Startup founders face a perplexing and even contradictory capital market in 2025, in accordance with Sapphire Ventures companion Cathy Gao. “Capital isn’t scarce. However entry to that capital is more durable than ever,” she mentioned.
Gao, who spoke at TechCrunch’s All Stage convention in July, mentioned it’s potential for startup founders, particularly these in later Sequence C stage, to navigate this explicit financial atmosphere. And they should begin with a actuality examine.
To start, she mentioned, it’s essential to notice that just one in 5 startups that elevate a Sequence A ever make it to boost a Sequence C. And, previously yr, the bar for elevating late-stage capital has solely risen; traders are not simply chasing momentum, as many had been in the previous few years — they’re chasing certainty, Gao mentioned.
“Traders are actually asking: ‘Is that this firm actually a winner in no matter market that they’re serving?’” Gao mentioned. “The query actually isn’t, ‘is that this firm rising?’ The query has shifted to, ‘is that this firm on a trajectory the place the upside is de facto simple?’”
Corporations elevating Sequence C rounds ought to meet sure standards. For one, they’re all class leaders, in accordance with Gao.
“They’re defining their classes. They’ve clear go-to-market and simple pull,” she mentioned. “In brief, they’re rising effectively, however there’s additionally traction to point out that these are actually the market leaders within the areas that they function in.”
Corporations trying to elevate a Sequence C also needs to do not forget that metrics don’t at all times equal cash. Certain, metrics are essential, as are annual returns, development, and retention, she mentioned, but when traders are usually not bought on the concept an organization can actually grow to be a frontrunner of their respective house, then they will transfer on.
Techcrunch occasion
San Francisco
|
October 27-29, 2025
“Traders have to clarify why an organization will win sooner or later,” she continued. For instance, there are corporations that don’t have superb metrics but one way or the other elevate an appropriate Sequence C spherical. In a single case, a startup nabbed greater than a $2 billion valuation, she famous. “They had been successfully in a position to talk the story to traders why this firm will probably be a number one firm over time,” Gao mentioned of the corporate’s profitable elevate.
One other Gao rule: continuity is best than short-term virility.
Within the age of AI, corporations are rising quicker than traders have ever seen earlier than, she famous. “However oftentimes it’s the case, what goes up additionally sharply comes down,”Gao mentioned. “So the query is, ‘is that this development sustainable?’”
In a Sequence C, traders are searching for “compounding loops,” or seeing that the corporate will get stronger because it scales, she mentioned.
“Does your product get higher for each new buyer you signal? Does your CAC [customer acquisition cost] lower or improve for each new person you convey on board?,” she requested.
If the reply is sure, then traders will “lean in,” Gao mentioned; if the reply is “no,” then traders are most certainly to “lean out,” even when an organization’s metrics look very sturdy.
Lastly, she mentioned, founders ought to deal with fundraising like a go-to-market marketing campaign and search to develop relationships with VCs earlier than pitching them for capital. Gao cited her agency for example. Sapphire likes to spend money on an organization on the Sequence B degree, however they often have identified the corporate for a yr or longer.
“Meaning on the Sequence A, although we’re not actively leaning in to try to elevate, we’re attempting to construct a relationship with an organization and with the founder,” she mentioned. “We’re getting data and we’re creating a longitudinal image of how this firm has progressed.”
She mentioned founders ought to begin constructing a “light-weight investor CRM,” or a database managing the relationships with traders.
Traders take notes whereas assembly with founders, and founders ought to do the identical, she mentioned. Founders ought to write down the names of companions, what they wish to spend money on, and what corporations they’ve backed not too long ago. Create a distribution checklist and ship out periodic updates to the traders on it, she mentioned. “That is a straightforward option to hold inventors within the loop.”
Maybe most significantly, nevertheless, Gao famous that an organization trying to elevate a Sequence C shouldn’t enter a fundraise till they’ve obtained a sign from a number of corporations that they’re occupied with backing the spherical.
“The very last thing you need to do is time the market incorrectly,” she mentioned. In any case, timing is all the pieces on the Sequence C degree. “It’s not about luck, pitching to a 50 and hoping that one says sure,” she continued. “It’s actually about timing and planning forward.”
{content material}
Supply: {feed_title}