Three investment hypotheses that can significantly improve the financial situationPaul Roberts 22 / January / 22 Visitors: 219
Cherry Ventures, one of the best-known German venture capital funds, is launching a new early-stage fund. With 300 million euros, the fourth fund of ex-Zalando managers Filip Dames and Christian Meermann is one of the largest so-called seed phase funds in Europe. Seed means grain: So it's about the first round of financing for a founding team.
The trend towards larger and larger funds is continuing: Like its competitors, Cherry is reacting to the rapidly increasing valuations of start-ups, which are still in their infancy. "This puts us in an excellent position to lead seed financing rounds and to become the investment company that the most ambitious founders call first," says Filip Dames of the Handelsblatt. The third Cherry fund launched in 2019 still had a volume of 175 million euros.
Cherry has made a name for itself primarily with investments in online trading and Internet companies. Auto1 and Flixmobility were the first big successes. Most recently, logistics start-up Forto, vertical farming company Infarm, ten-minute delivery service Flink and e-commerce company SellerX all hit the prestigious $1 billion mark in quick succession. The latter two even achieved this so-called unicorn status in record time.
The fresh money is to be invested primarily in financial technology and crypto, food, trade, software and climate technology. The risk capital experts have already revealed three investment hypotheses:
"Fintechization": "We believe that every company will become a fintech," says Filip Dames. Companies with consumer relationships could offer payment methods, customer accounts and loyalty programs or even their own payment cards. "We are observing that, above all, there is still a lack of financial technology infrastructure solutions for small and medium-sized companies."
People want to own things in the digital world: "If you look at how much time people spend online today, it's clear that they also want to own things in the digital world," says Dames. That is why innovations in the field of non-fungible tokens (NFT), i.e. non-replaceable digitally protected objects, are interesting.
The time for climate technology has come: For a long time there were no potential follow-on investors for expensive climate technology projects, says Christian Meermann. That is now changing: "With Carbo Culture, we have invested in a start-up that is working on reducing carbon dioxide, and there is much more to come."
Unlike a few years ago, however, the business is no longer proverbial “cherry picking”, no more raisin picking. German venture capital firms are exposed to tough international competition when it comes to the top companies and have to offer start-up teams something.
Ertan Can invested in the second Cherry fund with his Multiple Capital fund of funds. In its portfolio of European early-stage funds, the Berliners rank fourth out of ten in terms of returns. "In terms of brand strength and awareness, Cherry is, in my opinion, the best German fund," says the investor.
If you don't care about diversity, you don't get any money
"We win our deals with the founding DNA," says Sophia Bendz, Cherry partner and one of the first employees at the Swedish music streaming service Spotify. Founders in the Cherry portfolio should benefit from the operational experience of their investors. This also includes making them aware of the topic of diversity at an early stage.
"Diversity makes companies more creative and innovative," says Bendz - this is not just the result of research, but also her experience at Spotify and Cherry, half of whose investment team is made up of women. "We saw that at Zalando: It was a bit absurd to only run a fashion company with white men," says Meermann.
In the case of a more mature company, Cherry said on the advisory board that if the next position on the executive floor was not filled by a woman, they would not agree to the hiring. Other investors found that too hard, but Meermann sees his company as having a responsibility to put pressure on: "Anyone who doesn't hire women in time will remain a 'boys club'."
The later male founders took care of it, the more difficult it becomes. "Our contract offers state that we expect a diversity policy," says Bendz. If it didn't exist yet, Cherry would help implement it.
Cherry will initially set aside 60 percent of the money in the new fund. This money is set aside for follow-up financing in the best companies in the portfolio.
Paul Roberts 51 years old Born in Edinburgh. Married. Studied at University of Oxford, Department of Public Policy and Social Work. Graduated in 1997. Works at Standard Life Aberdeen plc.