Toronto and Montréal-based CMD Capital has halted fundraising and paused its operations indefinitely after failing to secure anchor institutional investors for its first fund, BetaKit has learned.
CMD Capital co-founder and general partner (GP) David Dufresne confirmed the news in an interview with BetaKit. The move was announced by Dufresne and fellow CMD Capital co-founder and GP Matt Roberts in an email sent to the early-stage venture capital (VC) firm’s friends, advisors, and investors earlier today.
“It’s a very tough market right now for the whole ecosystem.”
David Dufresne, CMD Capital
“We have made the decision to stop fundraising and to indefinitely postpone setting up the firm,” the email states. It goes on to say that going forward, Roberts and Dufresne plan to explore “different roles and mandates in the tech and VC ecosystem” and “perhaps outside.”
“It’s a very tough market right now for the whole ecosystem,” Dufresne told BetaKit in an interview. He said CMD Capital saw “little to no appetite” to invest in first-time funds from institutional backers, due to factors including low limited partner (LP) liquidity and existing portfolio VC funds returning for re-ups.
As BetaKit reported, Roberts and Dufresne—former partners at ScaleUp Ventures and Panache Ventures, respectively—officially launched CMD Capital in May 2023. Their vision was for the VC firm to help fill Canada’s early-stage funding gap by leading and pricing rounds for pre-seed and seed-stage startups using artificial intelligence (AI) to solve problems for other businesses.
CMD Capital had been fundraising for its first fund since then, aiming to raise between $50 million and $70 million CAD from LPs, with the initial hope of securing a first close by the end of 2023 amid what has become a tough VC fundraising environment. The VC firm did “a lot of going around in circles” over the past two years trying to secure one or two anchor LPs to help give the firm more credibility to other investors, Dufresne said.
After many invested heavily in Canadian VC when the market was hot, LPs have become more cautious and selective amid the downturn, which has led to smaller funds and longer fundraising timelines for the firms that invest directly in the country’s technology startups.
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Industry leaders BetaKit spoke with last year forecast more turnover and challenges across Canada’s VC industry, especially for emerging managers as LPs have focused their dollars on established VCs and slowed down or paused commitments to newer firms, leaving first-time managers, which tend to concentrate on pre-seed and seed stages, “at the back of the line.”
Last July, BetaKit reported that at the halfway point, 2024 was on pace to be the worst fundraising year for Canadian VC in a decade in terms both of dollars allocated and volume of first and second fund raises, per research from RBCx, though things picked up a bit since then with Radical Ventures’ $800-million USD AI growth fund and other more recent VC fundraises.
Roberts and Dufresne wrote in today’s email that CMD Capital tried to secure the anchor investors necessary to plan a first close of the fund during the fourth quarter of 2024, but none of their lead LP conversations came to fruition, and as of today, they have been unable to secure anchor institutional investors.
Following some reflection, the GPs said that they have “come to realize that the timing and context are wrong for us to raise a first-time fund, one of a size that would allow us to be proper lead investors in pre-seed and seed rounds.”
Before pulling the plug, Roberts and Dufresne wrote that they considered closing a smaller fund leveraging their existing commitments, but noted that this approach “would not enable us to execute on our strategy, and act as the lead and hands-on VC investors we want to be,” hence their decision to halt fundraising and operations.
CMD Capital had soft commitments for between $10 million and $15 million CAD from high-net-worth individuals, family offices, and the New Brunswick Innovation Foundation, but this alone was too small for a first close, Dufresne said. The VC firm had not made any investments yet. Dufresne said CMD Capital might have been able to raise a $15-million to $20-million fund, but this would not have allowed them to execute on their strategy.
“It’s a tough decision, especially considering the fantastic pipeline of opportunities we’ve identified in the Canadian vertical AI ecosystem, and all the efforts we’ve put into the project,” the pair noted in the email.
Roberts and Dufresne thanked investors who committed to backing CMD Capital’s first fund, Gabrielle Paris and Christian Grunt (who worked with CMD Capital during its early days), and individuals who agreed to serve as advisors to the VC firm.
The pair are not closing the door on CMD Capital for good: they are not yet deleting its data room and fund model and Dufresne did not rule out the possibility of CMD Capital returning at a later date should there be more LP appetite for its thesis.
Dufresne said that he and Roberts are currently considering their next steps, but noted that they both hope to stay involved in the Canadian tech and VC space.
With files from Douglas Soltys.
Feature image courtesy CMD Capital.