#29 Christian Meermann - Founding Partner at Cherry Ventures on Backing Europe’s Next Generation of Companies

Speaker A: I would say at the moment you get a very high premium for hyper growth. We're also seeing growth rates that are absolutely unheard of. It's all about who can grow very fast. It's a hyper competitive market. You know, we've been in phases where it's like we don't have much cash left. And kind of, you see, basically the end is near. We want to back the first European trillion dollar companies because we feel Europe is missing out a bit on that front. But we have amazing talent in Europe. Right. So there's absolutely no reason why this should not be possible.

Speaker B: Hello and welcome back to a new episode of Campus2Capital. Today, Julius and I are joined by a guest that I'm personally very excited about as today we're joined by the founding partner of Cherry Ventures, Christian Merman. So let's get started. And welcome. Christian.

Speaker A: Hi. Great to be here.

Speaker C: Yeah, thank you so much. Also from my side, um, let's dive into it. I mean, before you found Jerry, you had a lot of different experiences from growing up on your family farm and working there to working at BCG to then running marketing at Zalando. So you certainly carry a rich set of expertise. But when did you actually realize that you wanted to become a venture capitalist?

Speaker A: Yeah, so look, I would say I realized that rather late in my life. Uh, it's not that this was, uh, anywhere kind of in the room of options as a kid. Like, I probably didn't even know what an investor is. So it was more during my time at Zalando when, uh, at some point Zalando was like a proper scale up, so well known. And then more and more founders actually approached us and said, hey, you've been through this scaling journey. We want to start a new company. Can you help us? And that's kind of how we started Cherry as an angel fund, um, because we thought, hey, uh, it was kind of a group of three of us, we had complementary expertise. And then we said, hey, we can invest a little bit and then help them on the scaling journey. And that's how we started it more as a hobby initially still, uh, being at zalando and then 10 years ago, uh, turned this into a full time gig.

Speaker C: Cool.

Speaker B: I mean, honestly, it's kind of interesting because you recently spoke with the CMO of Scalable and he kind of had an inverse experience compared to yours where he was fundraising for his own startup before going into the marketing role. And now for you it's the other way around. And I mean, when you were the CMO at Zalando, you had a massive marketing budget, spending 250 million euros, um, per year on marketing. And you helped the company to scale from very small revenues to a, uh, 2 billion, uh, euro market valuation at IPO and also launched the brand across 15 different European markets. So, um, maybe looking at the experience on how it works from being a CMO and then going into venture, what did that period at Zalando teach you about brand distribution and speed that still shapes how you back founders today?

Speaker A: Yeah, but first of all, I think what I learned at Zalando is how important on the one hand, brand is as an asset kind of to you, uh, as a founder and as a company, and then also how important it is to manage growth in a scalable way. So when we now look at companies, it's obviously always about like, how do you grow? How do you get to hyperscaling mode? And if founders don't have a good answer to that, it's obviously a problem. And at Zalando, we were extremely analytical in marketing, which was a little bit, uh, kind of, I would say almost an innovation. So, uh, during my studies I did have marketing as a major, but it was very much marketing strategy. And, you know, people that everyone who had finance was always making fun of us that we were just kind of in la la land, uh, designing how a brand looks like and that this is not analytical and all of that, but kind of then when we started Zalando, which is now Also more than 15 years ago, the market had changed quite a bit so that you could do online marketing in a very analytical way. Right. So every year you spend, you can track it and the next day, you know, okay, was that year spent wisely or not? And kind of fast forward to today, I, uh, would say it's gotten even, even better. So there's kind of more channels out there that you can control. Obviously, if it's B2B, there's kind of product led growth as another lever. This can also be kind of managed and steered in a very good way. So I think having this kind of very analytical and structured mindset about growth, that really helps you set your company up for success and have this in an amazing scalable.

Speaker C: Way.

Speaker A: Because otherwise, if this is a bit more, hey, I have five sales guys and they will try to sell my product. It works, but it only gets you so far.

Speaker B: That's a good point because I think also, I mean, especially when you're a young startup, one of the first things you need is recognition and attention. And across the investing Space. This is a topic not only for companies, but also for investors. And LPs, like media attention is becoming more and more relevant. And I mean, you just also had your, um, annual conference in London this week. And, um, one of your most prominent claims is at Cherry, that founders first, investors second. And looking at your portfolio companies, obviously we don't want you to be playing favorites, but could you maybe introduce us to one or two of your portfolio companies and tell us why you decided to invest in them and why they will be successful?

Speaker A: Yeah, look, so when we kind of invest, it's usually very early on in the journey of a founder, and then what it comes down to is mostly the team. So do we believe this founder or this group of founders, uh, is exceptional? Right. So we see more than 10,000 companies a year and only end up investing in 12 to 15. So it's quite a sharp filter that you need to go through. And if we pick out one, for example, dash zero. So Muko, the founder, is a serial entrepreneur. He's now on his third company. So he's built two companies before. The previous one he sold for 500 million to IBM. You know, then he had made it basically right, so kind of made, uh, a lot of money, thought, okay, now I'll basically retire and, uh, and see kind of what life brings. But then at some point after two years, he was like, oh, like, I'm, I'm getting a bit bored. And at the same time, there was a new technological trend in his area of expertise, which is observability. So the way you monitor your code and make sure everything you have as a tech company is working properly in tech. Uh, and this trend was open telemetry. So much kind, better way to monitor everything. And he saw that coming and he was like, look, this is going to be huge and, uh, I want to do it again. Uh, and I think the good thing there, and that's something that I really loved, is his ambition level. So he had exited a company before he had made money. So it's now more about, hey, I want to win big time and I want to IPO this company and I want to go all the way and make this a huge success. And that is obviously kind of an extremely strong sign. And then kind of if you see him in action, how passionate he is about it. And he's an engineer by training, but he's also very good in sales, which is a very rare combination. And then just the more time I spend with him, kind of the more, uh, conviction I got, right? And that was pretty clear. Hey, we want to back this guy. Wasn't so easy because we were obviously not the only ones who wanted to invest. So I had to kind of fight, fight our way in. Uh, but are now kind of super happy shareholders and kind of after our first round he has raised another two. So uh, yeah, I've got very excited about the journey. It just became a billion dollar company and there's obviously still much more uh, ahead of them.

Speaker C: And then when you invest in such a company, I mean next to your claim, founders first, investors second, your core identity is by operators for operators. So I mean we talked to several uh, VCs in the past and it is always very interesting and fascinating when they talk about their own competitive mode. And I mean you just said it, it's like difficult to uh, write a check, um, and actually get the investment done. So in a competitive seed landscape, every fund claims they had value beyond capital provision. Um, so let's zoom in on that. When a portfolio company, ah, such as Dash Zero is hitting a wall within its internal procedures or operational third party dependencies, what can you, what can Cherry actually do there that a non operator fund cannot?

Speaker A: Yeah, look, I think we at Cherry, uh, have this super strong entrepreneurial DNA in the team and we're extremely rigorous about it. So everyone in the partnership and in the investment team has been on the other side before, so has been in a startup. Like one of my partners was uh, part of the very early Spotify team. The other one uh, was building out Uber in Europe. So we all have that same DNA and we believe that is significantly different from someone that has just been uh, on the investor side. And that doesn't mean that kind of entrepreneurial investors are the better investors or whatever. I think uh, there are enough examples for both. But we believe, look, we've been through the whole roller coaster of building a company, right? So there are always days when you think, hey, amazing, I've made it. And then 12 hours later you're like, oh shit, uh, we have a massive issue and we've been in phases where it's like we don't have much cash left. Uh, and you see basically the end is near and then you need to fight around it. And I think having been on that side, having been on this journey makes a huge difference. So if a portfolio company gets to a similar point, which obviously kind of happens, I think first of all we understand the situation better. So just applying more pressure on the founder just doesn't help. Right. So uh, I think you can always Be assured that the pressure is massively high on a founder if they're running out of cash. So just kind of asking 100 times, hey, have you received a term sheet? And why not? And you need to move fast. That's not going to change anything. So I think with that kind of mindset, we can rather sit down with them and say, look, what can we do? Let's just open all options, let's put them on the table. Okay, do you need to change something in your go to market? Do you actually have full product market fit? Or have we all just been believing we have it, but like, if we look at it, there's no real pull. You need to kind of push people into your product, uh, and then they churn still after a year. So then you probably don't really have product market fit.

Speaker C: Right?

Speaker A: So figuring that out together with the founders and having very honest conversations, I think makes a big difference. And then I think the other element of our entrepreneurial DNA is we have a fairly big team, uh, what we call strategic resources, that helps our portfolio companies to be successful. So that means we have a whole talent team that helps them recruit, especially in the early days. Look, if you're a seed stage or even pre seed company, you don't even have someone that manages HR and recruiting for you, right? So it's either you as a founder do that on a Friday afternoon when you're already completely exhausted from the week, uh, or like it's an intern doing it. I mean, yeah, you can do that, but probably helps, uh, if we have here three people on the payroll that do that for you for free, right? And send you super qualified leads, then we have the same for communications. So we help you position your company in the media. Like, what's the best story? Like what are specific elements to then kind of be out there and communicate them. The same for finance, if you need to raise debt or the next equity round, like, we make sure the pitch deck is amazing, the data room is in perfect conditions. So all of that is what we bring to the table because we have seen ourselves as entrepreneurs, that this is super important and ultimately makes a big difference, certainly.

Speaker B: I mean, I see how relatability is key here. And from the perspectives of a founder, I think that's something that you really need at the start to not feel entirely alone. But I mean, maybe let's also look at, uh, your strategy of capital provision, because obviously at the start there's no way around it. You need wood to fuel the furnace and you typically write ticket sizes between 2 to 7 million and then push for larger seed rounds to guarantee some leeway and Runway for founders to actually have time to hit the ground running. But I mean a lot of other venture capital funds, they preach lean pre seed rounds to avoid dilution. And maybe as a contrarian take, why do you strongly believe that a larger capital cushion at the start is actually better for uh, founders long term equity and focus so they don't feel maybe over rewarded at the start?

Speaker A: Yeah. So I would say if you look at the current market, we are in a market where it's all about growth again. Right. So it's all about who can grow very fast. It's a hyper competitive market. So like if you build something, you can be, if it's a good model, you can be pretty sure someone else somewhere in the world is building the same. Right. And if, then let's say someone builds that in the US and raises 5, 10 million on day one because someone as a VC believes in that, gives you that money, that team can scale much faster than if you raise a 1 million pre seed round. It's going to be tough to catch up. And then obviously kind of that compounds. So if your US competitor then quickly raises the next round of let's say 10 million and then you think, okay, after the 1 million I've raised, I'm now going to raise 4, you're already far behind. And in such a game where it's all about fast growth, who is the first? Who's the number one in the market? I just don't think it helps if you raise just very little money and maybe you save 2 percentage points on dilution, it's just not worth it. Right. And also I would say if we kind of invest and let's say we do bigger seed rounds, that doesn't mean it comes at a horrible dilution. Right. It comes at the end usual, uh, dilution.

Speaker C: Right.

Speaker A: That's, that's basically given by the market. So in the end I don't think you dilute, uh, actually more. Um, so yeah, I would always optimize like what's your goal? Which is, okay, I want to build kind of the market leader globally and then it's all about, okay, how can I do this the best way possible and how can I make sure I have sufficient funds to also not to worry about fundraising all the time. Right. So if you only raise a little bit from angels in the beginning and then nine months later you have to raise again. Fundraising always takes time.

Speaker C: Right.

Speaker A: You need to prepare a pitch deck. You need to talk to a bunch of investors. So rather take a bit more money in the beginning and then have 18, 24 month of Runway and you can really focus on the business. That's definitely worth it.

Speaker B: So it's a good point. It's actually funny because I think it sits right in line with the discussion that Julius and I had this morning because just yesterday we published an episode with the chief of staff of Peak AI and I mean they got to 10 million ARR in 16 months, which is super impressive. But we did some mental math and thought actually with them approaching 100 employees and expanding to the US like they're probably very much relying on external funds right now to fund their operations. But then that will certainly help them grow as well. And when looking into early stage investor, early, uh, stage investing, I actually really recently just helped friends of mine to prep for their Y Combinator interview and they actually got in and they'll be part of the next batch. So congratulations. And it's the classic American story of, uh, young founders. They have strong academic backgrounds with Ivy Leagues and then professional brand names ranging from Goldman, Jane street and Google. And then in the US that's often already sufficient to open the gates to institutional support. And I mean you at Cherry, you look at roughly 10,000 startups a year and then decide to back 12 to 15. So, and you've also stated that the top three criteria here are team, team and team, um, and that you're specifically looking for resilience here. So when you're sitting in a 30 minute Zoom pitch with a founding team that has no revenue and is just like in the middle of product development, what are some micro signals, behavioral cues maybe that make you guys say, okay, this is the person that has grit to return to the fund and be a meaningful portfolio company.

Speaker A: Yeah, look, I think when we talk to founders for the first time, I mean you look at many different or you try to discover many different signals. So one is, uh, what was the passion and motivation and drive of that person? So are they really in this for the long run? Do they have the hustle, the grit, the resilience to do this also when it gets tougher? Right. Because it's never a straight line, uh, to success. Right. I mean that's always, if you look at companies, you always think, oh wow, let's say anthropic, uh, that was always easy, always a mega company. No it wasn't. Right. So it also took them a while until it took off. Right. And for many years a month it looked like OpenAI is the clear kind of leader in the game until they were able to turn that around. So I think we want to see that people can go through thick and thin and are extremely driven and motivated, even to a level where it's a little bit, okay, are they dying to win? Right. And are they absolutely driven and passionate by whatever kind of their goal is? Right. So if it's. Sometimes if it's in healthcare, they're more like, okay, hey, I want to make sure people live longer or have a better life. If you build something in fintech, okay, people are probably not going to live longer because you've built an amazing fintech product, but companies run better or more efficiently and you're creating value there. And if you're passionate about that, then that's exactly what we need. Right. And so I think it's about that. Um, it's then also a bit about, um, especially if it's younger founders, like, what is your background in that sector? For B2B, it's a little bit more important than for consumer. For consumer, we also see founders, I have no clue in that market, go in with a fresh mindset, which is sometimes better, because then you're not thinking too much in restrictions of the market and that can work well. And B2B, ideally, you are somehow familiar with that market. Uh, and that doesn't mean you need 10 years of experience in that market. But there can be, hey, I've done an internship, uh, in this and that company. I figured out this is a huge problem. So that's why I'm tackling this. And I've interviewed 40 people in that industry, and this is what clearly came out of that. So we want to see that you've really assessed the market and are sure, you know that this is a real problem, you know how to navigate it and can show that you're bringing clear value with their product. So those are things that we look out for. Then if it's a team of founders, we also look, how are founder dynamics? Right? So how do they, uh, kind of interact? We've seen founders, they talk above each other and you're like, okay, hey, guys, uh, we want to see kind of, this is very much a team in sync, ideally a team that knows each other for quite some time. Right. So, uh, that not once the first surprise or challenge comes up, you see, oh, they actually disagree on this. Because if you know each other for long, you know how the other one's going to react to and how to maneuver a difficult situation. So those are all things we look out for and then obviously in the background we do the analytical work on is the market big enough, uh, how does competition look like and do we believe this team stacks up towards competitors and has a chance to win on that model?

Speaker C: I think this is super interesting since you just described that it's not only data driven but you actually look at like the inter human relationships which are mostly underrated as well. Yeah. Ah. Um, but now if we, if we look at Cherry and look where you are dispersed across Europe, I mean apart from your office in Berlin and Stockholm. London has become a super vital hotspot for Cherry. I mean you hosted your summit there two days ago, I believe.

Speaker A: Correct.

Speaker C: Shout outs to the ETN boys, by the way.

Speaker A: Yeah, they were there on the ground. That was, that was fun.

Speaker C: Yeah. One of the role models for us after tvpn. Um, and now you are also deploying a lot of your funds into the UK ecosystem. So while Stockholm is also certainly cooking and grinding right now, is there another city in Europe that you're currently monitoring with great interest? Maybe something underrated like Athens and if so, why?

Speaker A: Yeah, look, the beauty of Europe is that it's big and kind of there are many hubs and cities where great companies can be built. Right. And we always say great companies can be built anywhere. So we're not super dogmatic on you can only build uh, a trillion dollar company if you're based in London or in Munich or in Stockholm. So I think uh, this company can come from anywhere and there are enough kind of examples in the past where this has happened. Right. If you look at UiPath which kind of is a company that was started in Romania which also hasn't been that much on the map beforehand. So from that perspective we're always open and we're pan European funds, so we invest kind of wherever in Europe or if it's European founders that have just kind of moved to the U.S. there's obviously also something that we're seeing more and more and I would say like which other cities are relevant. I think Munich has done a great job, especially in the deep tech area. And also I would say in AI. Paris I think has been a little bit, uh, kind of stronger three, four years ago. But also there, there's always kind of interesting companies, which is Bank One there, Alta Ares, which is a defense company. Amazing founder from Paris. So look, we're super open, uh, uh, and whenever we see a great founder, um, we're going to back him or her wherever they are. So it doesn't matter too Much. But yeah, if I look at capital allocation that has been, I'd say currently for us, London or UK is kind of the biggest market.

Speaker B: Honestly the Munich point. Uh, I agree. I mean Julius and I are both from Munich so we like to be bullish on our hometown. But I mean uh, it's great to see that there's, I mean there's super great talent coming from the universities funding their own things. I mean we just talked about the new um, raising seed round that ESA Aerospace successfully did a couple days ago. But then also, I mean there's a lot of uh, external big companies coming in trying to scrape the talent. And then I mean general, I think Germany is not looking too bad right now with Berlin and then also a huge innovation center in Heilbronn as well. And you mentioned the keyword trillion dollar company. And with your uh, fund that you raised last year of 500 million, you made it clear that you are committing to Europe and that you have the clear ambition to fund the first trillion dollar company coming out of Europe. And um, while I um, said some nice things about the founding landscape in Germany right now, I think while there's good momentum, there's some consolidation in the VC market. We see some funds kind of having issues raising sufficient funds. Then we see partners splitting or transitioning into the next generation, some people pivoting away from VC and going into other buy sides, um, options such as pe. So within that market environment, what gives Cherry the clear confidence to double down while others may not seem as sure and confident?

Speaker A: Yeah, yeah, quickly kind of coming back to the trillion dollar uh, point. So when we raised or launched kind of the new fund, uh, we wrote a letter to all European founders and open letters saying hey, we want to back the first European trillion dollar companies because we feel Europe uh, kind of is missing out a bit on that front. But we have amazing talent in Europe. Right. So there's absolutely no reason why this should not be possible. And also at the later stages capital is available if you're building something great, if you have amazing traction. So that is kind of the goal that we set out there at our summit. Finally I had a fireside chat with Herman Hauser, the founder of arm, uh, Technology, so the chip design company. Uh, and we talked also about the trillion dollar company and he said uh, ARM is not a market cap of 370 billion and they've incentivized the current CEO to get to a trillion. Then he gets a mega bonus of I think 800 million. So uh, I think, look, maybe they are a little faster than any company we back in the next one or two. Uh, but it's also caves than the second trillion, uh, company that we find. Um, yeah. And look, as I mentioned, I think in the current market there are and also I think AI is driving this. There are so many amazing opportunities out there that are huge. Right. So there's so many markets that are up for grabs and we have amazing talent, we have amazing founders, we have great ecosystem. So you can raise money, uh, you can hire talent here. If you look at average salaries for engineers in the Bay Area versus here, obviously a huge delta which kind of helps you to be more efficient if you build from Europe. So we just believe this is a generational opportunity now to build great companies and we're extremely bullish about it. If you look at the fund landscape to your earlier question, yeah, there have been a few kind uh, of shifts, uh, some funds just kind of stopped investing, uh, or split up. I think that usually happens more actually based on the market downturn that we've seen three, four years ago. And then when the going gets a bit tougher, um, I think some funds kind of just don't make it to the next level. I think there's a normal selection. But like as a founder I would say that doesn't impact your journey. I mean there's more than enough early stage capital available in Europe. So yeah, I think everyone who wants to start a company should definitely go for it.

Speaker B: Yeah, I mean and we're certainly in a very strong market cycle right now. And I think maybe we also have to thank a certain politician for indirectly helping us to bring more confidence to Europe. And also maybe, who knows, maybe the, the big uh, IPO market activity that we see in the US will have a spillover effect um, across the pond in a couple of months or next year as well. We'll see.

Speaker C: And I hope that the European first trillion dollar company doesn't trade on a 4 or 500 multiple. But I don't want. So maybe we can switch to a different topic. Probably the elephant in every investor's room, AI. Um, I mean you've backed a couple of companies or like you're largely exposed to AI as well with your portfolio companies with black, uh, Forest Labs, Forgent or zero as we talked about. And when we look at Europe, um, I do believe that Europe's strongest AI opportunity isn't to compete head on with OpenAI or Anthropic. I think this isn't possible at the foundation model layer, but to win in applications and vertical use cases. But then you look at companies like Codesphere in Germany for example, which I find very interesting. Um, they recently secured a major government related sovereign cloud and AI infrastructure tenders and Mistral in France for example, which is becoming a key sovereign AI player. Does that suggest that Europe's real AI edge is not only the application layer but also the infrastructure layer for regulated, uh, government critical AI? And apart from that, are there any other industries in Europe could be manufacturing or logistics or fintech with Revolut that are riper for an AI agent overhaul than their US counterparts?

Speaker A: Yeah, look, I would say there are some kind of industries or models, if you take kind of defense that have like a very high sovereign aspect where you say M before I kind of use a Chinese or American model, I'd rather actually use European ones. So I think that basically gives you the very clear reason to exist for companies like Mistral. Um, and that this kind of trickles down into compute and hyperscalers that you want to be, uh, European. So I think there's clearly a market for that. On the other hand, also to be fair for many, many other use cases that does not apply. Right. So then it goes more for okay, what's the best model in the world? What's the cheapest solution? And I would say so far the focus hasn't been as much on actually what's the cheapest solution. It has been more on okay, what's the best. But at some point, kind of the more the market matures, the kind of models get better and get to similar levels, it will also be, hey, do I have to use anthropic for every use case? Which is I would say in the premium bucket pricing wise and obviously also quality wise. Or can I use for, let's say 80% of my use cases, maybe another model, right, that is open source or a Chinese model that does the majority of my use cases for a fraction of the cost. So I think this will all happen. That's pretty clear. And there you are in a global game. So it doesn't help if you can say, yeah, but this is a European company. Uh, but if it's about either price or quality, you compete immediately on global level. If it's not about a regulated industry. So I think that's a little bit kind of how we always differentiate this. So it depends a lot on the industry you operate in. Uh, and if there's no real sovereign element or data security element, then you have to play on global levels.

Speaker C: Yeah, I certainly agree and I uh, also like that you touch upon that there's not only this valuation risk but also this unit economics question in the market. Um, because many AI startups as uh, peak AI for example, are still subsidized by bc while token usage, inference costs, genetic workflows, they all create real marginal costs at a large scale. So even when large enterprises begin reassessing tools like Claude, I mean Microsoft did it a couple of weeks ago because the usage base bill becomes hard to justify. There are also some companies like, I listened to the most recent 20 BC episode with the Mecora founder and he said that um, they are spending more money on AI agents than on headcount. And he thinks that in three years this will be the case for every S&P 500 company. I don't know if that's really realistic, but in regards to that, is the market pricing AI startups too much like traditional SaaS companies before they know that the margins actually work?

Speaker A: Good question. I would say at the moment you get a very high premium for hypergrowth. And we've been there before, it was the same in 21. And if it's all about growth, then that's kind of where you get the multiples from and it's less about unit economics, which is I think fine in such a big technological shift. Right. Uh, and then it's all about, okay, who has a model that's kind of innovative or something that's new and that kind of drives extreme adoption and revenue. So you see that actually quite often. So like our valuations a little frothy and rich for sure in many areas. On the other hand, we're also seeing growth rates that are absolutely unheard of. Right. That hasn't happened in the past. That company scales from 0 to 100 million in just a couple of months. Right. The question is obviously how sticky is that? How defensible is that? Is that still going to be the same in two years? So look, it's a crazy market right now. There's kind of so many technological developments at the same time and also a lot of money chasing this. Um, but on the other hand, uh, it's also extremely exciting because it's a huge technological shift that only happens every decade or maybe even only every 20 years. Right. So uh, we gotta embrace it. Um, and there will be many new generation of companies built.

Speaker B: Yeah, I think it's super fascinating to see how fast something that is certainly by now a general purpose technology is evolving and then being in the middle of it and then trying to understand it, make use of it and then see how it develops, maybe to link that back to what we established earlier, that maybe it's not the most difficult thing for an investor to actually source the company to invest in, but actually to be able to get on the term sheet and get the contract signed. We actually recently spoke with a, uh, hardware founder here, based in Stockholm, in Copenhagen, who said there were so many VCs reaching out to him and uh, that he actually had to halt some of them back. And then it kind of came down to which VC put in the most effort and showed actual interest in tailored support. Talking about that, someone reached out and then like in the middle of the night they got Felix Haas on a call to convince them to let them write a ticket for them. And I mean we mentioned dash zero a couple of times and you also talked about that you sent flowers to Mirko's wife and send his kids some cherry merch. So I feel like you seem to understand what's necessary there. But then while everything becomes more data driven and everybody's trying to do the math correctly, would you say that in the scenario that we're currently in that you put even more emphasis on relationship building than maybe a couple years ago?

Speaker A: Totally. So in the kind of early stages of building a company or like talking to founders, there's also not so much to look at in terms of kind of other stuff. Right. So it's really all about the team and less about what are the numbers. And so like if you're a growth investor and let's say you invest here, CDE onwards, like you track a company for one to two years, you've met the team a few times, you look at their numbers, you even look at how have they performed towards their targets that they've told you a year ago. So you just kind of put that together and figure out, okay, is that good or not? Right. So it's a fairly objective decision in the end because it's extremely analytical. And then obviously comes the price discussion like, okay, which multiple do you think is the right one and how far can you stretch as an investor? But at early stage it's all about the team. Right. And it's all about building this relationship. And, and also we always say the kind um, of investor and founder relationship lasts longer than the average marriage. Right. So we usually partner with founders for 10 plus years. So you want to make sure from both sides that this is kind of the right one. Right. And the right match. So we also encourage our founders that we are kind of about to partner with and Say, hey, talk to all other founders in our portfolio. Talk to whoever you know in the market. Ask them about Cherry, ask them about the partner, kind of who's on that investment and who is going to be with you for the next 10 years. Like, how they are, how we behave under stress, uh, what have we done for the other companies in the past? So it's all about, uh, that and then making sure kind of both sides know what they're getting into. And then obviously when it's about, hey, kind of a, uh, founder has six other term sheets. And I think we try to show kind of our value with introductions with our strategic resources team that I mentioned in hiring comms. And sometimes they just kind of start hiring, uh, for that company before we've even signed a term sheet, just to show kind of how we're in this, um, as a game. Um, and then sometimes it's also a little bit about, okay, kind of the emotional side. Right. So. And in the case of Milko, like, I had talked to him, I think, for three weeks, three times a day. And then at some point his wife was like, hey, you're talking to Christian more than you're actually talking to me. So it's like, oh, we're getting into difficult territory. So, uh, I thought, I'll send her some flowers to make up for that. Uh, and, yeah, I think that's also just a human element that you have to have in those phases.

Speaker B: Yeah, I mean, I guess the more synergies you can realize between a portfolio company and a fund, the better. But obviously it comes down to the human aspect. I mean, Julius and I will be off to our summer internships next week. And it's like when I speak to my future colleagues, they always tell me, yeah, Konstantin, of course you need to show up and you need to be able to do good work. But in the end, the decision, if you want to make your job offer or anything, will come down to do. We actually like sitting next to you for most of our time during the day. And maybe to get back into what founders bring one last time, because we talked about that a lot today. I mean, you observed that while AI puts a lot of markets up for grabs, that there has been a market shift from very execution strong founders with a business background towards, uh, a desire from investors also to see more technically capable founders. So, uh, we have an audience of students and young professionals which a majority study at business school or work in finance consulting and in these industries. So for those of our listeners who are interested in maybe going into Entrepreneurship or going into the buy side and working into a venture capital. So how can they position themselves to become successful with these goals when they don't have the technical capabilities that someone like you might be looking for?

Speaker A: Yeah, yeah. First of all, that has changed over time also, right? So I'd say 10, 15 years ago, when it was, uh, probably more than 15 actually to 20 when it was in Berlin. So the big times of rocket Internet. Right. So I think their technical expertise mattered less for founders. It was more about do you have the execution skills to scale a company very fast? Because it was mostly consumer, it's always a land grab game. You got to make sure you build the number one in that market because otherwise there's no chance in winning. And there was more like, okay, where is kind of a good execution heavy founder pair? Pair that person with the CTO and then off the go. Right. So that has changed massively. So what we're looking for is founders. Look, ideally there are kind of engineers by background, but obviously not every founder is. And I think the AI world has one advantage, which is also as a non technical founder, you can do a lot. I think the flip side is you still need to have very high technical understanding and you want to do that. So if you're just a business student and you love finance and you just want to start a startup because that's the fastest way to make money, in your mind, that's probably not the best motivation and the best recipe for success. So that doesn't fly. But if you're really willing to understand things technically, you learn how to use cloud code, dig deep, understand it, what is important, how do I hyperscale? How do I get to a great product, uh, what's needed in terms of hiring on the engineering side? So how do I bring on the best people for that? I think then you have amazing chances. Right. And I think also for everyone that has finished, uh, kind of the business studies, uh, I mean the ship has sailed, right? To say I study engineering now, um, but I think it's okay, right? You just have to have that hustle and grind to go deep and be very open for that technical understanding. And sometimes I see that kind of missing in some founders that are really just kind of okay, yeah, I want to make money and I have the CTO and he takes care of it. That doesn't work. Right. So you really need to understand your product and really need to understand what do customers want? How can I meet that? How does that kind of work together if you're not willing to engage in that technical discussion, you're not going to build a successful company.

Speaker C: Yeah, I think this is uh, very forward looking and I really like that perspective. Um, think there's no way around being or having somewhat of a technical understanding these days.

Speaker B: Well, Julius, you've also spent a lot of time with cloud code recently.

Speaker C: Yeah, I mean if you reach the point where you have to decide about the top of credits.

Speaker B: Ah.

Speaker C: Um, so this, I mean this was a very, very interesting conversation so far. We would like to round up the episode today with somewhat of a personal question. Um, because in a different podcast, um, you gave a warning to young professionals wanting to join a fund like Cherry about some of the psychological reality of VC because traditional jobs have a 24 hour reaction cycle. But you just mentioned you plan to partner with um, startups for 10 plus years. So VC has, I know on average probably like a five to seven year feedback loop. So how like on a personal level do you evaluate performance or maintain motivation when you won't know if your investment decisions were actually brilliant or also disastrous until nearly a decade later?

Speaker A: Yeah, yeah, good point. So as I mentioned, the startup journey is always a roller coaster. So that means feedback size are extremely long. Right. So until a company has IPO or exited, you basically don't really know. Right. How they're doing. Obviously, like what are the milestones you can measure it on are kind of follow on rounds. Right. So if we invest at Seeds, then your next step is have they raised A, uh, great series A from a very good investor. Kind of, you know, good, good amount and size of that round. So that's, that's the next validation point. But it's also only just one single validation point and it can be completely different one year after.

Speaker B: Right.

Speaker A: And I think, and sometimes we see this, that people are like, wow, my portfolio company has raised an amazing Series A. Yeah, that's great. But it doesn't mean the company has made it.

Speaker C: Right.

Speaker A: So we're still very far away from that. Uh, and we're also quite clear on that. I mean we have a graduation rate of 85% from C to A. So for me raising an A is like if that doesn't happen then we actually, we've probably made a mistake beforehand. Right. So like raising a series A, that's almost a given. And uh, I think then kind of the magic happens afterwards. Right. So does the company really kind uh, of hit a great kind of growth trajectory? Does it compound over time? Are they great in shipping products? So, yeah, these feedback cycles are long we're talking about seven to 10 years. So what does that mean for someone joining a venture firm? I think, look, theoretically, it's always an amazing job. You're going to meet many smart and motivated people. As founders, you learn a lot. So every day you dive into three new industries and you learn here, you learn there. So that's obviously intellectually an amazing job, right? It's very stimulating. Uh, it's fun, it's cool. But then also, after two years, people figure out, like, it's also a lot of work kind of to find exactly the right companies. So I think anyone looking for like a 9 to 5 job where it's a bit of intellectual thinking, then ventures probably, or at least Cherry is not the right place. We believe kind of it's a grind, right? So kind of we need to find the best founders in Europe. And that means a lot of work, right? So that means scanning through 10,000 decks a year, figuring out what is also thematically something we want to back, and then let's figure out what are the best companies doing exactly that in Europe. So, ah, it's a tough job. Um, it's also very rewarding on the other hand, right? So once you see a company thriving, you're like, wow, that's amazing to see. It gives you very positive feedback, but it takes a while, so you need kind of that level of resilience. Um, otherwise you get quite frustrated quickly in, uh, the VC job.

Speaker C: Yeah. I think this is a very inspirational closing note to us and our listeners. So, um, thank you so much, Christian, for your time. This was a pleasure. I really enjoyed the episode.

Speaker A: Likewise. Yeah, thanks for having me. That was cool.

Speaker B: Thank you so much.