Startup founders face a perplexing and even contradictory capital market in 2025, according to Sapphire Ventures partner Cathy Gao. \u201cCapital isn\u2019t scarce. But access to that capital is harder than ever,\u201d she said.<\/p>\n
Gao, who spoke at TechCrunch\u2019s All Stage conference in July, said it\u2019s possible for startup founders, especially those in later Series C stage, to navigate this particular economic environment. And they need to start with a reality check.\u00a0<\/p>\n
To begin, she said, it\u2019s important to note that only one in five startups that raise a Series A ever make it to raise a Series C. And, in the past year, the bar for raising late-stage capital has only risen; investors are no longer just chasing momentum, as many were in the last few years \u2014 they are chasing certainty, Gao said.\u00a0<\/p>\n
\u201cInvestors are now asking: \u2018Is this company truly a winner in whatever market that they\u2019re serving?\u2019\u201d Gao said. \u201cThe question really isn\u2019t, \u2018is this company growing?\u2019 The question has shifted to, \u2018is this company on a trajectory where the upside is really undeniable?\u2019\u201d<\/p>\n
Companies raising Series C rounds should meet certain criteria. For one, they\u2019re all category leaders, according to Gao.\u00a0<\/p>\n
\u201cThey\u2019re defining their categories. They have clear go-to-market and undeniable pull,\u201d she said. \u201cIn short, they\u2019re growing efficiently, but there\u2019s also traction to show that these are truly the market leaders in the spaces that they operate in.\u201d\u00a0<\/p>\n
Companies looking to raise a Series C should also remember that metrics do not always equal money. Sure, metrics are important, as are annual returns, growth, and retention, she said, but if investors are not sold on the idea that a company can truly become a leader in their respective space, then they are going to move on.\u00a0<\/p>\n
Techcrunch event<\/p>\n
\n\t\t\t\t\t\t\t\t\tSan Francisco
\n\t\t\t\t\t\t\t\t\t\t\t\t\t|
\n\t\t\t\t\t\t\t\t\t\t\t\t\tOctober 27-29, 2025\n\t\t\t\t\t\t\t<\/p>\n
\u201cInvestors have to explain why a company will win in the future,\u201d she continued. For example, there are companies that don\u2019t have amazing metrics yet somehow raise a suitable Series C round. In one case, a startup nabbed more than a $2 billion valuation, she noted. \u201cThey were effectively able to communicate the story to investors why this company will be a leading company over time,\u201d Gao said of the company\u2019s successful raise.\u00a0\u00a0<\/p>\n
Another Gao rule: continuity is better than short-term virility.<\/p>\n
In the age of AI, companies are growing faster than investors have ever seen before, she noted. \u201cBut oftentimes it\u2019s the case, what goes up also sharply comes down,\u201dGao said. \u201cSo the question is, \u2018is this growth sustainable?\u2019\u201d\u00a0<\/p>\n
In a Series C, investors are looking for \u201ccompounding loops,\u201d or seeing that the company gets stronger as it scales, she said.\u00a0<\/p>\n
\u201cDoes your product get better for every new customer you sign? Does your CAC [customer acquisition cost] decrease or increase for every new user you bring on board?,\u201d she asked.<\/p>\n
If the answer is yes, then investors will \u201clean in,\u201d Gao said; if the answer is \u201cno,\u201d then investors are most likely to \u201clean out,\u201d even if a company\u2019s metrics look very strong.\u00a0<\/p>\n
Finally, she said, founders should treat fundraising like a go-to-market campaign and seek to develop relationships with VCs before pitching them for capital. Gao cited her firm as an example. Sapphire likes to invest in a company at the Series B level, but they usually have known the company for a year or longer.\u00a0<\/p>\n
\u201cThat means at the Series A, even though we\u2019re not actively leaning in to try and raise, we\u2019re trying to build a relationship with a company and with the founder,\u201d she said. \u201cWe\u2019re getting information and we\u2019re developing a longitudinal picture of how this company has progressed.\u201d\u00a0<\/p>\n
She said founders should start building a \u201clightweight investor CRM,\u201d or a database managing the relationships with investors.\u00a0<\/p>\n
Investors take notes while meeting with founders, and founders should do the same, she said. Founders should write down the names of partners, what they like to invest in, and what companies they\u2019ve backed recently. Create a distribution list and send out periodic updates to the investors on it, she said. \u201cThis is an easy way to keep inventors in the loop.\u201d\u00a0<\/p>\n
Perhaps most importantly, however, Gao noted that a company looking to raise a Series C should not enter a fundraise until they\u2019ve received a signal from multiple firms that they\u2019re interested in backing the round.\u00a0<\/p>\n
\u201cThe last thing you want to do is time the market incorrectly,\u201d she said. After all, timing is everything at the Series C level. \u201cIt\u2019s not about luck, pitching to a 50 and hoping that one says yes,\u201d she continued. \u201cIt\u2019s really about timing and planning ahead.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Startup founders face a perplexing and even contradictory capital market in 2025, according to Sapphire Ventures partner Cathy…\n","protected":false},"author":2,"featured_media":42092,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[45,49,48,137,1946,30000,2927,2147],"class_list":{"0":"post-42091","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-entrepreneurship","8":"tag-business","9":"tag-ca","10":"tag-canada","11":"tag-entrepreneurship","12":"tag-fundraising","13":"tag-series-c","14":"tag-startups","15":"tag-venture"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/42091","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=42091"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/42091\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/42092"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=42091"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=42091"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=42091"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}