Who Needs a Seed Round When You Have (Paying) Customers?

Summary:

Why a new wave of AI founders is skipping early VC cash to protect equity, stay lean, and scale profitably

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The Conventional VC Model Is Under Review

For over a decade, startup culture has equated success with three things: how much money you’ve raised, how many people you’ve hired, and how high your valuation has soared. But in the current AI-driven startup wave, a growing number of founders are rethinking this formula.

Instead of raising massive rounds early, some are choosing to “seed-strap”—operating lean, profitable businesses without giving up large equity chunks.

A standout example? Pukar C. Hamal, the founder of SecurityPal, a security review automation company backed by Craft Ventures. Despite being in one of the most hyped sectors in tech, Hamal held off on large early-stage VC investments, choosing instead to focus on customer revenue and sustainable growth.

“If you're early, you're better off with 10 customers than $10 million,” Hamal recently told TechCrunch.

Why Seed-Strapping Is Catching On

At the heart of this strategy is a rejection of the VC dilution treadmill. When a startup raises capital, it often trades off ownership and decision-making power. But in an era where AI tooling is cheap, accessible, and increasingly open-source (think: Hugging Face, LangChain, and OpenAI APIs), the cost of building a minimum viable product has dropped dramatically.

Founders no longer need $5 million to hire a dozen engineers when a lean team with strategic contractors and LLM-powered automations can accomplish the same thing.

According to PitchBook, the median size of a Series A AI deal dropped by over 23% in 2024, reflecting founder reluctance to raise large amounts prematurely.

The Profitability Mindset Over Growth at All Costs

This shift also represents a broader cultural correction in tech. The “grow first, monetize later” ethos of the 2010s left many startups overvalued, overstaffed, and underprepared when capital dried up.

The new wave of AI founders—especially those outside Silicon Valley—are focusing on actual unit economics and building revenue-positive companies from Day One.

Not Just a Trend—A Playbook

Startups such as Contextual AI, Lamini, and SecurityPal exemplify this lean, seed-strapped model. Instead of blitz-scaling with big VC checks, they are:

• Charging from the first customer

• Using low-code and no-code tools to iterate fast

• Hiring small teams of high-output generalists

• Partnering with channel resellers or enterprise sales consultants instead of bloated GTM teams

A 2024 report by Accel found that startups with less than $3M in initial capital were 25% more likely to reach breakeven within two years compared to those who raised more than $10M.

A Word of Caution

This strategy isn’t for everyone. Some AI models require significant upfront compute, regulatory navigation, or trust-building that demands VC-level capital.

But for founders in areas like security automation, developer tools, and AI-enabled SaaS, seed-strapping allows them to focus on traction, not burn rate.

“Dilution is forever. Revenue buys time and freedom,” said Garry Tan, CEO of Y Combinator.

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