Cathay Capital Closes Third Innovation Fund at $1 Billion, All In on AI Applications

"What global LPs care about." By Muxin Xu

Anywaves has learned that Cathay Capital's Cathay Innovation Fund III has held its final close, with assets under management reaching $1 billion, making it the largest AI-focused fund in EU history.

If you've been following Cathay's fundraising news, you may recall that on July 12, 2022, Cathay Innovation Fund III announced a first close exceeding €600 million, with a target fund size of €1 billion at the time.

Three years on, macro conditions and technological evolution have continually reshaped the industry landscape, prompting Cathay Innovation Fund to sharpen its investment focus — concentrating on driving deep AI applications in vertical sectors, covering four key industries: digital healthcare, fintech, consumer, and mobility & energy.

AI has clearly become more important, and more clearly defined. As Cathay Capital founder and chairman Mingpo Cai stated: "AI is not an isolated technology trend, but the infrastructure of a new industrial era. It will reshape the underlying logic of industries, and what it requires is not merely capital, but structural cognition, industrial application scenarios, and cross-regional execution capability."

Globalization is one of this fund's defining characteristics. It has added new LPs from South America, including Vale and COPEC (Wind Ventures), a South American energy and technology group. Combined with existing LPs such as Sanofi, TotalEnergies, Valeo, BNP Paribas Cardif, Groupe SEB, and Groupe ADP, the geographic footprint has broadened, while the industrial character remains pronounced.

Corporate LPs have inherent advantages. For instance, pharmaceutical giant Sanofi is collaborating with several of Cathay's portfolio companies — Owkin, AQEMIA, and Inato — to advance AI applications in drug discovery and clinical trials. For startups, connecting with industry giants earlier means achieving scale sooner; for large enterprises themselves, it enables more efficient access to frontier technologies.

What hasn't changed about this fund is its continued focus on early to growth-stage projects, with individual investments ranging from $5 million to $80 million. Its LPs remain global industry leaders, and geographically, Cathay continues to invest worldwide, with particular attention to China and Southeast Asia, Europe, and North America.

Cathay first made its name when Cathay Innovation Fund I backed Pinduoduo. Later, its consumer co-creation fund — established jointly with L'Oréal Group, Kering Group, Pernod Ricard Group, Sanofi, Vipshop, and Swire Group — made an impression in 2023 when consumer investment had cooled. Yet a review of Cathay's portfolio reveals positions across several hot AI domains: AIGC company Aichuang Guangnian, cross-border smart hardware maker Clubdeal (Xingmai Innovation), and the increasingly newsworthy humanoid robotics company Xinghai Tu, among others.

Cathay Capital managing partner Duan Lanchun told Anywaves: When Cathay invests in AI, it focuses on whether a team can build a systematic technical architecture to train an action model with generalization capabilities. Because large-scale commercial deployment of AI depends on more than who has the best algorithms — it's about who can integrate data, scenario understanding, technical integration, and business model into a continuously operating and evolving system.

This mirrors her representative case of Pinduoduo. In common understanding, Pinduoduo is an e-commerce company. But in Duan's view, Pinduoduo's true capability lies not merely in front-end operations, but in the deep linkage between its underlying business logic and algorithmic systems: through extremely high degrees of automation and data-driven processes, the platform achieves large-scale efficient operation with minimal intervention, consistently executing its foundational business logic.

And this is precisely the investment logic Cathay Innovation Fund will carry forward in AI.

Anywaves recently spoke with Duan Lanchun. Below are her key points:

1. Cathay's investment focus in AI has always centered on one core judgment: technology must serve specific scenarios and solve real problems. We pay more attention to AI's application logic in vertical industries, investing in solutions with systematic problem-solving capability rather than pure technical tools. Take currently buzzworthy Agent products: Cathay believes two questions matter — clearly defined target users, and clearly defined use cases. At early stages, we prefer to back entrepreneurial teams that can identify deterministic value in specific industries first, and possess viable paths to implementation.

2. Cathay has not participated in general-purpose large models or underlying infrastructure investments, stemming from its "heavy on implementation, heavy on ecosystem" strategy. AI applications are investable today because supply-side drivers (enhanced general model capabilities, declining compute costs) and demand-side drivers (mature B-side adoption, C-side penetration) have formed a closed loop; meanwhile, sustained national policy support for AI and technological innovation is providing crucial momentum for industrial deployment of AI applications.

3. Cathay's advantages in global AI investing are: first, we have local offices, strong on-the-ground teams, and investment track records across Asia, Europe, and the US; second, our corporate LP resources give us deeper understanding of how AI products should land in specific industry scenarios; third, we have the capability to help companies going global connect with customers worldwide.

4. Chinese AI companies going global currently face three major challenges: first, local compliance and user insights; second, building local talent; third, ecosystem resource matching. This is why Cathay must maintain local offices in key markets and deeply cultivate ecosystems.

5. The reason Cathay has won long-term support from numerous Fortune 500 companies is not only its global resource deployment, but its deep local knowledge and industrial understanding in every key market. We don't just understand China — we understand Europe, the US, Southeast Asia — we know what's really happening in each market, where industry opportunities lie, and how transformation truly occurs. In an era of rapid technological evolution and constantly reshaped market landscapes, global corporate LPs are seeking more than investment returns; they need a platform that can help them understand different markets, capture structural opportunities, and participate in the next wave of industrial transformation. The role Cathay plays is precisely such a long-term connector across cultures, markets, and cycles.

6. AI is a long-term proposition, not a short-term profit-seeking trend. What Cathay cares about is not who tells the best story, but who can truly hone systematic capabilities in real, implementable, differentiated-value scenarios. We believe that genuinely resilient entrepreneurs need to build algorithmic capabilities, business models, and talent systems step by step from industry foundations — this is a long-term cultivation of compound capabilities. As investors, Cathay provides not only capital, but accompanies companies through early uncertainty toward scaled implementation and cross-market growth, through global vision, industrial cognition, and resource synergy.

Image source | IC photo

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