Cathay Innovation, a Paris-headquartered multistage venture capital firm, has announced the completion of its third VC fund at US$1 billion, marking the largest AI-focused fund out of the European Union.

The firm invests in AI solutions across various sectors, including healthcare, financial services, consumer goods, and energy.

Fund III has made 14 investments, with 50% of its portfolio in European startups. The fund’s notable backers include French companies Sanofi and TotalEnergies, along with international entities Vale Ventures.

To date, Cathay Innovation has deployed 235 million euros (around US$266 million) from Fund III.

🔗 Source: Cathay Innovation

🧠 Food for thought

1️⃣ Europe’s dramatic VC transformation: from regional players to global AI power brokers

Cathay Innovation’s journey from a $150 million inaugural fund in 2017 to a $1 billion AI-focused fund in 2025 demonstrates the remarkable scaling of European venture capital over just eight years 1.

This growth parallels the broader European AI investment surge, which saw a 55% year-on-year increase in Q1 2025 alone, reaching approximately $3.4 billion despite broader tech market volatility 2.

France’s emergence as a leading AI hub is no coincidence. The country led AI funding in Europe in 2024, establishing itself as part of the top European AI ecosystems alongside the UK and Germany 3.

This evolution reflects Europe’s strategic pivot toward becoming a global AI investment powerhouse, with firms like Cathay deliberately building platforms that connect startups across multiple continents rather than focusing solely on local markets.

The $1 billion fund size is particularly significant when considering that European VC funds have historically been smaller than their US counterparts, indicating a closing of this capital deployment gap.

2️⃣ Vertical AI’s rise: the strategic bet paying off for European investors

Cathay Innovation’s focus on vertical AI solutions in specific sectors (healthcare, fintech, consumer, mobility/energy) aligns with the most successful European AI investment strategy emerging in 2025.

European investors have identified particular strength in specialized AI applications, with health tech, cybersecurity, and media creation emerging as standout sectors according to investment data 3.

This sector-specific approach is exemplified by companies in Cathay’s portfolio like Bioptimus, which raised €67 million for its biology-focused foundation model—a vertical AI application that leverages Europe’s strong life sciences expertise 4.