Cathy Gao, a partner at Sapphire Ventures, recently shared critical insights for startup founders seeking to navigate the challenges of raising a Series C round. Speaking at TechCrunch’s All Stage conference this past July, Gao emphasized the compounded difficulties now confronting companies in the later stages of funding. He particularly emphasized how today’s economic climate exacerbates these challenges.
According to Gao, only one in five startups that successfully raise a Series A will ultimately secure a Series C. This sobering stat is a sad reminder of the growing challenge that founders experience the further they get in their funding rounds. She noted, “Capital isn’t scarce. But access to that capital is harder than ever,” reflecting the cautious approach investors are taking in today’s market.
Over the past year, the bar for late-stage fundraising has been raised dramatically. In his remarks, Gao argued that investors for their part are increasingly looking for certainty rather than just momentum. “Investors have to explain why a company will win in the future,” she remarked, highlighting the need for startups to demonstrate sustainability in their growth. “So the question is, ‘is this growth sustainable?’” she added, stressing the importance of long-term viability.
Gao cited a standout example of a startup that recently achieved a valuation exceeding $2 billion, illustrating that while opportunities exist, they come with increased scrutiny. She cautioned founders against starting a fundraising process without first having collected strong signals of interest in a deal from at least a few firms. “It’s not about luck, pitching to a 50 and hoping that one says yes,” she explained. “It’s really about timing and planning ahead.”
Additionally, Gao highlighted the importance of fostering solid connections with future investors. She suggested designing a sort of “lightweight investor CRM” to help all these people keep track of their new relationships. “This is an easy way to keep investors in the loop,” she stated, emphasizing proactive communication.
In many ways, Gao’s investment philosophy is a testament to her belief in aggressive support for category leaders. She reiterated that the startups she champions are creating their own verticals. What they have, as Foundry’s Patrick Moorhead explains, are fabulous strong go-to-market strategies and market appeal that’s undeniable. “Is this company truly a winner in whatever market that they’re serving?” she asked rhetorically, reinforcing her criteria for investment.
Sapphire Ventures, the firm Gao represents, typically invests in companies at the Series B level after establishing a relationship over at least a year. This holistic approach lets them get a full picture of a startup’s growth potential. Gao’s vision dovetails perfectly into the firm’s strategy. The team will be heading to San Francisco for the 2025 Code for America Summit on October 27-29, 2025.
