The company was founded in 1971 by Joe Montgomery and Murdock MacGregor to manufacture precast concrete housing. Later Ron Davis came to Cannondale from CBS Laboratories where he was VP in charge of the development of microfilm reproduction. Ron, a polymath and a gifted mechanical designer/inventor, had ideas for an internal combustion engine that would use ammonia as fuel. Such a concept, if proved, could have far-reaching effects in warfare logistics and middle-eastern politics. Davis, with MacGregor as assistant, had some surprising success. They managed to duplicate and exceed results obtained by Allison Engine, then a division of General Motors. Faced with a commitment to invest a large amount of capital to take the project to a workable model installed in an automobile, Montgomery decided that the company should raise capital by developing and marketing other products that they had conceived. By now MacGregor and Davis had recruited two more CBS Laboratory alumni: John Wistrand, an award-winning Industrial Designer, and Jim Catrambone, a rising management star. A highly advanced air conditioner with no moving parts was a first effort.

Then Joe Montgomery, after a camping bike trip with his son, conceived the Bugger bicycle trailer. Ron Davis devised the under-seat hitch, a torsion spring made of Lexan. Wistrand designed the cloth bags and cargo carrier on the two models of trailers. Montgomery, in an effort repeated in numerous products, sourced the cloth components and ensured perfection in their manufacture. A trip to the Bicycle Show in New York was an eye opener. The team was besieged by bike dealers wanting to buy the bags. They bought trailers too but really wanted the bags. In less than six months Cannondale became the world’s largest manufacturer of lightweight bicycle bags. Using a marketing plan devised by Montgomery, Cannondale swept across the US, securing orders from more than 2500 dealers in less than 20 months. They then used the infrastructure developed to produce the bags to enter the camping goods market with backpacks and tents. Regarding the Bugger trailer, although Cannondale’s marketing department claimed to be unaware of the connotations of that name in British English,[citation needed] some were, nevertheless, exported to the UK.

Once fully immersed in the retail bicycle industry, Todd Patterson, another exceptional designer/inventor, came aboard and developed the process for jigging and welding aluminum bicycle frames. Cannondale became a serious manufacturer of bicycles.

Today, Cannondale produces high-end bicycles, although they are no longer hand-made in the US. Many bicycle frame manufacturers use many materials such as steel or titanium, Cannondale specializes in aluminum and carbon fiber, a technology in which they were pioneers.

The name of the company was taken from the Cannondale Metro North train station in Wilton, Connecticut. Another story as told in their 1983 catalog is that employee Pete Meyers was sent to order telephone service installation in 1970. When asked for the name of the business to be listed under, Meyers coined the name while looking at a rusty cannon inscribed “dale” and the sign on the Cannon railroad crossing.

Originally a privately held company, Cannondale became publicly held after a $22 million IPO in 1995.

In the late 1990s Cannondale moved into the motorsports business, producing a line of off-road motorcycles and all-terrain vehicles. According to an interview with Cannondale Communications Director, Tom Armstrong, the company was unable to reduce the cost of their vehicles fast enough. As sales increased, the company was losing money on each motorbike. This gap drove the company into bankruptcy protection on January 29, 2003. Cannondale’s full assets were then purchased at auction by Pegasus Capital Advisors fund Pegasus Partners II, L.P. Pegasus sold off the motorsport division and supported the company’s renewed focus on bicycle production.

In February 2008, Dorel Industries, a Canada-based diversified consumer products company, announced the purchase of Cannondale from Pegasus Capital for approximately $200 million. Dorel also owns Pacific Cycle, a distributor of bicycles made in Taiwan and the People’s Republic of China for sale under many historic U.S. cycle brands, including Schwinn, Mongoose, Roadmaster, and GT.

In April 2009 it was announced that all production would be transferred to Taiwan.