3 Billion New Fund First Close: Arthur Yeung on Kairous Capital's Two Major Organizational Restructurings

By Lili Yu

Edited by Jing Liu

In just two years, Arthur Yeung has accumulated three roles at Cathay Capital: from co-founder of Cathay InnoVenture Fund, to head of the Cathay Knowledge & Connection Platform, to Global President of Cathay Capital. Yet in his view, the work has been consistent throughout — it's all about helping companies grow.

For Yeung, long regarded as an "insider-outsider" to China's business world, this partnership that began in 2020 was initially surprising.

As a renowned management scholar, Yeung has helped numerous companies navigate transformations and organizational changes. His client list includes the globally recognized PC brand Acer in 1998, and Tencent — which leaped to a $1 billion company in 2008 and, grappling with big-company disease by 2018, began brewing its transformative "930 Reform." He has also served as a management advisor to Alibaba, China Resources Group, TSMC, TCL, Philips, and other major corporations. Even after becoming Global President of Cathay Capital, Yeung continues to hold his position as senior management advisor at Tencent.

Yeung studied under Dave Ulrich, the globally recognized management guru known as the "father of modern human resources." In China's business academia, few scholars have theories named after them — Yeung is one of them. His framework positing that organizational capability rests on three pillars — whether employees want to do the work (employee mindset), whether they can do it (employee competence), and whether the organization allows them to do it (employee governance) — became known as the "Yeung Triangle." Pony Ma himself called Yeung a "world-class practical business coach."

Cathay Capital, however, is an investment fund. Conventionally, funds are assumed to differ from companies despite both being "business organizations" — funds are seen as knowledge-intensive operations that don't require rigorous, meticulous management.

Yeung disagrees. Today, Cathay Capital manages over €5 billion across seed, angel, VC, PE, and pre-IPO stages. As a globally deployed fund, it maintains offices in Paris, Shanghai, Beijing, Shenzhen, New York, San Francisco, Munich, Tel Aviv, and Singapore. A sufficiently complex Cathay makes its organizational management a particularly noteworthy case study.

Moreover, compared to a single company, a fund can cover far broader commercial territory. Founded in 2006 as a China-France partnership fund, Cathay's investment stages now span the full chain, with representative portfolio companies including Pinduoduo, Chime, Genki Forest, JD Logistics, Aihuishou, Zongteng Network, Meinian Onehealth, and Suofeiya. "In a sense, this means at Cathay you can see a company's full journey from small to large," Yeung said.

Precisely for this reason, shortly after Yeung joined, Cathay Capital founder and chairman Mingpo Cai persuaded him to take the Global President role — to help build a more sustainable, growth-oriented management system as Cathay scaled.

Beyond this, Yeung is conducting another intriguing "co-creation experiment." Cathay Capital is far from a traditional fund. Beyond continuing to invest through conventional fund structures, Cathay actively operates businesses itself. The profit model for this segment no longer follows the traditional fund approach of management fees or carried interest, but rather operates like a company, earning profit distributions.

This co-creation can take the form of a "ten-month pregnancy" incubation, or it can begin as a "giant infant": for instance, stripping out a product and technology from a major European corporation, then recombining it with locally entrepreneurial Chinese partners.

Yeung and Cai first met in a CEIBS classroom. Before founding Cathay, Cai was himself an entrepreneur: in 1999, this native of southern Fujian founded Stonest in France and grew it into the country's largest stone company within three years. This entrepreneurial streak carried into Cathay, where Cai has placed particular emphasis on organizational and cultural development. According to our reporting, Cathay is one of the few funds with its own "culture manual."

On June 2, Cathay announced the first close of its RMB Growth Fund II. The fund, based in Taicang, Suzhou, targets RMB 3 billion with a first close exceeding RMB 1.6 billion.

Cathay Capital partner Siqi Chen told Anyong Waves that major domestic investors from Fund I — including Suzhou Fund, Taikang Insurance, Xiamen C&D, Ancheng Capital, and Quanzhou Financial Holding — all reinvested. Cathay's long-term investors, Fortune 500 companies Valeo and CMA CGM, also became cornerstone investors in the RMB Fund II.

We recently spoke with Yeung. Over the past two years, how has he helped Cathay complete two organizational restructurings? And have funds found new solutions to organizational challenges? Yeung offered some practical insights.

Three Things I've Done Since Joining Cathay

1. I joined Cathay Capital not because I love investing, but because I wanted to pour my greatest passion into building companies. I want to raise my own "children" — I'm interested in how companies grow from small to large. So I don't get too involved in specific investments. My main work is building platforms, structures, and incentivizing talent.

2. I've held three responsibilities at Cathay. The first was finding and cultivating entrepreneurs who can face and change the future, through Cathay's venture fund. The second was building empowerment platforms to help portfolio companies accelerate their growth. But later, Mingpo (Cai) convinced me: he said the largest portfolio company is actually Cathay Capital itself. He wanted me to help build a more sustainable, growth-capable management approach as Cathay scaled. So I also took on a third responsibility as Global President of Cathay Capital.

3. When I first joined, I felt that as a global fund, Cathay wasn't fully leveraging its global industrial resources and knowledge. It had a good hand but wasn't playing it well enough. Later, Mingpo and I did extensive thinking and planning on how to effectively integrate what we had — for example, focusing more on key industrial partners in Europe and China, and going deep into innovation opportunities in four vertical industries: consumer, industrial energy (carbon neutrality), healthcare, and fintech. Specifically, we would source deals together, design some co-creation enterprises, and recruit global operating partners in these vertical industries to break through knowledge and resources across different regions and funds in each sector. Then we'd expand this knowledge and resources to external, important industrial partners.

4. We regularly meet with influential entrepreneurs in these four sectors to share knowledge and opportunities. In France, we've established a Cathay Advisory Board with six prominent current French CEOs — this is led by Mingpo. In China, I've built a similar Cathay private board with 12 entrepreneurs.

5. The reason for doing these three things is the complementary potential between corporations and funds: many large companies, despite excelling in their own domains, worry deeply about future innovative models or technologies that might disrupt them. So this is the role Cathay hopes to play: a neutral party, acting as radar and scanner, helping them invest in and co-create innovative companies, better positioning their ecosystem to face the future.

Why Is the Fund Industry Like Traditional Chinese Medicine?

6. From last year to now, Cathay's global organizational structure has been upgraded twice. Version 1.0 was done around August-September last year, mainly clarifying the roles of fund managers, country heads, and sector partners. Version 2.0 mainly integrated knowledge and resources across Cathay's different funds and regions in the four vertical industries, and clarified the role of global operating partners.

7. Specifically, while Cathay Capital only has about 150 people total, it's sufficiently complex. Not only multi-regional, but with five funds and four industries. There are different fund line leaders, plus country heads. Under each fund we've also horizontally set up four tracks — consumer, industrial energy (carbon neutrality), healthcare, and fintech — so there are sector partners. The first upgrade was clarifying the roles of these three groups. Does the fund line leader have final say, or the country head? If someone wears multiple hats, they should know which hat to wear when.

8. Managing large companies versus funds still differs significantly: first, scale isn't comparable, since funds generally run lean with elite teams, not many people. But if it's a knowledge-intensive large company, it does share similarities with funds, because the most critical success factor for both is: finding excellent people. Their quality determines your output or investment returns.

9. For talent in knowledge-intensive industries, what matters most is: hire, hire, hire, and motivate, motivate, motivate. Then sufficient empowerment and enablement, especially keeping knowledge platforms, processes, and all aspects sufficiently simple, so they can focus on what they love without spending much time on miscellaneous tasks. Of course, companies and funds still differ greatly in incentive structures. Large companies generally have base salary, plus bonus, plus options (usually multi-year vesting). But funds, beyond base and bonus, heavily rely on carry — and that timeline is much longer.

10. Many ask whether funds can scale? I believe if a fund grows large enough, and can make knowledge cumulative, more structured, systematize processes, make management intelligent, and through talent recruitment and development achieve continuous self-renewal, it can also reduce dependence on specific individuals.

11. But overall, the investment industry's essence remains like traditional Chinese medicine. Partners' experiential judgment is unavoidable — look at Buffett and Munger, two old men still running their fund into their nineties, which shows this remains an industry heavily dependent on judgment, very much like an old TCM practitioner.

Why Are Investors Starting to Get Their Hands Dirty?

12. Though this industry appears to lack major innovation, there are still different innovations and variations within it. At Cathay, we're now dual-engine driven: our fund product business continues investing through mainstream fund models, but simultaneously, we're co-creating companies and actively operating them.

13. By actively getting our hands dirty, we operate like a real business, relying on shareholder dividends and equity value for returns. This co-creation can be a ten-month pregnancy incubating a small baby, or it can be a "giant infant" from birth. For example, a major European corporation might spin off a product worth billions, then we find a local Chinese partner or founder and recombine.

14. Why is this necessary? Because we've found some European companies, when expanding into China, first have overly slow internal decision-making that causes them to miss opportunities, and second, professional managers lack the entrepreneurial fighting spirit compared to local Chinese entrepreneurs. So we thought to find industrial investors (LPs) with excellent technology or products, strip out their products and technologies, combine with outstanding local entrepreneurs, and co-create an entirely new company to rapidly capture and master the China market.

15. Conversely, we can also bring excellent Chinese products and technologies to Europe, combining with local European entrepreneurs or excellent companies to help Chinese companies quickly master local markets. Through equity incentives and distribution, local management teams become fellow fighting entrepreneurs, not just salaried professional managers.

16. This "co-creation" isn't just fund-level entry — it's tight linkage between Cathay and industrial resources, co-creating across four dimensions: knowledge, resources, capital, and talent. Cathay is the convener, and we hold and accompany for the long term — this accompaniment might be 10, 20, 30, 40 years, not the typical fund's 7 or 10 years.

17. Why is "co-creation" more needed now? Because we've observed shifts currently occurring in globalization: with deep understanding of present geopolitical changes, many Chinese companies going abroad find that direct overseas operations aren't necessarily the safest or most welcomed approach (as various countries' localization demands continuously rise). They prefer partnering with excellent local companies, exporting technological, product, and business model capabilities through participation or licensing arrangements, gaining reasonable returns in ways more aligned with local government political demands. Meanwhile in China, multinational companies also need local enterprises to deeply integrate their technology, product, and business model capabilities — they are unprecedentedly willing to explore deep cooperation with Chinese companies in various aspects.

18. Globalization is essentially going out and bringing in, and all these provide growth momentum for excellent Chinese companies. Here Cathay can play the role of matchmaker. This is an era of coexisting with uncertainty, as A Tale of Two Cities says: "It was the worst of times, it was the best of times." For companies, the key is to follow the trend, find their own growth points, and identify suitable paths for growth.

Image source | Visual China

Layout | Guo Yunxiao