and healthcare networks that had more efficient procurement processes. This strategy let them make money and expand operations while keeping their Toronto base. Importantly, their success in U.S. markets later bolstered their standing with Canadian procurement teams, who saw their international traction as proof of the solution's worth.

The strategy of Braze shows that successful Toronto HealthTech firms are not confined by local procurement schedules. They consider the Toronto ecosystem to be a beneficial innovation environment, but they are also realistic about where the initial commercial scale might be most effectively accomplished.

Scaling Up From the Start

Companies that have successfully moved beyond the pilot phase have done so by designing their initial implementations with the challenges of scaling up in mind. Instead of creating highly customized deployments for each pilot site, they develop standardized implementation protocols, reusable training materials, and modular integration approaches that can be efficiently replicated across multiple institutions.

Successful companies are those that prioritize the collection of data that directly addresses the criteria for procurement decisions. This includes quantifiable ROI metrics, assessments of workflow impact, and compatibility with existing systems. These companies stand out from those that focus primarily on clinical outcomes and neglect the operational and financial impacts that drive purchasing decisions. This is because they extend the "scale-first" mindset beyond technical implementation to include the gathering of specific types of evidence during pilots.

One healthcare software company took this approach by integrating standardized change management processes into their pilot implementations. They documented exactly how much time was needed for staff training and how quickly users adapted to the new system. This detailed operational data was critical in subsequent procurement discussions. Decision-makers could clearly understand implementation requirements instead of facing uncertain adoption challenges.

Forming Strategic Partnerships to Fast-Track Growth

Successful Toronto HealthTech companies understand that the traditional direct sales model has its limitations in the healthcare sector. Therefore, they strategically form partnerships that offer access to established distribution channels. These partnerships can be in various forms, such as distribution agreements with medical device companies or integration relationships with major EMR providers. Regardless of the form, all these partnerships aim to overcome the traditional procurement barriers.

These companies use their partners' existing relationships and approved vendor status to get to healthcare customers without having to go through the entire procurement process themselves. This partnership approach lets them grow more quickly while saving the resources that would normally be used up by long sales cycles.

A diagnostic technology startup provides an example of this strategy. Instead of selling directly to hospitals, it partnered with a global laboratory equipment provider. The partner already had established relationships and maintenance contracts with laboratory departments across North America. This allowed the startup to reach dozens of institutions within months rather than years. This approach transformed what would have been multiple independent procurement processes into simple equipment upgrades within existing vendor relationships.

How Canada's Healthcare System Contributes to the Pilot Problem

Although startup strategies are key to overcoming scaling challenges, it's important to recognize how structural issues within Canada's healthcare system contribute to the pilot-to-scale bottleneck. By understanding these systemic issues, founders can develop better strategies and policymakers can tackle the root causes instead of just treating the symptoms.

13 "Sick Care" Systems Instead of One Healthcare System

"Canada doesn't have a healthcare system; it has 13 provincial and territorial sick care systems operating in silos with incompatible procurement processes, divergent technology standards, and contradictory implementation requirements." — Dr. Jane Philpott, Former Minister of Health, Canada

This fragmentation creates a situation where success in one province doesn't necessarily mean easier adoption in others. HealthTech companies must essentially restart their sales and implementation processes with each new provincial system, significantly increasing the resources required to scale nationally. What seems to be a unified market of 38 million Canadians is actually a group of smaller markets with their own buying processes, budget cycles, and technology priorities.

Startups with limited resources face a difficult choice: expand slowly within a single provincial system or try to navigate multiple systems at once without enough bandwidth for proper execution in any of them. This dilemma often leads companies to focus only on Ontario initially, limiting their potential for growth and making them susceptible to cash flow problems during extended procurement cycles.

Provincial fragmentation isn't just about having different purchasing processes. Each system has developed unique clinical workflows, documentation standards, and technology infrastructure, which means HealthTech solutions must adjust their products for each market. This customization requirement puts further pressure on startup resources and extends the timeline for national expansion.

Policy Lagging Behind Tech Advancements

The healthcare regulatory and reimbursement frameworks in Canada are constantly playing catch-up with technological advancements, and this has led to significant challenges for digital health and virtual care solutions. The COVID-19 pandemic did speed up the adoption of some technologies, but the underlying policy infrastructure has not yet evolved to support these innovations in a sustainable way beyond crisis responses. Reimbursement models, for example, are still designed for traditional in-person care delivery, which financially disincentivizes healthcare providers from adopting innovative digital solutions.

This policy delay results in a vexing circumstance where technologies that have been shown to enhance results and lower costs are unable to achieve sustainable implementation because they do not conform to existing funding and reimbursement systems. This means that healthtech startups, even after successful technical and clinical validation, face additional challenges in persuading healthcare organizations to finance implementations from restricted budgets without clear reimbursement pathways.

Why American Patients Often Benefit First from Canadian Innovation

Due to a combination of fragmented markets, procurement barriers, and policy limitations, Canadian healthtech innovations often achieve commercial success in U.S. markets before they gain traction in Canada. Despite its own complexities, the American healthcare market offers advantages for scaling, including larger potential contracts, more streamlined procurement in certain segments, and reimbursement codes that more readily accommodate innovation. This creates the unfortunate scenario where technologies developed with Canadian research expertise and often public innovation funding deliver their primary benefits to American patients while remaining inaccessible to Canadians.

How the Stalled Innovation Pipeline Affects Future Growth

When Toronto HealthTech startups can't scale beyond pilots, the economic impacts are far-reaching and extend well beyond the individual companies that fail. When innovations that showed promise stall, we lose not just the direct benefits of those technologies, but also the future versions and enhancements that would naturally come from successful implementation and market feedback. This stalled innovation pipeline means that revolutionary technologies developed in Toronto research institutions are increasingly failing to reach commercialization, creating a growing gap between our research excellence and economic outcomes.

Loss of Talent and Ecosystem Deterioration

Perhaps the most worrying long-term effect of the pilot-to-scale gap is the slow drain of entrepreneurial and technical talent from Toronto's HealthTech ecosystem. When seasoned founders and technical leaders keep running into the same structural barriers, many eventually move to markets where scaling healthcare innovations is less challenging. This loss of talent has a multigenerational impact, as we lose not only current ventures but also the future companies these entrepreneurs would have started and the guidance they would have given to budding founders.

The weakening of the ecosystem is not only due to a lack of talent but also due to investment patterns. Investors are noticing the trend of Toronto HealthTech companies not growing after their pilot phase and are starting to invest in other areas or sectors. This means that Toronto startups are getting even fewer resources, creating a negative cycle that makes it even harder for new companies to grow.

The Creation of New Opportunities through Geopolitical Changes

While there are significant challenges, recent geopolitical changes have opened new doors for the HealthTech ecosystem in Toronto. Vulnerabilities in the global supply chain that were revealed during the pandemic have led to a renewed focus on domestic healthcare technology development. Policymakers are beginning to understand the strategic importance of local healthtech innovation more and more. This change in thinking is starting to result in tangible policy changes that could potentially tackle some of the structural obstacles to scaling.

After disruptions caused by the pandemic, healthcare independence has become a priority, creating opportunities for policy reform that could simplify procurement processes and create more uniform national standards. Provincial health authorities are increasingly willing to work together on technology evaluation frameworks, which could reduce the fragmentation that has historically made it difficult to scale up nationally.

Moreover, the shifting global landscape in healthcare innovation is setting up Toronto to play a more significant role as a link between American and European healthcare markets. The city's diverse population, coupled with its mixed public-private healthcare model, creates unique testing environments for technologies meant to work across various healthcare systems—a valuable benefit as healthcare technologies increasingly need to work in global markets.

Founders Adopting the "Stay in Canada" Mantra

There is a significant change happening among Toronto HealthTech founders, with many showing a renewed dedication to growing their companies locally instead of moving to American markets. This "Stay in Canada" mantra is a reflection of both patriotic feelings and a practical acknowledgment of the growing ecosystem benefits of Toronto. Founders are increasingly mentioning the city's density of talent, research partnerships, and better early-stage support systems as reasons to keep their primary operations locally, even as they seek international markets for revenue growth.

Breaking Down Interprovincial Trade Barriers

Recent advancements in breaking down interprovincial trade barriers have been especially promising for the growth of HealthTech. Provincial health authorities are slowly aligning technology assessment frameworks and procurement standards, which is paving a more uniform way for companies to grow across provincial lines. While these efforts are still a work in progress, they show an increasing understanding that the fragmentation of Canada's healthcare market has been a roadblock to the adoption of innovation and has created needless inefficiencies that harm both patients and healthcare providers.

Renewed Interest in Local Companies by Canadian Investors

Canadian investment firms are now paying more attention to domestic HealthTech opportunities, thanks in part to the successful exits of Toronto-based companies such as Think Research and PointClickCare. This surge in local investment activity is helping to bridge the funding gap that has often forced companies to seek investment from the U.S. prematurely. As more Canadian investors gain expertise in healthcare, they are becoming valuable partners who understand the unique challenges of the local ecosystem and can provide the patient capital necessary to navigate extended procurement cycles.

How the Success of Toronto's HealthTech Startups from Pilot to Scale Affects the Ecosystem's Future

At the end of the day, the future of Toronto as a global leader in HealthTech depends on how well we can address the problem of scaling after the pilot phase. We have all the ingredients for a successful innovation ecosystem: world-class research institutions, diverse clinical environments, and growing investment interest. But turning these resources into sustainable companies requires deliberate action from everyone involved in the ecosystem. Founders need to approach pilots with a clear plan for scaling; investors need to provide patient capital that is in line with the timelines of healthcare; and policymakers need to update procurement and regulatory frameworks to allow for innovation without sacrificing safety or quality.

By tackling the specific barriers outlined in this article, we can pave the way for Toronto HealthTech companies to grow from successful pilots to scaled enterprises, transforming healthcare in Toronto and around the world.

Common Questions

The questions below are often asked by HealthTech founders in Toronto. While every company's path is different, the answers to these questions are based on patterns seen in various ventures.

We've gathered these insights from our hands-on work with more than 50 HealthTech companies as they navigate the transition from pilot to scale. We've also used aggregated data from our ecosystem partners, including accelerators, investors, and healthcare institutions.

These answers can guide your scaling strategy, but keep in mind that successful implementation requires adapting these principles to your specific technology, target market, and resource limitations.

• Is my business ready to grow beyond pilots?

• How much proof is "enough" to secure procurement?

• Should we focus on Canadian or U.S. markets first?

• What metrics should we prioritize during pilot implementations?

How long does the average HealthTech pilot phase last in Toronto?

The average HealthTech pilot in Toronto healthcare institutions usually lasts between 3-6 months for the active implementation and evaluation period. However, the entire process from initial discussions through pilot execution, evaluation, and potential procurement decision often extends to 18-24 months. This extended timeline reflects the multiple approval stages, budget cycles, and evaluation periods characteristic of healthcare procurement. Companies should plan their runway accordingly, recognizing that even "successful" pilots rarely translate to immediate revenue.

How many Toronto HealthTech startups scale beyond pilots?

According to data collected over the past five years, about 12-15% of Toronto HealthTech startups manage to scale commercially after their pilot phase. This percentage is not constant across all subsectors. Medical device companies have a higher success rate (around 22%) compared to digital health solutions (around 8%).

Startups that make it through this phase usually have a few things in common: their founding teams are diverse and have a mix of clinical and technical knowledge, they've formed strategic partnerships with established healthcare vendors early on, and they've set up their funding in a way that aligns with the timelines for healthcare procurement rather than the timelines you'd expect from a traditional software company.

Which HealthTech sectors in Toronto have the most difficulty in scaling?

With only around 5% successfully moving from pilot stages to long-term commercial operations, digital therapeutics and behavioural health solutions face the most significant scaling challenges in the Toronto ecosystem. Despite strong clinical evidence, these solutions often struggle with reimbursement models that don't accommodate software-based interventions. On the other hand, diagnostic technologies and operational efficiency solutions show higher success rates (approximately 25% and 18% respectively). This is likely due to more straightforward ROI calculations and established procurement categories.

How does Toronto's HealthTech funding compare to other major North American hubs?

HealthTech companies in Toronto raise approximately 40% less capital on average than similar companies in Boston and 50% less than those in San Francisco across all funding stages. This difference is especially noticeable at the Series A stage, where Toronto companies typically raise $5-8 million compared to $12-15 million for similar-stage companies in leading U.S. hubs.

When a funding gap is present, there are unique problems during the pilot-to-scale transition because Toronto companies often don’t have the necessary resources to support extended pilot evaluations and build sales and implementation capacity for growth at the same time. The capital efficiency that is needed to succeed with less funding can sometimes become a competitive advantage for Toronto companies that are entering U.S. markets, but it significantly increases the execution risk during the scaling phase.

What government measures are in place to help HealthTech startups expand beyond pilots?

The Health Innovation Pathway in Ontario is the most direct government measure addressing the pilot-to-scale gap. This program was launched in 2023 with the aim of creating more predictable evaluation and procurement pathways for healthtech innovations based in Ontario. The program includes standardized assessment frameworks, dedicated innovation procurement specialists within healthcare institutions, and the potential for expedited procurement for solutions that meet specific criteria. Although it is still in the early stages of implementation, the program shows potential for reducing some of the structural barriers to scaling within Ontario's healthcare system.

Other helpful programs include the Federal Strategic Innovation Fund, which offers matching funds for later-stage healthtech companies with proven solutions; the Scientific Research and Experimental Development (SR&ED) tax incentive program, which helps offset R&D costs; and various procurement modernization initiatives that are being implemented at both the federal and provincial levels. Companies should also look into health-specific programs offered through innovation hubs like MaRS Discovery District and ventureLAB's Health Tech program.

Aside from specific initiatives, there are also campaigns to tackle fundamental policy obstacles. This includes revamping reimbursement models to include digital health solutions and standardizing technology assessment frameworks across provinces. These systemic changes, although they progress more slowly than direct funding programs, could eventually create more sustainable routes for healthtech scaling.

Scaling from the pilot phase to a full-fledged operation is the biggest hurdle for Toronto HealthTech startups. Founders who understand the structural obstacles, learn from successful companies, and leverage emerging opportunities can increase their chances of success. They can build companies that not only create innovative technologies but also deliver them to patients and healthcare systems on a large scale.

• Federal Strategic Innovation Fund

• Ontario Health Innovation Pathway Program

• Scientific Research and Experimental Development (SR&ED) tax incentives

• MaRS Excite Program for health technology evaluation

• CAN Health Network procurement facilitation

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