Cathay Innovation launches third multi-stage startup fund at $1B

Global venture capital firm Cathay Innovation has announced its third fund, targeting €1 billion ($1.05 billion) at a broad gamut of companies and technologies around the world.

With Fund III, Cathay Innovation launches what will surely be one of the largest multi-stage VC funds to emerge from Europe once it closes, encompassing Series A, B, and later-stage startups. The company said that it intends to serve as lead- or co-investor, with investments ranging from $5 million to around $80 million in size.

The new fund follows its $550 million second fund back in 2020, which -- like the inaugural fund before that -- was also a multi-stage fund. In tandem, Cathay Innovation, which is part of the broader private-equity outfit known as Cathay Capital, has also been entering vertical-specific industries, having just last month launched a new $110 million fund directed at the crypto sector. The month before that, Cathay Capital itself launched a $500 million health fund.

So against a backdrop of economic downturns, startup recessions and VC trepidation, it seems that someone, somewhere at Cathay Towers may have missed the memo.

"Despite the current market conditions and uncertainty, we’re strong believers that the digital revolution will only continue to accelerate, and that leading tech companies will do extremely well, showing strong growth and pricing power," Cathay Innovation CEO and co-founder Denis Barrier told TechCrunch. "In the next 10 years, all industries face massive change as modern digital infrastructure better links products, customer needs and the wider value chain. As a result, today’s markets will be redefined and the companies who cope well with digital transformation will have the opportunity to lead much larger markets than before."

Cathay Innovation co-founder and CEO Denis Barrier. Image Credits: Cathay Innovation

Cathay Innovation's focus is about as broad as it gets, spanning just about every nook of the industrial spectrum, from fintech and mobility to retail and energy. But behind what at first might appear to be a scattergun investment ethos, there is a strategy. Businesses often have to forge relationships with complementary companies from other industries, for example as supply chain partners or even as paying customers, so by investing in such a wide range of businesses, Cathay can help build bridges across sectors.

"We specifically built our funds to include a diverse ecosystem of leading multi-sector corporations as not only LPs (limited partners), but as strategic partners to help tailor our investment thesis to industries such as healthcare, finance, consumer, energy, mobility and logistics," Barrier explained. "This has several benefits, as it grants access to invaluable industry expertise and allows for cross-industry fertilization; it connects startups to potential partners or significant customers that can help them scale; and it helps boost the digital transformation efforts of our corporate partners while bringing innovation to life in real-world industries."

The core focus of the new fund will be on Series A and B rounds; however, the company said that it plans to hold enough reserves for later growth rounds, and will target investments at companies that fall under the U.N.'s Sustainable Development Goals, incorporating good health and well-being; decent work and economic growth; industry, innovation and infrastructure; and climate.

Global norming

While Cathay Innovation is by no means a location-specific fund, its roots lie firmly in Europe, having initially set up shop in Paris back in 2015 where Barrier is now based. More than half of Cathay Innovation's global team -- amounting to nearly 30 individuals -- are also based in Europe, and more than one-third of its portfolio companies also hail from Europe.

"While we invest globally, with our marquee funds primarily covering Europe, North America and Asia, we’ve always maintained a strong European presence in terms of local team, LPs and portfolio companies," Barrier said. "We’ve invested in many leading European startups."

Cathay Innovation's Paris-based team. Image Credits: Cathay Innovation

Many of these startups have gone on to achieve notable exits, including Spanish electric vehicle charging startup Wallbox, which now trades on the New York Stock Exchange, and delivery company Glovo, which was recently acquired by Delivery Hero. More broadly, Cathay Innovation has invested in 120 companies, delivering two IPOs, five acquisitions and 19 unicorns in the process.

That all said, since its inception seven years ago, Cathay Innovation has expanded with new offices and teams in North America, Asia and Africa, giving the VC firm inroads into lucrative markets everywhere.

"We started Cathay Innovation to back emerging startups transforming key industries and with the belief that the best innovations come from all corners of the world -- which will continue with Fund III," Barrier added.