Summary:
Only 20% of Series A startups reach Series C, with even higher bars in 2025
Investors now prioritize certainty and market leadership over mere growth
Sustainable growth and compounding loops are key to attracting Series C funding
Founders should build VC relationships early and maintain an investor CRM
Timing the market correctly is critical for a successful Series C raise
Startup founders in 2025 face a capital market that's both abundant and restrictive, according to Cathy Gao, a partner at Sapphire Ventures. Speaking at TechCrunch’s All Stage conference, Gao highlighted the paradox: capital isn’t scarce, but access to it is harder than ever. For founders eyeing a Series C round, the journey begins with a stark reality check.
The High Bar for Series C
Only one in five startups that raise a Series A ever make it to Series C, and the criteria have only gotten stricter. Investors are no longer just chasing growth; they're chasing certainty and undeniable upside. "The question isn’t just 'is this company growing?' but 'is it on a trajectory to become a market leader?'" Gao emphasized.
What Investors Look For
- Category Leadership: Companies must define their categories with clear go-to-market strategies and undeniable market pull.
- Sustainable Growth: In the age of AI, rapid growth is common, but sustainability is key. Investors seek "compounding loops" where the company strengthens as it scales.
- Beyond Metrics: While metrics are important, investors need to believe in the company's potential to lead its space.
Building Relationships Early
Gao advises founders to treat fundraising like a go-to-market campaign, building relationships with VCs well before the pitch. Sapphire Ventures, for example, prefers to invest at Series B but starts engaging with companies at Series A.
Practical Tips for Founders
- Create an Investor CRM: Track interactions, preferences, and recent investments of potential backers.
- Timing is Crucial: Don’t start fundraising until multiple firms signal interest. "It’s about timing and planning ahead, not luck," Gao noted.
This strategic approach can help founders navigate the complex Series C landscape and secure the funding they need to scale.
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