The number of new Canadian venture capital funds will hit a decade low in 2024, with just 14 funds having closed as of Dec. 18, according to PitchBook data. But lurking unseen in the data is a bigger problem: zombie funds.
These funds are run by firms that have quietly retreated from a difficult market. Unable to raise new financing but still managing old portfolios, the firms linger on the fringes, waiting for the right conditions to reemerge.
“People call them zombie funds because they’re like walking dead,” said Rick Nathan, managing director at Toronto-based Kensington Capital Partners, which invests in venture capital funds. “They don’t go out of business, they don’t go bankrupt, they just kind of survive,” Nathan said. Some funds may eventually have a big exit or two, giving them the fuel and credibility to go back out and raise another fund, he said. Others will ultimately perish.