Panache Ventures team, from left to right: Patrick Lor, Nicolas Jacques-Bouchard, David Dufresne, Mike Cegelski, and Gabrielle Drouin.
The team behind 500 Startups' short-lived Canadian foray has resurfaced with a new fund after severing ties to the disgraced Silicon Valley seed-stage venture capital firm last year.
The new fund, called Panache Ventures, will be led by veteran entrepreneurs Mike Cegelski and Patrick Lor, both managing partners, and partner David Dufresne, all of whom were involved with 500 Startups Canada. That venture had secured $23-million in commitments and was in the process of raising another $25-million from five institutional investors last summer when 500 Startups founder Dave McClure resigned after a New York Times story revealed "inappropriate" interactions and the founder acknowledged he was a "creep" who "selfishly took advantage of those situations where I should have known better."
When investors balked at continuing to support the Canadian group as long as Mr. McClure maintained ties to 500 Startups, the team instead decided to shut down the Canadian operation last fall.
"There was definitely two or three weeks of being disappointed and angry," said Mr. Dufresne. Most of the principals then regrouped and decided to build on their initial success at fundraising and investing in 38 companies during the Canadian unit's year in operation. The exceptions were 500 Startups Canada partners Sanjay Singhal and Neha Khera, though both are advising Panache and helping the fund hire a Toronto-based partner. (Mr. Dufresne and Mr. Cegelski are based in Montreal while Mr. Lor is in Calgary).
"It's been a rollercoaster," Mr. Dufresne said. "At the end of the day we have a fund that's completely independent, it's our own brand and it will be able to grow into its own reputation," he said.
Three of the five institutions that had planned to back 500 Startups Canada – two provincially controlled investing agencies (Investissement Quebec and Alberta Enterprise Corp.) and Quebec's FTQ Solidarity Fund – agreed to fund Panache, along with 30-plus angel investors, and it has now hit its first close of $25-million, on the way to a planned $40-million close. In other words, the group has already surpassed the committed total raised by 500 Startups Canada. They've also invested in seven startups so far. "We're hitting the ground running because we never really stopped running," said Mr. Dufresne.
Like 500 Startups, Panache will invest in a broad range of tech companies at the seed and pre-seed financing stages, writing initial cheques averaging $150,000 a deal, and $500,000 for follow-on investments in startups that make it to the next stage. The group is still on friendly terms with 500 Startups, which is now led by founding partner Christine Tsai, and looking to send some of its portfolio companies to participate in the Silicon Valley firm's accelerator.
Panache could also co-invest in deals with 500 Startups, Mr. Dufresne said.
Sean Silcoff