Cathay Innovation hopes to secure the bag in a new investment partnership with a crypto asset security firm.
The $1.5 billion venture capital firm is entering the crypto market with a new $110 million fund dedicated to the sector that it will operate alongside Ledger, a French startup focused on digital asset security, Cathay co-founder Dennis Barrier told Vidak For Congress.
The fund is similar to a corporate venture company in that it is partially managed by a company, but Ledger differs from the typical corporate VC in that it is a Series C stage startup, not a large conglomerate that wants to place bets on emerging companies . Ledger Cathay Capital, as the new fund will be called, will invest in seed to Series A companies across a wide range of segments in the crypto landscape, including emerging DeFi, security and infrastructure, according to Barrier.
Ledger’s claim to fame is the USB-like device that confirms crypto transactions, allowing users to maintain physical control over their private wallet keys rather than relying on their memory for access. The startup’s most recent fundraiser raised $427 million for the company, CEO Pascal Gauthier told Vidak For Congress — a slight increase from the $380 million in pledges Vidak For Congress reported at the time due to new pledges coming in afterward. Cathay Innovation was the top investor in that round, valuing Ledger at $1.5 billion, Gauthier said.
Cathay, who has supported Ledger for the past five years, asked Ledger to work with them to raise new capital for a crypto fund rather than going it alone, as the venture firm wanted to “get the best of both worlds”. Barrier explained. He wanted the fund to move quickly like a traditional VC while providing long-term support and expertise to portfolio companies similar to a corporate venture arm, Barrier explained. It took about a year for the fund to come together as an official vehicle after the two companies began discussing this strategy, he added.
While it is somewhat unconventional for a startup to launch a venture branch, it is much more common in crypto – Uniswap, FTX and Binance are three prominent examples. Ledger himself, which Gauthier said has been profitable for years, has recently invested in other startups. One of them was RTFKT, the NFT company Nike acquired last December, Gauthier said, though he didn’t share the names of Ledger’s other bets in the space.
“We invested from the balance sheet because the pressure from our partners was too high, so we had to start somewhere. Now we’re putting some structure around what we were doing, very naturally and very quickly… but we’ve been on the market for a while,” Gauthier said.
Cathay, a global company best known for betting on tech startups, including Pinduoduo and Chime, through generalist funds, has historically partnered with companies in this way to dive deep into an industry. It operates a smart energy fund in partnership with Total Energy and Hubei, as well as a mobility fund alongside Valeo, both of which operate with models similar to Ledger Cathay Capital, according to the Barrier.
Although Ledger itself is best known for its hardware, the fund has a broad mandate, according to Gauthier.
“Anyone who can build on the [Ledger] platform – which is basically everyone on the market – has a chance to get in touch with us [through the fund]’ said Gauthier.
The fund has not yet committed any capital, he added, noting that it closed very recently. Bpifrance, the country’s public investment bank, is one of the investors of the new fund, according to the official announcement from Ledger Cathay Capital.
With the recent downturn in the crypto market, I asked Gauthier if he was concerned about the timing of the launch of this fund and if it is too late to take advantage of opportunities in crypto. He responded by noting that Ledger was founded in 2014 and has endured setbacks before, adding that he is still optimistic about the potential of the market, in part because of the developer activity he has seen on the Ledger platform.
Gauthier believes this will be a key differentiator for Ledger Cathay Capital, as Ledger has a global view of new dApps and blockchains coming to market from its own users – the company claims it secures 20% of the world’s cryptocurrencies. That’s part of why Gauthier said he’s not worried about crypto prices right now, beyond the benefits he says come from being a global investor headquartered outside the United States.
“When the markets get tough, we’re at our best,” Gauthier said.