Cathay Innovation's $1B Bet On Rewiring Venture Capital For The AI Age

For Denis Barrier, the release of ChatGPT in November 2022 was the moment that changed everything for venture capital.

"We were very surprised by the violence of the event," said the Co-Founder of Cathay Innovation, describing the seismic impact of OpenAI's breakthrough. That "violence"—the sudden, transformative arrival of mainstream AI—didn't just disrupt industries. It rewrote the playbook for how venture capital itself operates.

The proof is in the numbers.

This May, Cathay Innovation closed its Fund III at $1 billion, making it the largest AI-dedicated venture capital fund to emerge from the European Union.

This isn't just another mega-fund chasing the AI gold rush. It represents something more fundamental: a reimagining of how startups and established corporations can work together in an age where, as Barrier put it, "it's AI time, it's the new technology shift, and it's happening now."

From Fundraising to Transformation Engine

The journey to this billion-dollar milestone wasn't planned as a moonshot.

"It's a continuum," Barrier said. "It was more to recognize the moment."

Cathay Innovation was created with Mingpo Cai, founder and chairman of Cathay Capital and Cathay Innovation. The firm had already established itself with earlier funds: $300 million for Fund I, $650 million for Fund II. Cathay built expertise across four key verticals: FinTech, digital healthcare, consumer, and energy mobility.

I last interviewed Barrier about this strategy in 2021:

The OpenAI moment changed the calculation entirely.

"We built a large platform to work with corporates, to make startups work for corporates," Barrier said. "Then, when we were thinking about fund number three, we said, 'Let's go further.' Because if you just pile up fund after fund, you just do the same thing. But you must move. How to go further? We have four domains of investment where we feel comfortable. We have this ecosystem of corporates. So we kept the same verticals, but we will focus on vertical AI and how it changes the industries."

This philosophical shift attracted corporate heavyweights including French giants Sanofi, TotalEnergies, Valeo, and BNP Paribas, alongside international players from Latin America's Vale Ventures to Chile's Copec WIND Ventures.

The response exceeded expectations.

The fund has already deployed $235 million across 14 investments, with half based in Europe, a deliberate strategy to strengthen the continent's position in the global AI race.

Collaboration Currency

What sets Cathay Innovation apart isn't just the size of its war chest, but its approach to deployment.

Barrier believes that in the AI era, traditional venture capital models are obsolete. "Collaboration is really a currency, more than ever," he argued. "So I would say in the AI time, if collaboration is a super currency, this is what we want to have."

This collaboration currency plays out through Cathay's platform approach, connecting startups directly with corporate partners for strategic partnerships, co-investments, and business development opportunities. It's already bearing fruit with portfolio companies like Owkin, AQEMIA, and Inato in digital health, where major industrial partnerships showcase what Barrier calls "real business development with people who have skin in the game."

The fund's portfolio spans from Nabla's AI co-pilot for physicians to Bioptimus's universal foundation model for biology, from Range's AI-driven wealth management to David Energy's next-generation retail energy platform. Each investment reflects the fund's thesis that AI isn't just about better algorithms. It's about fundamentally reshaping entire industries.

Cathay Innovation has also restructured the traditional venture capital model by transforming from a fund manager into what Barrier calls a "purpose-driven" platform operator.

Unlike classic VC funds that primarily provide capital and advisory services, Cathay performs "two jobs for one same fees"—it invests in startups while simultaneously building what Barrier claims is "the largest venture capital platform in the world today."

This platform actively connects portfolio companies with their corporate investor ecosystem across Europe, the US, and China through dedicated business development and corporate development teams.

The key distinction is that this isn't just networking or "Rolodex" connections, but also business development with corporate partners who have invested in the fund and are actively seeking technological solutions. In the AI era, Barrier said only five or six companies will build the big LLMs, and everyone else must collaborate to access data, understand processes, and integrate these "tech bricks" that corporates need to embed in their operations.

The High-Stakes Game

Barrier doesn't sugarcoat the risks involved. "There will never be so much money made by some, and there will never be so much money lost by some in the current cycle," he warned.

This isn't hyperbole. It's the reality of a technological shift that demands participation from everyone, not just tech companies.

"Everybody has to play because before, you bought software to enhance productivity," Barrier said. "Now you change the nature of the way your business is done. So if you don't play, you will be irrelevant."

This existential pressure extends beyond individual companies to entire ecosystems. Europe, in particular, faces the challenge of competing with Silicon Valley's established infrastructure while building its own innovation capabilities. Cathay Innovation's model offers a European alternative that prioritizes strategic partnerships over pure financial firepower.

Navigating the Pinball Machine

The pace of AI development can feel overwhelming, even to seasoned investors. His solution is to focus on outcomes, not technology. Rather than chasing the latest algorithmic breakthrough, Cathay Innovation identifies specific industry problems that need solving, then deploys whatever technological tools are necessary.

"You should come back to the 'why?'" he said. "What do you want to change? What is the outcome? You don't think about algorithms. You think, 'What do you need to make this change?'" This compass-oriented approach helps navigate what he calls the "pinball machine" of constant AI announcements and developments.

The European AI Challenge

France's emergence as a serious AI player adds another dimension to Cathay Innovation's strategy. In general, European AI development urgently needs more capital.

This creates opportunities for well-positioned funds like Cathay Innovation to find promising startups at more reasonable valuations.

"You have the impression that there are huge rounds," he said. "But for very few players."

As Cathay Innovation deploys its billion-dollar fund, the broader question remains: can Europe build a sustainable alternative to Silicon Valley's approach?

Barrier seems confident, but acknowledged the work ahead will require a relentless pace to capitalize on this AI moment. He added, with a laugh: "No vacation this summer."