Global VC firm Cathay Innovation, which is based in Paris, has closed a €1bn multi-stage fund dedicated to AI.
It is the firm’s third fund and marks its entrance into the small pool of VCs in continental Europe to have passed the billion-euro threshold. Swedish investor EQT Ventures raised a €2.4bn growth fund and a €1.1bn early-stage fund in 2022; in France, Atlantic Vantage Point (AVP) recently announced it has nearly closed €1bn of a €1.5bn growth fund.
Cathay’s new fund will back around 30 startups from early to late stages. The ticket size will vary, says Denis Barrier, cofounder of Cathay Innovation. “For portfolio champions, we’re looking to invest at least €50m throughout their lifetime.”
About half of the fund will be deployed in Europe and the remainder in the US and Asia. Cathay is targeting startups applying AI to digital health, fintech, consumer services, mobility and energy.
It has already deployed €235m to back 14 companies, half of which are European. They include French AI assistant for doctors Nabla, biotech Bioptimus and materials discovery startup Entalpic.
Doubling down on AI
Cathay announced the fund in 2022, initially targeting Series A and Series B companies in AI, digital health, mobility and energy tech, and focusing on the sustainable transformation of industries.
In 2023 the firm announced it would allocate €50-100m from the fund to back French founders in AI. “We did this to show AI was the important thing to focus on,” says Barrier. “It was also the opportunity to show we believed in the French ecosystem.”
Cathay is now dedicating the entire fund to AI — and Barrier says the size of the fund aligns with that thesis.
“We want to be a tier-one investor… With AI it is extremely important to have a fund with a significant size that can invest in founders from the start and then follow-on without having to raise capital externally,” says Barrier.
The fund also qualifies as an Article 8 fund, meaning it must “promote” environmental and social characteristics.
Strategic LPs
Barrier says half of its LPs are financial investors and the other half are strategic investors — typically corporates who want to access the technologies developed by portfolio companies.
Strategic LPs range from pharmaceutical company Sanofi to Brazilian mining company Vale through French bank BNP Paribas Cardif, Total Energies, automotive supplier Valeo and Chilean energy company Copec.
Barrier says this enables Cathay to connect industrial players with portfolio companies. “We are entering a phase in AI where future champions will be those who can work together with the ecosystem to find solutions that will reinvent industries,” says Barrier.
“Our platform enables us to be a catalyst for large-scale partnerships between startups and our strategic industrial partners.”
Aqemia, a Paris-based AI startup focusing on drug discovery, which is backed by Cathay, signed a $140m deal with Sanofi in 2023. Another portfolio company building AI-powered drug discovery tools, Owkin, has had a strategic partnership with Sanofi since 2021, which saw the pharmaceutical company make a $180m investment in the startup.
Read the orginal article: https://sifted.eu/articles/cathay-innovation-1bn-fund/
