Europe is making a definitive statement in the global artificial intelligence arena with the launch of Cathay Innovation’s colossal €1 billion fund, exclusively dedicated to AI. Announced just yesterday, this marks one of the largest AI-focused venture capital funds ever raised in Europe, signaling a surging investor appetite for transformative technology and a clear ambition to challenge the AI dominance of the United States and China.
The fund, unveiled by Paris-based Cathay Innovation – the venture arm of Cathay Capital – positions the firm among an elite group of continental European VCs to surpass the billion-euro threshold. This substantial investment comes at a pivotal time, as overall tech investment has slowed elsewhere, highlighting Europe’s accelerating momentum in the AI field.
Crucially, Cathay’s new fund is not primarily focused on developing foundational AI models, a domain often dominated by tech giants. Instead, it strategically targets application-layer AI companies. This deliberate focus reflects a belief that AI’s most significant near-term impact will be realized through real-world applications that solve pressing industry problems. The fund aims to fuel innovation in diverse sectors, including digital health, fintech, consumer services, mobility, and energy, by backing startups that are leveraging AI to create tangible value.
This investment strategy aligns with Europe’s distinctive approach to AI, which emphasizes a human-centric and trustworthy regulatory framework, exemplified by the EU AI Act. While the U.S. and China often prioritize scale and foundational model development, Europe appears to be carving out a niche in applying AI responsibly and effectively across various industries.
Early portfolio highlights from Cathay Innovation underscore this focus. The fund is supporting companies like Bioptimus, a French biotech startup developing a foundation model for biology, often dubbed the “Biology GPT,” and Aqemia, a Paris-based company pioneering RNA-based drug discovery using AI. Other investments include Nelly, a Berlin-based firm automating administrative tasks in healthcare, and Nabla, a French healthtech startup with an AI-powered assistant for generating clinical notes. These examples showcase the fund’s commitment to driving innovation in critical sectors through AI applications.
The strategic backing from notable corporate Limited Partners (LPs), including pharmaceutical giant Sanofi, energy company TotalEnergies, automotive supplier Valeo, and French bank BNP Paribas Cardif, further broadens the fund’s industry reach and signifies a strong vote of confidence from established players in the potential of application-layer AI. This cross-sector collaboration is vital for the successful integration of AI into traditional industries, fostering both technological advancement and economic growth.
The surge in European AI investment, with European AI startups securing up to 55% year-on-year investment in Q1 2025 according to Dealroom data, indicates a robust and maturing ecosystem. This financial influx is expected to accelerate the development and deployment of AI solutions that are not only technologically advanced but also designed with European values of ethics and privacy at their core.
As the global AI race intensifies, Europe’s strategic investment in application-layer AI, backed by significant capital and a growing network of innovative startups, positions the continent as a formidable player. The success of this approach will be a testament to whether focusing on practical, impactful AI applications can create a sustainable competitive advantage in an increasingly AI-driven world.
