Startup founders face a perplexing and even contradictory capital market in 2025, according to Sapphire Ventures partner Cathy Gao. “Capital isn’t scarce. But access to that capital is harder than ever,” she said.
Gao, who spoke at TechCrunch’s All Stage conference in July, said it’s 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.
To begin, she said, it’s 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 — they are chasing certainty, Gao said.
“Investors are now asking: ‘Is this company truly a winner in whatever market that they’re serving?’” Gao said. “The question really isn’t, ‘is this company growing?’ The question has shifted to, ‘is this company on a trajectory where the upside is really undeniable?’”
Companies raising Series C rounds should meet certain criteria. For one, they’re all category leaders, according to Gao.
“They’re defining their categories. They have clear go-to-market and undeniable pull,” she said. “In short, they’re growing efficiently, but there’s also traction to show that these are truly the market leaders in the spaces that they operate in.”
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.
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“Investors have to explain why a company will win in the future,” she continued. For example, there are companies that don’t 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. “They were effectively able to communicate the story to investors why this company will be a leading company over time,” Gao said of the company’s successful raise.
Another Gao rule: continuity is better than short-term virility.
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