According to Sapphire Ventures partner Kathy Gao, the founders of Startup face a disturbing and even contradictory capital market in 2025. “There is no lack of capital. But access to this capital is more difficult than ever,” he said.
The GAO, who spoke at the Tech Crunch All Stage Conference in July, said that for the founders of the Startup, especially the later series C, it is possible to visit this particular economic environment. And they need to start with the reality examination.
To start, he said, it is important to note that only one of the five startups that increases the series makes it to raise the series and, last year, the ban on the latest capitalization has only increased. Investors are no longer chasing pace, as there were many people in the past few years – they’re chasing CertaintyGao said.
“Investors are now asking: ‘Is this company really a winner in any market that they are serving?” Gao said. “The question isn’t really, ‘is this company growing?’ The question has changed, ‘Is this company at a speed where the upside is really undeniable?’
Series C round enhancement companies want to meet some standards. According to the GAO, for one, they are all category leaders.
“They are praising their category,” he said. They have clearly market and undeniable bridges. ” “Typical. They are growing effectively, but there is a traction to show that they are really market leaders in the spaces they work.”
Companies wanting to collect series C should also remember that the matrix is not always equal amount. Certainly, the matrix is important, such as annual profits, growth and retention, he said, but if investors are not sold on the idea that a company can really become a leader in their own place, they are going to move forward.
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“Investors have to explain why the company will win in the future,” he added. For example, there are companies that do not have amazing meters but still raise a suitable series C -round. In one case, a startup cost more than $ 2 billion, he said. “They have been able to effectively convey the story to investors because the company will be an important company over time,” GAAO said of the company’s successful increase. ”
Another rule of GAO: Such -term viral is better than continuity.
He said that in the AI era, companies have never seen investors before they are growing faster. “But it is often the case, what grows, too, goes down.” “So the question is, ‘Is this growth sustainable?’
In a series C, he said, investors are looking for “compounding loops”, or are seeing that the company is getting stronger with the scales.
“Does your product get better for every new customer? Does your CAC (Customer acquisition cost) decreases or increases for every new user who brings you on board?” He asked.
If the answer is yes, then the investors will be “bent”, Gao said. If there is no answer, then investors are most likely to “tilt”, even if a company’s measurement looks strong.
Finally, he said, the founders should treat fundraising as a market campaign and try to build relationships with the VCS before setting a pitch for the capital. Gao cited his firm as an example. Sapphire likes to invest in a company at Series B level, but they generally know the company for a year or more.
“This means that in Series A, although we are not actively inclined to try and enhance, we are trying to build relationships with a company and founder,” he said. “We are getting information and we are producing a longer picture of how this company has developed.”
He said that the founders should start making “lightweight investor CRM”, or a database is about to handle relations with investors.
He said that investors take notes during the meeting with the founders, and the founders should do the same. The founders should write the names of the partners, what they like to invest, and what companies they have recently supported. He said that a list of distributions and send the investors from time to time. “This is an easy way to keep the inventors in the loop.”
However, most importantly, the GAO noted that a company is trying to submit a series C unless they receive a signal from several firms that they are interested in backing the round.
“The last thing you want to do is, the market is wrong,” he said. However, time at the Series C level is everything. He added, “This is not about luck, is pitching at 50 and hopefully someone says yes.” “It’s really about time and planning.”