What Founders Should Think About If Looking To Raise A Series C

Startup founders look a perplexing and moreover contradictory superior marketplace successful 2025, according to Sapphire Ventures partner Cathy Gao. “Capital isn’t scarce. But entree to that superior is harder than ever,” she said.

Gao, who said astatine TechCrunch’s All Stage convention successful July, said it’s imaginable for startup founders, particularly those successful later Series C stage, to navigate this peculiar economical environment. And they request to commencement pinch a reality check. 

To begin, she said, it’s important to statement that only 1 successful 5 startups that raise a Series A ever make it to raise a Series C. And, successful nan past year, nan barroom for raising late-stage superior has only risen; investors are nary longer conscionable chasing momentum, arsenic galore were successful nan past fewer years — they are chasing certainty, Gao said. 

“Investors are now asking: ‘Is this institution genuinely a victor successful immoderate marketplace that they’re serving?’” Gao said. “The mobility really isn’t, ‘is this institution growing?’ The mobility has shifted to, ‘is this institution connected a trajectory wherever nan upside is really undeniable?’”

Companies raising Series C rounds should meet definite criteria. For one, they’re each class leaders, according to Gao. 

“They’re defining their categories. They person clear go-to-market and undeniable pull,” she said. “In short, they’re increasing efficiently, but there’s besides traction to show that these are genuinely nan marketplace leaders successful nan spaces that they run in.” 

Companies looking to raise a Series C should besides retrieve that metrics do not ever adjacent money. Sure, metrics are important, arsenic are yearly returns, growth, and retention, she said, but if investors are not sold connected nan thought that a institution tin genuinely go a leader successful their respective space, past they are going to move on. 

“Investors person to explicate why a institution will triumph successful nan future,” she continued. For example, location are companies that don’t person astonishing metrics yet someway raise a suitable Series C round. In 1 case, a startup nabbed much than a $2 cardinal valuation, she noted. “They were efficaciously capable to pass nan communicative to investors why this institution will beryllium a starring institution complete time,” Gao said of nan company’s successful raise.  

Another Gao rule: continuity is amended than short-term virility.

In nan property of AI, companies are increasing faster than investors person ever seen before, she noted. “But oftentimes it’s nan case, what goes up besides sharply comes down,”Gao said. “So nan mobility is, ‘is this maturation sustainable?’” 

In a Series C, investors are looking for “compounding loops,” aliases seeing that nan institution gets stronger arsenic it scales, she said. 

“Does your merchandise get amended for each caller customer you sign? Does your CAC [customer acquisition cost] alteration aliases summation for each caller personification you bring connected board?,” she asked.

If nan reply is yes, past investors will “lean in,” Gao said; if nan reply is “no,” past investors are astir apt to “lean out,” moreover if a company’s metrics look very strong. 

Finally, she said, founders should dainty fundraising for illustration a go-to-market run and activity to create relationships pinch VCs earlier pitching them for capital. Gao cited her patient arsenic an example. Sapphire likes to put successful a institution astatine nan Series B level, but they usually person known nan institution for a twelvemonth aliases longer. 

“That intends astatine nan Series A, moreover though we’re not actively leaning successful to effort and raise, we’re trying to build a narration pinch a institution and pinch nan founder,” she said. “We’re getting accusation and we’re processing a longitudinal image of really this institution has progressed.” 

She said founders should commencement building a “lightweight investor CRM,” aliases a database managing nan relationships pinch investors. 

Investors return notes while gathering pinch founders, and founders should do nan same, she said. Founders should constitute down nan names of partners, what they for illustration to put in, and what companies they’ve backed recently. Create a distribution database and nonstop retired periodic updates to nan investors connected it, she said. “This is an easy measurement to support inventors successful nan loop.” 

Perhaps astir importantly, however, Gao noted that a institution looking to raise a Series C should not participate a fundraise until they’ve received a awesome from aggregate firms that they’re willing successful backing nan round. 

“The past point you want to do is clip nan marketplace incorrectly,” she said. After all, timing is everything astatine nan Series C level. “It’s not astir luck, pitching to a 50 and hoping that 1 says yes,” she continued. “It’s really astir timing and readying ahead.”