Investing in the future

Announcing Cherry IV

Any venture capital firm that wants to stay in business needs to raise new funds from time-to-time (except when you’re going permanent). So why this post — aren’t we launching just another fund?

Yes and no. With Cherry IV, our new fund, we are continuing our strategy to partner with the most daring and ambitious founders in Europe at the pre-seed and seed stage. But we are doing so in an ecosystem that has changed dramatically since we planted our first cherry trees and we have some exciting updates to share:

One of the things that won’t change is our curiosity and appetite for risk. One of the most beautiful things about seed investing is that it gives us a unique opportunity to make bold bets — to swing big, even if the chances of failure are far greater than the chances for success. We’ve done this many times before and witnessing the exciting creation of category-defining businesses continues to be one of the biggest privileges of our jobs.

Over the past few years, we’ve partnered with a group of truly inspiring founders who are setting out to change the world. We will continue to push the boundaries and explore new spaces while remaining committed to our core Cherry themes within software, foodtech, fintech, commerce, climatetech and health. In addition, we’re launching a dedicated strategy for crypto/web3 and will share more about our approach there soon.

We’re excited to announce our newest seed fund — Cherry IV — and work alongside a new generation of European tech founders.

We have raised an additional €300 million — Cherry’s largest fund to date. That’s a lot of capital for a European seed fund. Yet, we believe that Europe is entering a new era. Seed rounds have roughly doubled over the last three years in size and founders are able to attract follow-on capital faster than ever before. We’ve seen this in our own portfolio many times and within the past year. Flink, SellerX, Moss and Juni are all companies that have been created less than two years ago.

Our new fund will become the preferred partner for founders at the seed stage no matter how ambitious the project. We’re allocating around 60% of our capital for follow-on investments — hence being able to support our founders journey across several stages.

Our fund has been oversubscribed multiple times and one of the most common questions we received during the last few weeks is whether we want to raise a growth fund to allocate our investor demand. Our answer was “NO.”

No, because we want to stay focused:

Everything we do at Cherry is centred around helping our founders more successfully navigate the seed stage, get to product-market fit, and raise a strong Series A. Having been part of building companies like Zalando and Spotify into global market leaders, we as a team understand first-hand the challenges founders face as they go from brainstorm sessions to scaling.

According to Dealroom data, the average graduation rate from seed to Series A is just above 20%. Taking the same definition, our Cherry average is roughly 80% — 4x that.

We’ve rallied a small SWAT team across core functions such as recruiting, fundraising, and communications to leverage our expertise and learnings across the portfolio. We believe in creating connections and actively reaching out for support.

Next to some world-class institutional fund investors, we’ve continued to raise money from well-established tech entrepreneurs who will also share their company building expertise with our portfolio. It makes us most proud if they are our portfolio founders, individuals we’ve backed before, such as the founders of Flixbus, flaschenpost, Forto, Amboss, Flink, Amorelie, SellerX and others. In addition, we’re counting on the support of founders and executives of Dropbox, N26, Sennder, Skype, Spotify, Supercell, Zalando — and many more.

All of this results in a laser-focused organization that is set up to maximize our founders’ chances of success. While our founders are center stage, we truly believe we can make a difference in their journey to build tomorrow’s winners.

So we want to continue doing what we are best at. Looking back at last year alone, our founders raised over €5 billion in total funding. They created well over 20,000 jobs. We welcomed 14+ new companies into our portfolio and our Cherry portfolio witnessed 5 key exits — including 3 IPOs — and 5 portfolio companies were crowned unicorns, 2 of which are among Europe’s fastest growing ones.

So, who needs a growth fund after all?

The Cherry team during one of our rare in-person meetings in 2021.

Our firm started out in Berlin but had a European focus from day one. By now, Cherry has local presence in London, Stockholm and — of course — Berlin. Our team of 24 comes from ten different nationalities and backgrounds such as engineering, natural sciences, media, and business.

In addition, we’re proud to have built a 46% female team and are working to implement a comprehensive framework to achieve higher diversity standards within our portfolio. We are making this our priority and will have more on this to share.

While we won’t be expanding our team massively, we are always looking for unique profiles with strong motivation to make a dent in the European tech community — if this speaks to you, do reach out.

With this, let’s get back to work. It has never been a more exciting time to be an investor in European tech and we can’t wait to announce our first fourth-generation Cherries.

A huge “thank you” to our LPs for trusting us again to scout and back the next generation of European technology leaders. To our co-investors, business angels, and other funds alike, thank you for being our partners and jointly working towards making Europe a prime place to build companies.

However, the biggest shout-out goes out to our founders: You’re the only reason we get to call this our jobs and we are privileged to be investing in your dreams — let’s continue writing the story of European tech together and we are incredibly excited to enter this next chapter for Cherry!

Team 🍒