How to make partner in less than three years: Cherry Ventures' Dinika Mahtani

0:02Hello and welcome to the Sifted podcast supported by Vanta. Vanta is the fast frictionless way for growing companies to get compliant, stay secure and earn and maintain the trust of vendors and customers. As always, I'm Amy, Sifted's editor, and today I'm joined by Danika Matani, partner at early stage VC firm Cherry Ventures, which has recently announced a fresh 500 million euros in new funds to invest in European startups. Danika heads up Cherry's investment strategy in the UK and has led deals in global e-commerce platform Swap, AI fashion company Finesse, compensation software platform, Ravio, and a whole bunch that are in stealth that she unfortunately can't tell us about just yet.

0:43Before joining Cherry, she was an operator, spending four years at Uber, where she launched its e-bikes in the UK, and at climate tech startup, Calooza. And before that, she was an investment banker at Barclays. We'll get into what deals she's looking to do right now, her days at Uber, and her advice for other operators turned investors. Welcome to the pod, Danika. Thank you, Amy. Very, very glad to be here. So let's start talking about the UK. It feels like we're at a very interesting juncture at the moment with all the chaos that is kicking off in the States. It feels like there's a quite a strong narrative emerging that the UK could position itself as a really good home for all the tech talent and companies that maybe no longer want to be in the US or move to the US.

1:30Are you seeing that play out at any of the companies that you work with or have been speaking to recently? Yeah, absolutely. I would say the UK and Europe are in a position that they have never been in in the last decades where everything is up for grabs. I would say there are a couple of themes that we're seeing at Cherry right now that are driving this. As a firm, we've not seen more early stage pitches in defense and defense tech related to both UK and European sovereignty than we've seen in the last six months. spaces like robotics, you know, deep tech is back again, research heavy spaces like in new pharmaceutical products, drug discovery.

2:14Those are not just kicking off, but gaining traction in a really meaningful way. And not just in narrative, but in substance as well. A lot of that is happening in the UK and in Europe. And I think more tailwinds to come here, three themes I'm seeing. So researchers in the US looking to move back to the UK because of all of the volatility in academia in the US. The second theme is folks really excited about the level of talent that's coming out of not just UK universities, but version one of UK tech that is kicking off to build the second and third generation of technology companies with talent.

2:57And then the third is capital. I mean, I know that in venture world, we like to moan about the lack of capital at both the early and later stages, but at certainly the early stage and all the way up to Series B, you've seen US funds move out here, but not just move out here, deploy meaningful amounts of capital. You know, the iconics of the world, IVPs, general catalysts, putting their money where their mouth is and supporting UK based and European startups. What do you think the UK government or any governments in Europe could do to capitalize on this moment even more? What would encourage that wave of researchers from the US to come and set up companies here or European investors to take that maybe slightly more long-term view back those tricky deep tech type companies that we know we need but haven't always fitted the model?

3:50Yeah, absolutely. I think the question you're asking is patient capital. Founders who are founders to build, you know, what we as Cherry hope to back the first trillion dollar company born out of Europe. Those founders want extremely patient capital. Those founders want lots of capital if they need it. And those founders want sort of the comfort that the regulatory burden on them at different stages won't exist. I spend quite a lot of my time in the climate space. And I would say maybe a quick anecdote on, you know, what I think is Europe moving in the right direction here. So two months ago, the European Commission decided to remove the regulatory reporting requirements for around, you know, I would say 42 ,000 companies.

4:39So, you know, backwards a year ago, 50 ,000 companies in Europe had to report on ESG every year. These are small companies, SMEs, medium-sized companies, and large enterprises. And so, you know, Cherry as well, we followed suit. We put in our term sheet, hey, all companies of all sizes need to report on ESG from like day one that you take our check. A lot of founders were quite unhappy about this. They were like, look, if you want us to build, let us build. We're not going to be doing anything crazy from an environmental standpoint on year one. And the Omnibus proposal, which was put forward to the European Council two months ago, basically stripped out regulations and regulatory reporting requirements for most companies in Europe.

5:22And so on one hand, you might think, does that mean they're rolling back on their focus on climate tech and climate change? And I actually don't think that. I think there is a sense that building a business is hard and requires as little barriers as possible. and some folks I think in the UK and European governments are starting to get it and removing sort of unnecessary hurdles so that companies can focus on hiring, building the technology and going through the roller coaster without these additional headwinds. What would be some of the other hurdles you'd like to see removed? I would say setting up a company.

6:03So in the UK, I think we're very lucky. It takes, about a week to set up a company, incorporate it, set up your first bank account. In Germany, that's close to a month. In France, it's slightly longer. In the Nordics, they're pretty good there, but there's not one way, right? There's not one way that across Europe, you can set up a company, create a bank account. And that, again, those are hurdles. Folks want to just build. So that's one example. I would say the second one is, and this might be a slightly controversial one, the amount of time it takes to leave a company in Europe that is, you know, between three and six months.

6:42And so if you want someone extremely talented who works at a large scale up to, you know, leave and be a builder again, be a founder, it takes them six months to leave their company. So stuff like that, that's less sort of on the regulatory front, but just more on how, you know, companies do business and set up in Europe. I think those are two that I would say could change things. What would you do about that, about the kind of notice period of someone, you know, someone who's a sort of important exec at a big company, but a startup wants to hire them, they're on six months leave. What would be a good way of dealing with that?

7:18Have you seen it work out better where that person can kind of extract themselves faster? Yeah, absolutely. So I have a brilliant founder that I have backed companies in stealth. She was the CTO of a public company in the UK. And so when she told them that she was spitting out to build her own company, it was six months. And then you can think about what you'd like to do or incorporating the company, et cetera, et cetera. What she did, and I think this is what most startup operators turned startup founders end up doing, is negotiating, working double the hours to make sure transitions go well, in empowering their teams, creating sort of a plan.

7:59And so she managed to sort of exit within between two and a half and three months, which is record time for someone who works at a public company in the UK who has sort of board obligations. But so far, it's being done on an ad hoc basis. And the onus is on the entrepreneur to shorten that period. I think most folks at board level seem as long as you're not going to a competitor, it's fair game. As long as you're abiding by your fiduciary responsibilities. It's fair game. So, so far, I haven't seen sort of any hard nose where that's concerned. But I think structurally, when you're talking to founders who are at these companies, and you're like, all right, so when are you going to start building?

8:36You've got a great idea. They're like, well, my notice is this, and I have to think about that. And so it's just a way less seamless process than obviously we would like as investors. What I would do, I would change, I would remove it from or shorten the time period from six months, which is de facto standard to probably somewhere between one and three. Just to ensure that, you know, that's sufficient time for someone to build a plan and help recruiting their successor to try to ensure that, you know, folks can folks can build quickly. Have you seen any differences in the amount of people working at kind of more, let's say, established companies, either leaving to start their own company or leaving to join a startup recently?

9:19Do you think the kind of broader economic shit show, for use of a better phrase, one of a better phrase, is going to have an impact on the number of people who leave kind of safe, you know, quote mark, safe feeling jobs to join risky startups? Yeah, you look, I mean, the barrier to be an entrepreneur has been reduced dramatically. We make this joke at Cherry all the time that, you know, starting a company before was, you know, you earn basically no salary for two years. You know, you grind it out really hard. Your seed round is two million at best. And it's perceived as like a huge risk that you're taking and that your family has to sign up to.

10:03Building a company now is not like that. There are entrepreneurs who are building companies from their dorm room, generating capital, vibe coding, and building startups that way. And there's nothing wrong with that. There is an extreme advantage to lowering the barrier to entrepreneurship. And I think that's a great thing for our industry. But that also means that the shit show that you're seeing, what we're seeing is likely going to happen, which played out in 21, is early stage markets. become even more crowded because growth stage markets become really tricky when there's sort of equity market turmoil.

10:40Early stage markets very rarely get hit, particularly because big funds have a lot of money to deploy, which still means that it is a really great environment for entrepreneurs to build. There's capital, there's lots of capital, and there are a lot of founder of friendly terms in the market when there's a lot of capital in sort of a specific segment like seed. Interesting. So you predicting we'll see those slightly later stage firms move down the chain as in start investing earlier stage again. Yeah. Are you seeing that happen already? We're seeing signs of it. We've been seeing signs of it from December.

11:20And I mean, I think this will become much clearer when we have confirmation. And I think we can already assume that equity markets will be shut for IPOs for a long time. And whether that's six months, another 12 months, which impacts again, how growth investors think about multiples at growth stage, and then the knock on impact on how and where they deploy capital. And so yes, we're seeing multi-stage funds at pre-seed and seed all over again, just like 2021. very interesting so what deals are you looking at at the moment what sectors feel sort of very overdone or overhyped and which ones do you think there's lots of like there could be more more startups more innovation yeah so it's a really exciting time to be an investor today because you know in europe we are seeing two-person teams building companies that are scaling like brilliantly, you know, very low sort of capital expenditure with these AI products and they're taking off.

12:26I think the challenge with that is how we assess durability, how we assess retention, how do we assess the fact that, you know, these companies are not selling to people who want to trial products because everyone wants to try AI products today. And so at Cherry, We've taken sort of the one step back approach, which is let's try to be slightly thesis driven, but still founder led. So a year ago, we came up sort of with the hypothesis that probably the LLM world is not where we wanted to place a bet as a fund. We focus on the application layer in AI. That's where I would say most founders in Europe are building today.

13:10I will also say that, you know, we have seen more deep tech pitches than in recent sort of three to five year periods, which is very exciting, but also means that, you know, we need to think about, again, capital expenditure, whether these companies are software only or software and hardware. And sort of those conversations that we had a few years ago are coming back to the fore. The areas that are unloved, I would say, continue to be very consistent in my mind. Women's health is a space that's still very hard to fund. I would say climate tech is facing its challenges, definitely in the venture world.

13:49And in climate specifically, not just because of the change in regulation that I just talked about, but also because I think a lot of people are thinking about the business impact of buying the software or hardware solution and not just from a reporting or from a vanity metric standpoint. So folks are like, you know, what is this actually going to impact in my business and should I procure this? So climate and climate reporting is going to be very hard hit and I think will be challenged for a while. So because companies don't need to report as much as they used to, they're just not procuring that climate reporting software anymore.

14:28I think that that space is going to be very hard. And on deep tech and the cost, I guess, and how it looks to build those deep tech products, are you seeing those come down as a result of AI tools? So absolutely. I would say they're coming down based on two things. I remember a meeting with a founder, I think it was a few months ago, where he said, you know, I've started building my own my own robot at home. And I was like, tell me more. And he said, well, I buy this from Amazon. It's from China. It costs like$30. I buy that and it's from China. And then I put it all together and I built software on top of it.

15:06And I have built my own robot that monitors when my plants need to be fed and what ambient temperature is in my nursery. And I was like, wow, that's pretty cool. But I think that's been sort of just an anecdote of a prevailing trend. The cost of building hardware has declined dramatically. Now, I'm not sure if this continues with tariffs, because a lot of hardware is built in China or with materials from China. And on that specific point, particularly because, you know, at Uber, I used to work with hardware with sort of the e-bike and e-scooter products. Yeah, we assembled in Portugal, but all of those products were from China.

15:46And so I think the space is also going to be very volatile in the next months and years. I think hardware teams are going to have to rethink their supply chains. And, you know, at Sherry, we have already committed to our founders that we're going to work with them on solutions and how to, you know, get through this rocky period. But I think the reality is really volatile for those companies right now. What has the response been amongst the portfolio to the tariffs? Like where are some obvious areas or, you know, obvious sectors, obvious companies that will be impacted? and what does the kind of next few months look like?

16:23What are those companies actually doing right now to, I guess, assess the damage or the potential for some? Yeah, absolutely. And a really good question. So yesterday we put out a big survey to all of our founders telling them, hey, you know, tariffs is one, but there are few things and there are big things going on in the US right now. How are you impacted? We haven't gotten clear results back from the survey, but anecdotally, I can give you a few tidbits. So I'll do sort of the positive side of it just very quickly. So my company, Swap Commerce, they're an operating system for e-commerce brands.

16:59So they operate on the back end. And a lot of their companies, they work with about 400 brands, a lot of them thrive in cross-border trade. So this company swap is in the thick of it right now. But one of their core products that they that they offer to e-commerce brands is a tax calculator. So as you can imagine, with all of the changes in tariffs, everyone's cost base is changing dramatically by the day and folks don't know what to do at all. So, for example, they had a customer who moved their supply chain from China to Vietnam three months ago to try to avoid tariffs. And so now they're trying to figure out sort of the right approach with these clients.

17:38But a company like that, you know, with an inbound of, you know, 4x more demand than they can handle is really well placed because they're trying to help their customers solve and make sense of it all. I mean, on the other hand, you know, when we have companies and maybe out of respect to these companies, I won't name them because they're going through very, you know, rocky times themselves. But companies that do use hardware across sort of surveillance technology where any type of hardware is involved, you're likely looking at China as part of how your business is run or operating. And the dependence on that is going to be meaningful.

18:20So, you know, e-commerce businesses, companies that have hardware, but then even sort of taking a step back. A recession is or we think a recession is likely on the horizon, right? Like a lot of our banking partners are telling us this. And so most of our portfolio, vanilla B2B software companies are now thinking, what's next for us? Do we focus on selling to the US? Do we focus now on Europe? just six months ago we were planning a move to San Francisco things are looking really tricky on on sort of the immigration side as well with Trump kind of pulling back on visas so I would say generally across the portfolio there are a lot more questions than answers at the moment we're trying to be as helpful and supportive as we can.

19:09What's the mood like amongst founders it It feels like we were so, we had kind of, Klarna's potential IPO is this sort of beacon of, oh, finally, maybe stuff's going to get back to normal and we'll have an IPO. And then they've pulled out, tariffs come along. It almost feels like, I don't even know what number hurdle this is, but pandemic, recession. Yeah, every year is, it's wild. Yeah, how are founders feeling? Do they seem resilient to use a favorite word at the moment or are some of them like bloody hell how many more of these can I can I do I think look it's it's a founder's life as we see it is a roller coaster in itself like the journey of building a company from the early stage to whatever stage they end up getting to is a roller coaster at the best of times and so external shocks are awful because they're uncontrollable you have to react you're already reacting to all the things that are, you know, natural in the evolution of a company.

20:12And that's why I think sort of our operator first, like how can we help mindset makes us in the position to understand like what founders need. And in this moment, what they need is for someone to tell them what the mood is actually like. So for example, is it the right time to fundraise? Should I go out and raise capital right now? Or is the market absolutely shut? And that's so that's where founders are at. They have no clue. They have absolutely no clue because things are so rocky and they're hearing mixed messages on all sides of the market. And this is across both fundraising. This is across hiring.

20:51This is across sort of which markets to expand into. Yeah. So look, there are some there's some founders I work with who are also completely unimpacted by this. Right. So I have a founder who's selling into the UK's national healthcare service. Very hard segment to sell. The company is doing really well. But broadly, in health care, I would say this is a sector that I feel like is pretty insulated at the moment from all of the tariff war news. And there continue to be sort of a couple of sectors that will stay sort of under the radar. because as I sent these messages over the weekend to, hey, are you guys okay?

21:32Some were like, yeah, fine, why? And so there are certainly founders who are luckily sheltered from it all. Let's talk about something that might be keeping you up at night, cybersecurity. According to Vanta's latest state of trust report, it's the number one concern for UK businesses. And that's where Vanta comes in. Whether you're a startup, growing fast or already established, Vanta can help you get ISO 27001 certified and more without headaches. And Vanta allows your company to centralise security workflows, complete questionnaires up to five times faster, and proactively manage vendor risk to help your team not only get compliant, but stay compliant.

22:14Stop stressing over cybersecurity and start focusing on growing your business in 2025. Check out Vanta and let them handle the tough stuff. Head to Vanta.com forward slash Sifted to learn more. Because when it comes to your business, it's not just about keeping the lights on. It's about keeping everything secure. So last year, Cherry launched a coaching program for portfolio founders. My guess in response partly to how hard the past few years have been. How is that going? What has take up been like? And from your perspective, working with those founders, what kind of impact do you think that has had?

22:52Yeah. So I would say the take up has been between 60 to 80 percent of founders that we have given sort of a new term sheet to and given a new investment to since that was announced. There are some founders that absolutely love the thought of this at the very early stages. There are some that still think that it's a waste of time and that say, you know, I'm fine, maybe later. How has it supported and helped? I mean, coaching is such a nuanced, delicate topic, I think. It helps every founder in a very different way. At Cherry, in the partnership, we started getting mandatory coaching across the partnership because we realized that sometimes we were ill-equipped to deal with a founder calling us and telling us that they had cancer or a founder telling us that they were pregnant and had to leave for a year as a CEO and not knowing sort of how to be empathetic, but an investor and do our jobs as well.

23:57And coaching really helped us try to be better investors. Now, for a lot of founders, we see that coaching has really helped their confidence, their ability to pitch and tell stories better. And then lastly, their ability to attract the right type of talent and know what type of company culture they want to build. And at the early stages, it tends to be less sort of, you know, my company's failing, can you help me? It's more sort of, you know, empowering, you know, individuals to be the best that they can be as they're about to embark on sort of this 10-year journey. So I would say, yes, the take-up has been good and the impact has been very mixed because I think what each founder needs has been very different.

24:43makes sense so for you when you transitioned from being a operator to an investor what were the areas that you maybe felt least confident about in that new role and how did you equip yourself to feel confident in those new shoes and thinking advice for anyone else who wants to make that jump? Yeah, I have a very like very clear answer here because my my journey was was one that I embarked on after speaking to about 25 other investors. And so in sort of joining Cherry, I made sure that there was no pressure on me to do a new investment or my first deal within a set time, because I knew that sort of deploying firm capital was going to be a big deal.

25:30And so I shadowed one of our founding partners for six months. I would sit in his calls. I would tell him how I felt about an investment. I would basically be shadowing him the entire time, but we had pre-agreed that this would be okay. And sort of on month four, I took my first deal to IC because I felt like I was ready. But that was really important for me just to understand how the firm worked, what was a cherry deal, and sort of how to navigate that transition from operator to investor. The things that I was naturally good at as an operator were connecting with entrepreneurs, building relationships, understanding what they need, and like the winning part.

26:13So like convincing folks to want to work with me, that was the easier part of it. It was more the, hey, like, is this going to be an interesting deal for cherry? And every firm is different. And so I wanted to get that right. And it's very important for folks to learn that as early as possible in their journey as an investor. And what kind of, I guess, like due diligence did you do before making the move from operator to investor? I don't mean, I mean, I do mean specifically about do I want to work for Cherry, but also do I want to be a VC? Is this a job I would enjoy doing day to day? Like, how did you figure out if that was a good fit or might be a good fit?

26:51Yeah. And again, like I, it was a very, it was a very thoughtful journey because of how my brain works. It had to be very well planned. And so, you know, I spoke to sort of one of my colleagues who was in my team at Uber. Her name is Annie Case. She now works at Kleiner Perkins. And she had made the transition from Uber to, to, to venture in the US at a big firm. She had at the time, and this was when I was still at Uber, introduced me to basically everyone she knew. And so through network, I started meeting investors and I started meeting investors at firms that I came away with being like, I would not fit in there or I would not want to work there.

27:35And so I started doing these meetings casually for a year and a half and then was during that period building my angel investment portfolio. and then it came to a time my husband was like well you need to make a decision whether you want to just keep spending your weekends trying to help founders raise money and build their pitch decks for them or you want to professionalize this and do this yourself and it took a while but but I only made the transition when I found a fund that was the right fit for me. How big are you still angel investing and how big is your angel portfolio? I'm not allowed to angel invest anymore As a partner of the fund, it's a conflict from an LP standpoint.

28:17And I stopped when I made partners. So this was almost two years ago, a year and a half ago. Portfolio, you know, 15 to 20 companies. So not huge, but not tiny either. And I think the difference for me was I would go to, you know, everything from pitch events, outbounded founders very early in my sort of angel journey and was very thoughtful about sort of where I could add value, how I was selling myself. I built a small program for myself on this sort of journey of, you know, how to pitch yourself as like the most value add investor when you have a very small angel portfolio. And then building that up was much easier.