Berlin-based venture capital firm Cherry Ventures has closed its latest fund at $500 million, with ambitions to help build the first trillion-dollar company in Europe. The fund will be split between early-stage rounds and follow-on rounds at Series B and beyond, marking a significant investment in the region's startup ecosystem.

The news comes as a response to the prevailing narrative that European venture capital firms lack the firepower to compete with their US counterparts, which regularly raise billion-dollar+ funds. Cherry Ventures' statement emphasizes its goal to reverse this "doom and gloom" narrative about Europe's economy, but the reality on the ground suggests that European startups still have a long way to go to reach the trillion-dollar mark.

For instance, in the AI sector, which is expected to be a major growth driver, European companies have raised significantly less capital compared to their US counterparts. Recent research estimates that AI companies in Europe have raised around $8 billion, whereas their US counterparts have secured a staggering $97 billion. While capital is not the only factor in a startup's success, it is a critical component, and Cherry Ventures is well aware of this.

The firm did not provide a timeline for achieving its ambitious goal, but the current state of the European startup landscape suggests that it will be a challenging task. In the UK, the largest startup market in Europe, venture capital funding for startups fell by 50% in the last quarter, with startups securing only around $2.9 billion, according to a Dealroom and HSBC Innovation Banking report.

Cherry Ventures itself did not feature in last year's HEC-Dow Jones Venture Capital Performance Ranking, with the top title being taken by Earlybird Digital East Fund. Meanwhile, Revolut backer Balderton Capital recently raised $1.3 billion for European tech startups, acknowledging that Europe is missing out on the AI boom.

Cherry Ventures' previous fund, announced in early 2022, came in at €300 million ($312 million). The VC's portfolio includes space-tech company The Exploration Company, grocery delivery startup Flink, neurosurgical microbots company Robeaute, Greyhound owner Flix SE, and logistics unicorn Forto. The new fund has attracted LPs such as entrepreneurs Miki Kusi from Wolt, Ilkka Paananen, chief executive of Supercell, and Jochan Enghert from Flix.

Cherry Ventures has had 18 exits, including CoWSwap, Ninetailed, and Homelike. While the firm's latest fund is a significant step forward, it remains to be seen whether it can help bridge the gap between European and US startups in terms of scale and valuation.

In conclusion, Cherry Ventures' $500 million fund is a positive development for the European startup ecosystem, but it is only a small step towards achieving the firm's ambitious goal of building a trillion-dollar company in Europe. The region still faces significant challenges in terms of capital availability, talent, and scalability, and it will require sustained efforts from investors, entrepreneurs, and policymakers to create an environment that fosters growth and innovation.