Summary:
Only one in five startups that raise a Series A ever make it to raise a Series C.
Investors are no longer just chasing momentum—they are chasing certainty.
Category leaders are more likely to secure Series C funding.
Metrics aren't everything; investors need to believe in your long-term potential.
Continuity and sustainable growth are more important than short-term virality.
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, shared insights on how startup founders, especially those in the later Series C stage, can navigate this challenging economic environment. The key? Starting with a reality check.
The High Bar for Series C Funding
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—they are chasing certainty.
"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?'"
What Investors Look For in Series C Startups
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."
Metrics Aren't Everything
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.
"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.
Continuity Over Short-Term Virality
Another Gao rule: continuity is better than short-term virality.
In the age of AI, companies are growing faster than investors have ever seen before, she noted. "But oftentimes it’s the case, what goes up also sharply comes down," Gao said. "So the question is, 'is this growth sustainable?'"
In a Series C, investors are looking for compounding loops, or seeing that the company gets stronger as it scales, she said.
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