What founders should think about if looking to raise a Series C

Startup founders are facing a challenging capital market landscape in 2025, as highlighted by Cathy Gao, a partner at Sapphire Ventures. During her talk at TechCrunch’s All Stage conference in July, Gao emphasized the paradox of current funding conditions: while capital is technically available, securing access to it has become increasingly difficult. Gao pointed out a startling statistic: only 20% of startups that successfully raise a Series A financing go on to secure a Series C round. The criteria for late-stage funding have grown more stringent over the past year. Investors are shifting their focus from merely chasing growth to seeking certainty in their investments. "The critical question now is not just whether a company is growing, but whether it is positioned as a clear leader in its market," Gao explained. For companies aiming to raise a Series C, Gao noted that being a category leader is crucial. These firms must demonstrate clear market strategies and substantial traction. "They must be defining their categories with strong growth metrics and undeniable market presence," she stated. However, she cautioned that having solid metrics alone is not sufficient. Investors need convincing narratives that demonstrate why a company is destined to be a future leader. Gao provided an example of a startup that, despite lacking exceptional metrics, managed to achieve a valuation exceeding $2 billion. The key was their ability to communicate a compelling vision for their future leadership in the sector. Additionally, she underscored the importance of sustainable growth over fleeting spikes in performance. In the rapidly evolving AI landscape, companies may experience swift growth, but investors are increasingly scrutinizing whether that growth can be maintained. Investors are looking for what Gao refers to as “compounding loops”—evidence that a company becomes stronger as it scales. Founders should ask themselves critical questions about customer acquisition costs and product improvement with each new user. Positive answers can attract investors, while negative ones may lead them to withdraw. Gao also advised founders to approach fundraising as a strategic go-to-market initiative. Building relationships with venture capitalists prior to formal pitches can be beneficial. She shared that Sapphire Ventures prefers to invest in companies they have known for a year or more, which allows them to observe a startup's growth trajectory. To facilitate these connections, founders should create a lightweight investor CRM to manage relationships and maintain communication with potential investors. This could include keeping track of investor preferences, recent investments, and providing regular updates. Lastly, Gao emphasized the importance of timing in fundraising. Startups should not initiate fundraising efforts until they have received indications of interest from multiple firms, as misjudging the market timing can lead to unfavorable outcomes. In the world of Series C funding, careful planning and strategy are essential for success.