Ex-Panache, ScaleUp partners team up to launch new early-stage VC fund CMD Capital

Long-time Canadian technology startup investors Matt Roberts and David Dufresne have teamed up to launch their own fund at a time when early-stage investment in Canada’s tech sector is needed more than ever.

The pair, who have been working in the venture capital (VC) industry since around the time of the dot-com crash, has backed a wide range of Canadian tech startups through VC firms like Panache Ventures, BDC Capital, and ScaleUp Ventures. In the process, Dufresne and Roberts have navigated a variety of different tech market cycles, from the 2008 financial crisis to the VC funding boom of 2021.

“We won’t pretend to fix the whole problem,” said Dufresne. “We’re two guys that have experience that know what we’re going to do. We’ve seen multiple cycles, and we know we can do a good job.”

– David Dufresne

Now, as Canadian tech stares down the barrel of another challenging macroeconomic period that has seen other investors step back and could entail a sector-wide shakeout, Roberts and Dufresne have launched their own early-stage VC firm, CMD Capital. The pair are joined by RenoRun and Fasken alumnus Gabrielle Paris as principal.

In an exclusive interview with BetaKit, Dufresne and Roberts laid out their plans for CMD (pronounced “Command”) Capital, the seed-stage lead investor market gap they hope to help fill, and why they feel their experience and expertise make them the right folks for the job at the right time.

Split between Toronto and Montréal, CMD Capital aims to raise between $50 million to $75 million CAD from limited partners (LPs) to lead and price rounds in startups that use artificial intelligence (AI) to solve problems across the B2B and enterprise sectors. According to Roberts, the firm has generated “lots of verbal interest” from prospective LPs but does not yet have any committed capital.

As CMD Capital co-founders and general partners (GPs), Dufresne and Roberts intend to stick to their generalist, early-stage investment roots, while also focusing on pre-seed and seed-stage firms leveraging AI in interesting ways. The VC firm has begun the fundraising process and hopes to reach a first close by the end of 2023.

As market conditions have deteriorated, seed-stage investment has fallen, and company creation has dropped, Dufresne and Roberts said they honed in on one particular but important problem—Canada’s dearth of pre-seed and seed round lead investors.

“Ontario and Canada have lost their early-stage lead cheques, or people who focus consistently on that space,” Roberts argued.

“We won’t pretend to fix the whole problem,” said Dufresne. “We’re two guys that have experience that know what we’re going to do. We’ve seen multiple cycles, and we know we can do a good job.”

Canada’s tech sector is currently in the midst of the “survival-of-the-fittest” part of the cycle. As interest rates have risen, fundraising has become much more difficult, and many firms have executed deep staff cuts to preserve cash, sought bridge financing at onerous terms, sold for pennies on the dollar, or closed up shop entirely.

However, seed-stage investment levels in Canada have been an issue for at least a few years now. As Canada’s tech ecosystem has matured, seed funding has remained low, failing to keep pace with increases in VC financing totals and deal counts at later stages. As Roberts previously told BetaKit, amid the downturn, seed-stage fundraising has become particularly challenging for local companies in the last few months. These conditions have also contributed to a decline in company creation.

Read more - Firenewsfeed