Fintech investor Simon Wu discusses the rising popularity of the secondary exit strategy, and staying disciplined amid the AI frenzy
Simon Wu is a Partner at Cathay Innovation, a ten-year-old venture offshoot of Paris-based Cathay Capital. With $2.5 billion in assets under management (AUM) across three funds, Cathay Innovation focuses on fintech, digital healthcare, consumer, and vertical SaaS. Wu was Cathay’s first San Francisco hire and has helped build out the organization’s US investment presence. Wu was the Series B lead for brands like Chime, Sidecar Health, and Ghost.
Facing an uptick in private- and public-market fintech activity—and with Chime waiting in the IPO wings, Fintech Nexus hopped on a call with Wu to glean his perspective on market volatility and prospects, investor diligence, and capital’s coalescing around an AI-deterministic thesis.
The following has been edited for length and clarity.
You’re three funds in. How much has your thesis changed over that time?
I think the track record and being part of these category game-changing companies early on obviously helps, not just from a branding and marketing perspective but also as a lesson-share for our founders today. We most recently invested in Range, which is an AI wealth tech company, the next Fidelity LPL. There were many lessons we have from Chime, which were: own as much tech as you can, build an amazing brand, distribute well–that playbook.
Then, are there companies in our portfolio and Fund I potentially disrupted by AI today? And how that may play out? I think that these founders are super resilient. I would say the learnings from each geography are shared amongst each other.
To what extent are you looking at current market volatility as a variable that will affect the timing and the outcomes of some of these IPOs?
If we’re talking about near-term specific IPOs,that’s one answer. There’s the Hey, how does that affect my day to day job? question of, Should we be paying 100x for all these companies? That’s another answer. We are not growth investors, but I think for our founders who are asking, Should we go raise the public round? There is also the ability to raise these massive rounds in the private market; secondary markets provide liquidity and have gone through many evolutions since we started.
The public markets right now are freaking down and freaking bearish, to say it frankly. And then the VC world has seen the craziest amount of deployment in the last six months, right? And that has continued into Q1; the pace I am at this quarter is even faster. We are more expensive in the price we’re paying for each of the risks we’re taking on. And there are just more founders going out right now.
A lot of people sat on their funds, and they realized, Shoot, I told them a four-year investment period. I sat through ‘21 and ‘22 … I gotta catch up and just deploy, deploy, deploy. And so I’ve got to go raise my next one because that’s how our business works. The other part is I think the non-AI companies right now are getting close to AI-like multiples because of the excitement and exuberance. So I think you will see a lot of things being announced, but I wouldn’t be surprised if we had a lull because the public and private [markets] have to merge at some point.
So either President Trump is going to say, See, I did it again, even though I caused the mess in the first place, or we’re going to go look at the private markets like, Whoa, there’s no growth investor interested in the next markup, so shoot, what do we do? Right back to 2021. It’s like we never learned anything. This quarter, we’ve been very disciplined. I would say we are seeing the ridiculousness of it andwe told our founders, It’s great to be in a company right now, because they’re all getting preempted like crazy, so we’ll all take the markups, but like, they understand this music may end again, which is what we saw two years ago.
Secondaries are beginning to dominate the exits for VCs. How might this impact venture investment over time?
Secondaries are no longer a stopgap: They’re becoming a structural pillar of venture liquidity. We learned in 2021 that selling into a hot market requires both discipline and access, and secondaries offer that opportunity. They’re set to play an increasingly central role in how venture capital operates — reshaping how funds return capital, how startups manage their cap tables, and how long-term value is unlocked. But secondaries aren’t for everyone. In sectors like cybersecurity, where exits are typically barbell between $200 million to $500 million or Wiz-like range, the secondary market can be shallow unless you’re holding a name-brand company like SpaceX or Stripe that has a lot of liquidity. Not every fund can take advantage, as it’s opportunity-dependent, but those that can, should.
Rather than devoting your attention to just what’s in the spotlight, it sounds as though you’re still pursuing quite a bit of bread-and-butter investments like Range. I’m wondering how much of your time you’re devoting to that more tried-and-true path and whether you see the valuations there also staying relatively more disciplined.
Discipline is, I would say, thrown out the window right now. There’s no discipline, period. I think the argument for why there’s less discipline on verticals is that horizontal is very ephemeral now. There are so many incremental use cases everyone can go after, and so the staying power is debatable. People are rationalizing verticals because if it is very sticky, if an SMB chooses you in logistics, then you can build around that data and that workflow, such that now, if they do choose and finally buy you… you have caught onto a mousetrap. Therefore I’m willing to pay up now today because I believe this is the right team to execute that. That’s the kind of inside baseball logic of how you walk yourself up for paying twice as much as you thought you would.
Tying things back to fintech, we think we’re an AI-native era in fintech, which means that everything is rethought by first principles. We have this new technology now. How do you make sure you thought about it on day one? I think about the bread-and-butter along with the hype, because, ultimately, you’re not saying I need a net-new use case; it is solely a labor problem that we’re solving or the demand problem we’re solving. And so vertical SaaS meeting fintech plus AI is better now because of rebundling, and so you can actually get more LTV. Stablecoins can also become rails now because there’s more comfort in it; what cool apps can you build on top with AI now that you can kind of do all that? That’s the higher-level theme, if you will, and then we can work our way down to point solutions flowing into it.
How much have you seen this sort of hypothesis actually pan out already?
I think there are chips being placed. If you think about the number of stablecoin companies, or even search the term right now since the Bridge acquisition, for example, it’s been through the roof. Do we need seven Wise competitors or Western Union competitors, picking different corridors, just like they did in 2016? No, but we’ll see what this time brings out.
There are a bunch of vertical SaaS companies right now that have a voice agent on top that can answer a book call or maybe do a transaction for you, things like that. So do you replace the front-office receptionist of your favorite med spa or your favorite construction, GC, or things like that, up for debate, right? But I think there’s money being put in there with everyone hoping that’s the case. There are going to be a lot of rounds being announced later this year. You can hear some skepticism in my voice whether you can really get there, but at least the picture has been painted.
