We’ve collected a number of questions we frequently receive from founders.
Timing and stage
At what stage do you invest?
We are an early stage investor. That means we typically invest in seed stage startups. While our investment usually happens before the series A, we sometimes make exceptions if we think the startup is a really good fit and we can add value.
When is the right time to approach you about investing?
We love to meet founders when they are just starting and it’s never too early to reach out. We are usually the first institutional investor in a startup and we invest earlier than most other VC firms. We have invested in other startups pre-product and pre-revenue. So, even if you have just an idea and a good team together, we’d like to get to know you.
I already have some business angels invested in my company - does that mean Cherry won’t invest?
No, there is a number of angels and other funds that we actively invest with. Even if you have raised some seed money from business angels, we are happy to consider an investment.
How much money do you invest?
Our initial investment is usually between 300k and 3M Euro. Unlike smaller seed funds, we have a larger reserve for follow-on financing which means that we can invest more capital across later stages of the company.
Will you always invest in the following financing rounds of your seed investments?
Yes, we will.
We typically do not lead or price follow-on rounds, but work together with funds that are focussed on series A and later-stage investments. We also actively support founders in their fundraising and in scoping out financing options. There is a strong network of international funds we can resort to.
How much money should I raise?
There is of course no general answer to this question as it depends on various criteria such as the stage your company is in and how capital intense a specific business model may turn out. That said, we are fans of slightly larger seed rounds and we think that this is your interest. It is still early when we invest and there are usually still a lot of things to be figured out. Even if you think you have identified product-market-fit for your company at an early stage, scaling sales, ramping up online marketing, finding new channels to grow your userbase, etc. still require lots of testing. We advice our companies to have runway for at least 18 months, ideally longer. Otherwise you run into the problem that you are constantly out fundraising instead of working on your business. And there is just too little room to make any mistakes that risk your entire startup. Lastly, it is always easier to raise follow-on financing when you don’t need it and raising a slightly larger seed round may help you with that.
How many investments do you make?
We make around 12-15 seed investments per year and a number of follow-on investments in companies we have backed before.
Do you have an industry or sector focus?
No. We invest in a broad range of industries and sectors. We are very curious and we love to learn about new problems and challenges in an industry from our founders. It is always great if you have a clearly defined problem that you aim to solve.
Most of the companies we back solve specific problems for consumers or small businesses with technology addressing a large enough market to build a big company.
Do you invest in B2B companies?
Yes, we invest in B2B companies as long as there is a scalable way to acquire customers or clients. We love companies that build (small) business enabling technology.
What are your investment criteria?
If you look at our top three criteria, they would be: team, team and team. The founding team is by far the most important factor in our decision making process. Since we back startups early, we have to develop a strong belief that you and your team can solve the extremely hard problems that you will face inevitably when building your company. We are looking for founders who are ambitious, resourceful and resilient.
Of course, we also look at the market and the problem you are solving. The market is important because we want to make sure that if you succeed, you end up building a very large company. We examine the respective model or approach itself and usually develop our own thesis on the business model or industry.
Do you invest outside of Germany?
Yes, we want to back the best founders in Europe and have already invested in teams in many other countries outside of Germany. Although our team is based in Berlin, we are a very international team and like to work with a diverse set of founders and to back international companies.
What is your investment process and how long does it take?
The answer is: it depends, but we are pretty quick in coming to a decision. Most important for us is that we don’t want to hold you up in building your company. We know how distracting the fundraising process can be and we have been through it ourselves.
While there is no linear process, we usually start with an initial meeting or call. We pass on most companies after this initial meeting. After this, there is usually a second and third meeting/call with a different set of people from our investment team. Since we are a small team, it is not uncommon that you will have met or spoken with the entire investment team once we make the invest decision. This way, you will get to know everyone who you will end up working with. The only requirement we have is that all 3 partners have to meet the founder team along the process to come to a final decision.
The timeline of making an investment decision varies widely, but we usually adjust to the preferences of the founder. We have made investments in under a week (which requires conviction in the team and approach). Since we like to meet founders when they are just getting started, it can also take weeks or months until we make the final decision. Not everyone is looking for money right away, but we still like getting in touch early. This gives both sides some time to get to know each other and build a relationship.
How are you different from other VCs?
All of our investment team members know exactly how it is to raise a financing round as founders – because they have done it themselves. We want to be the most entrepreneurial-focussed venture firm in Europe and working with a team of experienced startup veterans helps us to deliver on that promise. In our Limited Partner-base we have a group of over 50 individuals who have successfully run companies across all stages or are experienced investors. We match you and provide you with access to these experts in all industries and across all major parts of the value chain. So whether it’s meeting with a customer service expert, legal advice regarding your operations setup, or preparing your growth round in the US, there are only few connections we cannot make.
In one sentence, we try to make a difference in how we support you.
How do you support companies?
We are not a company builder which means we do not employ large staff to take operative roles in your company. We believe you as the founder should be running the show. However, we have a strong network of partners that can help you when you need extra help. We have a genuine interest in helping you. We want to be as resourceful as possible as we try to make ourselves available to our founders whenever we can.
Since building a team is probably the most important success factor for a startup, especially in the early stages, we have an HR expert on the team who brings a lot of experience with direct search, tech and executive hiring. By joining our portfolio, you will not only benefit from our experience as entrepreneurs, but you can also tap into a much broader network (see how are we different).
We have also teamed up with several corporates which will get you preferential treatment such as key account management or price advantages, including Amazon Web Services, Google, Facebook, Adyen and many more.
Will you sign my confidentiality agreement / NDA?
No. We see so many deals in so many industries, that even if we wanted to sign your NDA, it would be impossible to administrate and keep track. Nevertheless, we treat all info you share with us absolutely confidentially.