From Opera Singing to Billion-Dollar VC: How European Startups Will Win I Filip Dames, Cherry Ventures

0:00If we don't step off our game in Europe, there's a high chance that it's too late and Europe becomes this museum which is beautiful and people like to visit and go to go to in the summer. Philippe Darmes, co-founder of Cherry Ventures. Philippe is on a mission to fund Europe's first trillion dollar company. He co-founded Zalando and led it to a$6.7 billion IPO. Now he's building Cherry Ventures and raised a$500 million fund to support European winners. We need to normalize failure and celebrate ambition. What are ways that we can actually implement it? How do you train ambition? What could this company become?

0:34What would be the article, the future press release five years down the line that you want to read about yourself? Why don't we build the fund that we would have liked to have by our sides? And that became sort of the first cherry portfolio. Skip the theory, dive into the practice and start building. Ladies and gentlemen, by way of introduction. Philipp, when I dive deeper into your story, I noticed that you are, at least in my mind, you are a rare combination of things that usually don't appear in the same place. so outside of entrepreneurship and before you started your first startup what experience context or value from early in your life had a strong impact on you that still affects what you're doing today yes i did not grow up in a family that was in any way involved in tech i always thought i was going to become a musician so i um had classical training in violin and then also in singing.

1:36So at some point I thought about becoming an opera singer. So that creativity and on the one end, but on the other end, also the discipline of having to work on it every day on knowing that unless you put in the hours, you're going to get a good result. I think that's definitely something that influenced me. I think the creative thinking is helpful when we talk about startups and investments, because we need to think about, you know, if all the stars align, And if everything goes right, what could that company become? And often you need a bit of a creative thought process for that. And I think the discipline helps as well because we also want to be the hardest working VC firm in the market.

2:17And we know that we can just sit here and wait for the best companies to come to us. But we need to lean forward and we need to put in the work as well. So I think two principles that are very, very helpful for me today. And I think the second part is, you know, I grew up in a very big family. So my mom and dad had five kids. Then my father and his first marriage had another two. So I had to start negotiating pretty early. I think that helps as well today. And one concept that I'm always very fascinated by is the idea of cross-pollination, where basically ideas from different fields exchange and blend at some point.

3:00and you mentioned you were on track to become a classical musician. Tell us more about this chapter. What pulled you towards opera singing, and also how did it then eventually cross-pollinate other stages of your life? Yeah, I think I firmly believe you cannot just be one thing, and you see some of the best minds in the world. They started in one field and ended up in a completely different field, and I think it also adds perspective. I think perspective is so important in today's world. We talk about efficiency and AI and automation, but what actually matters is creativity and creative thinking.

3:40And I think, therefore, you can really benefit from, you know, not being too single-minded, too focused on one topic. Quick one. Eight months ago, I had no idea what venture capital was, but I thought it sounded cool. But I also noticed that this industry is very gate-capped. So I started this podcast for one simple reason, to make venture capital and entrepreneurship more accessible. Now I want to take the show to the next level and share the most personal and actionable conversations. Could I ask you for just one favor? If you ever got value out of any of these conversations, could I ask you to subscribe to the channel right now?

4:18This two-second action helps the show more than you can imagine. It means I can bring on bigger guests and have more impactful conversations. Thank you. It's a story. When I was training a lot, I had a small surgery on my vocal cord because I had to assist because I was singing too much. And then I was spraying cortisol on it. So exactly the stuff that you shouldn't do. And that sort of made me think, okay, wow. So I'm here relying my career on these like two few centimeter strings that are in your neck, in the back of your neck. And I was actually also always someone that was interested in a lot of things.

4:57Now, my parents are both doctors, so for the longest time, I thought I was going to become a doctor. Then I had this music thing going on, and then I was super interested in business and entrepreneurship. So I was never sort of set out to be this one thing or have this one career. and in a way that's also a bit why I love VC so much because you get to spend time on different topics. You get to spend time with different people. Now I had this go in the tunnel heads down phase in my life when we were building Zalando and that was definitely an intense phase as well. It was also really, really good for me to go deep for a couple of years, the startup before as well that I had.

5:39But in a way I love the fact that you can take ideas and concepts from different areas and combine them for what you're doing at that particular time yeah i think it's interesting that you say that because i moved from architecture to like venture capital entrepreneurship and i was so surprised that i noticed that i felt or feel still that entrepreneurship is actually more creative than architecture because of all the decisions you have to make like you always need to be creative about every single step of the process and in architecture I noticed that in the end it ends up being a service provision very often as well so yeah I mean as an architect you need to be creative you need to be service minded you have to bring in your own ideas by not forgetting your customers I know this because we're building a house at the moment and sometimes I want this is our idea or the architect's idea and then in a way you learn how to run a professional firm as well and that's all things you need And what was the underlying motivation for you to then become an entrepreneur to start your first business?

6:48So when I finished school, we had sort of three camps, I say. There was the first camp that went into consulting. You know, I had done that. I had done a few months in consulting just to try it out. It wasn't for me. I didn't like the fact of working for a presentation and not for a thing, not being able to build. The other went into banking. And then maybe there was a few that also went into kind of industry jobs. And then there were just startup people. And back then it was very few. We had first couple of successful, quote, unquote, successful examples in the Berlin ecosystem. You had Studi4Z.

7:32I don't know if you remember that company. It was started, co-founded by one of my alumni. And so it was this new thing mostly going on in Berlin, and I was intrigued by it. And I like the Fed to go and build and just try things out. And I was ready for that and wanted to become my own boss, and I loved that idea. And then I met a few people that were ex-Ebay, and I pitched them this idea of a marketplace for art and collectibles. It's something I was really passionate about. I still am. I still love art, and it's an important part of my life. And there we developed this idea of doing a live auction marketplace for this particular category with the hypothesis, yeah, eBay has gone super mass market, and we have these chargers for mobile phones and ugly products So bringing back the authenticity and the soul in a way to the platform, something that, you know, others have tried, like Katawiki or also Sotheby's, Christie's and these companies.

8:46But it was hard. It was tough learning for me. It was definitely Tamundo, so that's the name of the first company, was definitely a failure. We didn't get the flywheel going. We had, obviously, we had a passion for the product and a lot of our users were really, really passionate. But we had super low frequency. We had very fragmented supply. And there's nothing compounding about this business because you always had to scale supply side and demand side in parallel. And I think we realized that pretty quickly. I would say a year, a year and a half in. We had scaled the company a little bit. I think we were maybe 30 people in the peak, but we realized there's not enough pull for this to become a meaningful business.

9:34And yeah, I mean, obviously this was super disappointing and we had basically worked nonstop for a year and a half in order to get this thing going. But it was an important learning for me as well. So I think also as a founder, we talked about failure in the beginning, but I think you learn both ways. And I think the most important thing is also that it didn't hold you back to continue your entrepreneurial journey because after Tamundo, you joined a small fashion startup at the time that became Europe's largest fashion marketplace, Zalando. And I'm curious if I would have been a fly on the wall in the rooms where you had your first team meetings, what would I have seen in terms of the team's ambition?

10:23Did you already say that we want to build a massive company or did your ambition grow over time? No, I would love to say we started out saying let's IPO this and this is going to be the biggest thing yet. We didn't. We definitely had something going on for us. So when I met Robert and David who had just started and they were like, hey, come join us. We're a late co-founder. We're both introverts. We need an extrovert, this kind of conversation. And I was like, hey, you know, I love the idea. And by the way, to your question, there was no way for me going back into a regular job. I had totally caught the bug of being a founder and being an entrepreneur.

11:08I loved it. I loved going to the office and, you know, writing specifications, talking to the engineers and then turning ideas into a product, seeing users use it and being able to understand and define these things for us, whether successful or not. I said at the beginning it was not that successful, but for me it was no way I would sort of go back and become employed somewhere. So that sort of ship had sailed. And then for me it was like, you know, I really, obviously we knew each other from school and I thought the idea was really interesting. And Zalando obviously had a much, much bigger TAM.

11:51That's the first thing. So I think also as a founder, if you think about sort of where do I want to build, you want to pick either a market that's sizable enough. So if you have a small market share, you can already have a big business. It's much, much easier to own a small share of a very large market than a big market share in a very small market. Or you want the market where you think and maybe you're unique in thinking that, which is sometimes even the biggest company, is that the market will be growing very fast. And at Zalando, you kind of had both. You had good repeat purchase behavior.

12:30We actually built a proper execution machine and scaled the company. But also Zalando, to be fair. I mean, IPO was 2014. so the seven years before there were lots of ups and downs there were so many moments when we thought we're running out of money or we have to close the business so also an important reminder that even if the story looks really really great at the end or looks great from afar there's lots of ups and downs starting a company is always a rollercoaster and it's never a straight line up in the right and that was also the case for Zalando where now you would look at this company And we were like, okay, we're in the ducks.

13:16And it's this massive business. I came across a quote the other day that I wanted to ask you about. It's from Brad Jacobs. And it goes, success lies not in the elimination of problems, but rather in the art of creative, profitable problem solving. And he goes on and says, problems are an asset, not something to avoid, but something to run towards. And I was curious, how did you deal with this when you were moving so fast with Salando? Yeah, I agree with that. And it's the same about what's most important about the startup. Very rarely it's the idea. It's most important what you make out of it.

13:58So if you start a company, test it out. Don't just write a business plan and think this is going to go well because I have such a good idea. Talk to customers, validate, iterate. And I think if you face problems, it just forces you to do that faster. I think having a problem-solving mindset as a founder is absolutely key because you also need to be creative around problem-solving. And I think also there's a muscle that you can learn in dealing with problems. And I see that today now also having done venture for almost a decade, it's not that you get more relaxed about the problem. You still have the same paranoia.

14:48Okay, I need to solve this. I need to solve this. But you know it can be done. So there's a certain confidence that you acquire, I think, over time where you're like, okay, this is just a problem. So let's break it down. How can we solve it? What are the elements of it? Which one can we solve today? Which one can't we solve? and sometimes also where do we have to just accept that we simply won't be able to solve it now. And then it's also important as a founder saying, okay, let's not spend more time and let's deprioritize. It's sort of a known unknown. We keep going and we'll encounter the problem later down the line and maybe we can solve it then.

15:26Yeah. And what was the hardest part of this journey building and scaling Zalando that also helps you now empathize with founders today? I think there were a couple of challenges. And, you know, I was in Zalando. I took over the product team. So we had to innovate a lot on the product experience. In the beginning, Zalando was this first mover, right? Then others caught up. We had lots of competition. Fundraising has always been a challenge. If you look at the cap table of Zalando, it's not the super shiny names always that invested. Obviously, everyone that invested made a lot of money. but you had to have conviction that this could be done because this hadn't been done before in Europe.

16:11And I think one of the key challenges also, I thought, and also looking back and seeing the company today, who's still there, who has left, I think one area where we really had to excel, and that's probably true for all startups, it was hiring. So the people that we brought in in the beginning when we were still sort of forming the DNA of the company played a huge role for the success of the business. And I think it continues to be the way today. It's just that the hiring becomes different as the company and the organization grows. In the beginning, you talk to everyone. I think you try and keep that for as long as possible so you really know who's joining, who's performing, who's not performing.

17:01And over time, you need to develop a system. You need to create an organization where you as a founder can get leverage from other people. But at the same time, it's still as critical as in the beginning, right? So if you have a team and there's one bad person in the team, the whole team can flip. And it's kind of this one foul apple rottens the entire basket, right? So to keep that balance between, on the one hand, hiring really like world-class people, taking time to make hiring decisions, then also being fast at assessing and analyzing, do these people perform not only individually but also in the entire construct of the organization?

17:42So also firing fast, which is an important character trait that's sometimes not that easy as a founder. And then balancing that with the pressure that you have from, oh, we raised X amount of money, we need to scale. If we're not X people at the end of the year, like our board said, terrible advice, by the way. Then it's sometimes hard to always have the bar very, very high. and that's something that you need to be, you just cannot compromise on as a founder. And then in 2014, after Zalando's IPO, you left, like you changed from running a startup to sitting across the table as an investor. Why?

18:27So it was not something we had planned as it's sometimes cool. You know, at Zalando, I was always the person for like the new business stuff as well. So I started a company called Zalando Lounge, which is also today a few billion in sales and successful business in sort of the off-price world. And, you know, also new categories, you know, new countries. I brought the company to 17 markets in Europe when we were expanding. So I was always the kind of person that was interested in building and creating either new business or new markets. And that's also why I was always interested in what other people were building.

19:09And quite organically, we got approached by founders. They were pitching us their ideas, initially asking for help, asking for advice. How did you do that? How did you set up your customer service? How do you manage your product teams? These kind of questions that you can learn from people who've done it before. And that organically led into the first angel investments. At some point before the IPO, we were able to sell a little bit of our shares in the secondary. So we had a little bit of money and then started investing. And one thing that I think we did then, which I think was cool and was the reason why Cherry exists today, like Christian and I, we realized how different we are in assessing things and how complementary in a way also our skills and our characters are.

20:04And we felt like putting this together makes a lot of sense because we have different eyes on the same thing, different opinions. And that's also why we started doing it together. So the first cherry fund is really a small angel fund. It's our own money. And then later down the line, we asked a few friends if they wanted to invest with us so they gave us a little bit of their money and we had a bit more to invest and that became sort of the first cherry portfolio I think it was 24 companies and investments in terms of size they ranged from as little as 100 ,000, 200 ,000 sometimes even less so it was really, really small so we started small and then in the meantime when I had decided for myself Look, Zalando was an incredible experience that I'm also incredibly thankful for because I learned so much and also met so many of my closest friends during that time because I think the intensity of it, it brings people together.

21:11But for me, it was clear after the IPO, I need something new. the company had grown to a size where you come to the office you log into SAP and it definitely was a different vibe than when we were starting out and I think that's natural but for me it was like okay I think I need to start a new chapter I was quite sure about that and I had a couple of ideas in the healthcare space we were quite far with one idea but then we kept coming back to this investing and we actually really enjoyed it Because it was less of, okay, we have to now build this. It was more of like, how can we enable others to perform at their maximum?

21:51And that sort of led us to the idea of like, you know, why doesn't this become our next company? Why don't we build the fund that we would have liked to have by our sides as operators? So really like a founders first. I know many say that, but an organization that has the founder really at its core and try and just work with the most ambitious people out there and help them create the next Zorandos and the next billion dollar companies, hopefully. I'm curious to get more into the value proposition of Sherry. And I have this hypothesis that around like 20 or more years ago, there were mainly two things that VCs could provide, which is knowledge and money.

22:33And I feel like with the democratization of knowledge, like through the internet, but especially now with AI. Nearly all information are publicly accessible. So there's only money left. But then I think with all the competition that is going on in the VC space, money as a value proposition is dead. So I'm curious what is it that sets Cherry apart? We try and be the most founder-focused firm in the world. We try and be the hardest working firm in the world. We try and think about how can we maximize the chances of success for our founders. And we have set up a couple of things internally where we think this could be helpful.

23:12It starts with the investment team, let's be honest, because those are the ones that interact with the founders the most. And everyone on that team has been a former operator. So whether they had started their own companies or have worked inside fast scaling businesses, everyone has operator experience. And I think that's important, particularly at the early stage, because we want people that are able to relate to the journey that our founders go through. And then we have sort of created this team in the back, which we call the strategic resources. And there are people that help you hire, help you with go-to-market, help you with communications, with go-to-market.

23:50A lot of funds have that. And we try and keep that team relatively small, but very experienced and senior. But it's something that our portfolio really likes, particularly on the tenant side as well. You can make so much of a difference if you can complement a founding team or can bring the first three, four critical hires to a company. And they are really a match and they're really a fit. I think that adds incredible value. So the other thing that I think is important, and there's a few funds in the U.S. that do this well. Very few, actually, I think in Europe, is about go-to-market. So we really try and pre-map for any given company.

24:33We try and pre-map design partners. We try and make introductions wherever possible, particularly in the beginning when it's about like, let's explore a collaboration. Let's explore building a product together. So in a way, we see Cherry less than a firm that provides capital, but more like an operating system. So you join Cherry as a founder. We know it's hard. We know not everyone makes it, but we want to sort of build the platform or the operating system for you to rely on so you can focus on building. And that's a bit of the idea. And we try and make that very, very concrete as we work together.

25:15So with most of our teams, we're on WhatsApp almost on a daily basis. We work quite closely with the teams if they want to. So it's not something that we push upon them. And what are the topics that founders usually struggle with the most that you can also then provide most support with? Yeah, so I think, first of all, talent is key. So close the first critical hire. How do you do sourcing? How do you do outreach? And how do you really get the best people to join? I think this is something where we can help. And obviously on the commercialization side, so one mentors to Lighthouse customers, understanding how to run a structured discovery pilot logo motion with conversion reviews and these kind of things.

26:07So it's on the commercial side. And then we often work with teams during fundraising. That's a critical moment. It's not only about who's going to invest how much, but it's also about crafting the story. So what's the narrative? How do you phrase the equity story in the context of the current market? Right now that's, for example, super important because the market is so concentrated and almost binary on things AI and things that are non-AI. So we work on stuff like that. And in a way, it's also us being a sounding board, kind of like someone, a resource to tap into when you need it. Dear founders, is Europe ready for its first trillion dollar company?

26:51And are you ready to build it? The current narrative around European tech is all doom and gloom. Europe is failing, venture is tough, the US is way ahead, and Europe isn't the place for builders. We don't buy it. Yes, the next decade will look meaningfully different from the last. Everything is up for the grabs as the world transitions to new technologies and advancement in AI. We need to act boldly and defy conventional expectations. There was just the beginning of a letter that you published earlier this year with the announcement of the Fund 5, which is like a huge$500 million fund. What made you write this letter and why now?

27:36So I think this can be Europe's decade. It sort of has to be Europe's decade. And for that to be true, we have to stop playing defense and start playing offense. And in a way, Europe has all the ingredients, right? So we have Europe has the most engineers in the world. We have the talent. We have the top-tier research institution. We have the industrial customers. So there's a lot of things set up there, but then there's a couple of things that are missing. And we need to just work hard to overcome the barriers that are preventing founders to swing big at the moment. So that's why we wrote this letter.

28:21We wanted to make a deliberate statement, And we all know, you know, a trillion dollars is a very, very big number. But the message that we wanted to send is like, it can be done. We need to do it with everything that's going on in the world. Europe has a responsibility. European founders need to raise the bar. VCs too, by the way, because I think the founders are getting better. Also, the VCs need to get better. And we don't lack the talent. sometimes we lack the permission to swing big in Europe and that's what we wanted to change with the letter. And I think one topic that always comes up in this discussion is also the discussion that European founders are not ambitious enough.

29:06What do you think needs to happen to spark a cultural shift in Europe's approach to innovation but also to ambition? Because what I'm asking basically is how do you grow Europeans' ambition or do you think it's even necessary? Yeah, so I mean, let me start by saying a lot of European founders are incredibly ambitious. And I think we've seen fantastic examples of that in the European ecosystem also lately. If you look at teams like Proxima Fusion or Exploration Company in our portfolio, also teams like Lovable and Mistral. So founders that actually really have a global mindset and are ambitious enough to truly believe and back it up to win on a global scale.

29:58So that's definitely, it's there, we just need more of it. And I think the first thing is that what we need to do is we need to normalize failure and celebrate ambition. And that's something that I think culturally in Europe is lacking a little bit. If you look at the newspaper here in Germany, it's often talking about, okay, who has failed, the startup that went bust. And it's very rarely celebrating actually incredible achievements that are happening in the ecosystem. So we don't need cheerleaders, but we need people that also help celebrate ambition. there's this whole area of bureaucracy in Europe that we need to fight.