What founders should think about if they seek to raise a series c

Start -founders are facing a confusing and even conflicting capital market in 2025, according to Sapphire Ventures -Partner Cathy Gao. “Capital is not scarce. But access to this capital is harder than ever,” she said.

Gao, who spoke at Techcrunch’s All Stage Conference in July, said it is possible for the start -up pins, especially those in later Series C phase, to navigate this particular economic environment. And they have to start with a reality check.

For starters, she said it is important to note that only one in five startups raising a series A ever makes it raise a series C., and in the past year the bar to raise capital in late stage has only risen; Investors are no longer chasing speed that many were in the last few years – they hunt securitySaid Gao.

“Investors are now asking, ‘Is this company really a winner in the market they earn?'” Gao said. “The question really isn’t,” this company is growing? “The question has changed to ‘Is this company on a track where the upside is really undeniable?’ “

Companies that raise Series C rounds must meet certain criteria. First, they are all category leaders according to Gao.

“They define their categories. They have clear go-to-market and undeniable features,” she said. “In short, they are growing effectively, but there is also traction to show that these are really market leaders in the spaces they operate in.”

Companies that want to raise a series C must also remember that measurements are not always equal. Of course, measurements are important, like annual returns, growth and retention, she said, but if investors are not sold on the idea that a company can really become a leader in their respective space, they will move on.

“Investors have to explain why a business wins in the future,” she continued. For example, there are companies that do not have fantastic measurements, but somehow travel an appropriate series C round. In one case, a start -up more than a valuation of $ 2 billion, she noticed. “They were effectively able to communicate the story to investors, which is why this company will be a leading company over time,” Gao said of the company’s successful increase.

Another GAO Rule: Continuity is better than short-term virility.

In AI’s age, companies grow faster than investors have ever seen before, she noticed. “But often, that’s what goes up is also sharply coming down,” Gao said. “So the question is,” Is this growth sustainable? ”

In a series C, investors are looking for “compound loops” or seeing the company getting stronger when it scales, she said.

“Does your product get better for each new customer you sign? [customer acquisition cost] Fall or increase for each new user you bring on board? “She asked.

If the answer is yes, investors will “lean in,” Gao said; If the answer is “no”, investors are most likely to “lean out” even if a company’s measurements look very strong.

Eventually, she said, founders had to treat fundraising as a go-to-market campaign and try to develop relationships with VCs before throwing them into capital. Gao cited his company as an example. Sapphire likes to invest in a company at Series B level, but they have usually known the company for a year or longer.

“That means in series A, even though we do not actively lean in to try to travel, we are trying to build a relationship with a company and with the founder,” she said. “We get information and we are developing a longitudinal picture of how this company has emerged.”

She said founders should start building an “light investor CRM” or a database that manages the relationship with investors.

Investors note as they meet with founders and founders should do the same, she said. The founders must write down the names of partners, what they like to invest in and which companies they have supported recently. Create a distribution list and send periodic updates to the investors on it, she said. “This is an easy way to keep inventors in the loop.”

Perhaps most importantly, Gao noted that a company that wants to raise a series C should not enter a fundraise until they have received a signal from several companies that they are interested in supporting the round.

“The last thing you want to do is time in the market wrong,” she said. After all, timing is all at Series C level. “It’s not about luck, to settle for a 50 and hope to say yes,” she continued. “It’s really about timing and planning ahead.”