Startup founders in 2025 are navigating a capital market that is both perplexing and contradictory, according to Sapphire Ventures partner Cathy Gao. She explains that while capital is not scarce, accessing it has become more challenging than ever. Speaking at TechCrunch’s All Stage conference in July, Gao emphasized that founders, especially those at the Series C stage, can successfully maneuver through this economic landscape—but they must start with a reality check.
Only one in five startups that raise a Series A eventually secure a Series C. Over the past year, the bar for late-stage funding has risen significantly. Investors are no longer solely chasing momentum, as they did in previous years—they are now prioritizing certainty. Gao notes that the key question investors ask is no longer whether a company is growing, but whether it is on an undeniable upward trajectory.
To qualify for a Series C round, companies must be category leaders. They should define their markets, have clear go-to-market strategies, and demonstrate undeniable traction. Growth efficiency alone is not enough; they must prove they are the dominant players in their respective spaces.
However, strong metrics do not guarantee funding. While annual returns, growth, and retention matter, investors must believe a company can become a market leader. Gao cites an example of a startup that secured a $2 billion valuation despite modest metrics by effectively communicating its long-term potential.
Sustainability is another critical factor. In the age of AI, rapid growth is common, but investors now question whether that growth is sustainable. For Series C rounds, they look for compounding loops—evidence that a company strengthens as it scales. They assess whether the product improves with each new customer and whether customer acquisition costs decrease over time.
Gao advises founders to treat fundraising like a go-to-market campaign, building relationships with VCs well before pitching. Her firm, Sapphire Ventures, typically invests at Series B but often engages with companies a year earlier. Founders should maintain a lightweight investor CRM, tracking key details about potential backers and keeping them informed with periodic updates.
Most importantly, companies should not initiate a Series C raise without clear signals of interest from multiple firms. Timing is crucial—it’s not about luck but strategic planning. As Gao puts it, success at this stage depends on foresight and preparation, not just pitching and hoping for the best.