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Forbes
09-07-2025
- Business
- Forbes
'Seed-Strapped' AI Startups Are Refusing Millions— To Make Billions
Investors Chasing AI startups Valuation, headcount, and total capital raised are the traditional markers of startup success. But what if that conventional wisdom is actually a relic of the SaaS era? AI startups that have asked that same question are now turning to a new, 'seed-strapping' funding strategy to become profitable, keep their stake in the company, and avoid the notorious dilution treadmill of venture capital. A story of a particular AI CEO, Pukar C. Halal of Craft Ventures-backed SecurityPal is what put this trend on my radar. And I'm seeing a pattern emerging in entrepreneurship that's worth exploring: in 2025, you can scale to profitability while incurring far fewer sunk costs, and this means entrepreneurs can retain ever-larger shares of their own companies—often to the disdain of their early of climbing the 'Series A-to-IPO' ladder, this new cohort of AI founders is raising one seed round—if any—sprinting to profitability, and basically skipping the traditional follow-on rounds venture capitalists depend on for valuation mark-ups and expanded founders, a self-funding, cash-flow-positive company is the dream—more control, more equity, and the ability to fundraise on their own terms, if they so choose. But for many traditional venture investors, this is dead money with no new valuation mark-ups. As this seed-strapping trend gains momentum, AI startups may be the clearest indication yet that the old, growth-at-all-costs model is broken, and the balance of power may be shifting towards entrepreneurs. Venture Math Has Flipped Right now, venture capitalists are sitting on record amounts of unused capital, known as "dry powder," which has reached nearly $500 billion as of mid-2025. Yet IPO markets are just starting to thaw, while billion-dollar acquisitions—which were commonplace through 2021—have been scarce ever since rising interest rates and market uncertainty slowed deals in 2022. Without these exits, VCs can't return profits to their own investors and must rely on paper mark-ups—increased valuations from later funding rounds—to show results in higher competition for fewer attractive deals. It also drives up entry prices, slows returns, and makes it harder for VC firms to raise future funds. But for seed-strappers, their strong financial position gives them the leverage to set deal terms in their VCs vying for a shrinking pool of standout opportunities, founders can choose the most founder-friendly investors and auction scarce equity to the highest bid term sheet. This creates higher valuations, minimizes dilutions, and allows the company to set protective provisions in place that preserve equity and control. And, with no public-market deadline looming, founders can focus on building durable cash flow instead of chasing vanity metrics for Wall is this supply-demand mismatch clearer than in AI, where falling compute costs and open-source models let teams reach profitability on a shoestring. Why AI Economics Have Changed It's never been cheaper to build a profitable AI business. Cloud computing costs, particularly GPU prices essential for AI training, have been plummeting. At the same time, powerful open-source AI models like Meta's Llama have drastically lowered entry barriers, allowing lean, disciplined teams to deliver market-ready products increased efficiency means many AI companies can now achieve meaningful revenue well before even reaching what used to be considered Series A territory. This fundamentally changes venture economics. Lower costs and faster paths to profitability grant entrepreneurs unprecedented leverage, allowing them to dictate deal terms on their own timelines—or reject outside funding altogether. A New Cohort of AI Entrepreneurs Here are a few companies that have embraced seed-strapping and found skyrocketing success along the way:After raising $21 million Series A from Craft Ventures, SecurityPal AI built a hybrid AI platform that pairs LLM agents with a team of 300 forward deploy analysts at its 24/7 RLFH command center in Kathmandu, aka 'Silicon Peaks.' Think Surge AI but for the fast-growing Security Assurance market at the intersection of GRC, cybersecurity, and revenue. What once took weeks now takes hours with SecurityPal. The company quickly became profitable, landing six- and seven-figure deals with Fortune 500s and top tech names including OpenAI, Grammarly, Airtable, and then, the founder hasn't raised another dollar despite, according to inside sources, fielding interest from over 100 firms. In an email from Pukar C. Hamal, SecurityPal AI's CEO, to somebody inquiring about investing, Hamal replied,'we're already profitable, and we're taking customers away from the Big Four every week. My focus is on scaling revenue right now, not growing headcount with venture capital or increasing our paper valuation.'SecurityPal AI's last valuation was $105 million, but, it appears Hamal shares the sentiment of quite a few AI founders these days: the only metric that matters is could not be reached for comment on this AI, a bootstrapped data-labeling powerhouse, took seed-strapping one step further by skipping outside funding entirely. While heavily-funded rivals like Scale AI raised hundreds of millions in an effort to scale quickly, Surge AI grew organically and is now generating over $1 billion annually. Their platform tackles the bottleneck of quality, human-labeled data for LLM training, leveraging a global crowd-workforce platform to deliver premium RLHF datasets to customers such as Anthropic and a company that bolts AI-powered edge modules onto factory equipment, bootstrapped itself to $80 million in annual revenue before accepting a single outside investment. When Bright AI's founders did raise a meager $15 million, it wasn't because they needed to. It was optional R&D money to test new form factors while keeping full control of the business. They kept all of their board seats and routinely turn down nine-figure term sheets from growth startups like these are leading the charge when it comes to rejecting the blitzscale model and shifting power back to entrepreneurs. However, investors don't share the same enthusiasm. Why Investors Are Annoyed—And Founders Don't Mind Investors accustomed to frequent fundraising rounds and rapidly increasing valuations find seed-strappers frustrating because it chips away at the industry's core sales pitch: raise aggressively and then raise again. Without further fundraising, investors can't increase valuations on paper, nor can they easily exit their investments. For venture firms whose performance metrics depend heavily on these mark-ups, seed-strappers represent a wrench in the traditional venture machine, and investors are taking losses as a founders don't seem troubled by their investors' impatience. This is likely due to the fact that reducing their reliance on venture capital means founders now have the freedom to focus on scaling their company, rather than chasing fundraising cycles. Staying lean allows them to control their destiny and maintain ownership and strategic flexibility without external pressure and unnecessary oversight. What This Means for Entrepreneurs and InvestorsFor aspiring entrepreneurs, seed-strapping represents a path of greater autonomy, lower risk, and a higher financial upside. It challenges the assumption that startups must continuously raise capital to succeed. Instead, founders can leverage capital-efficient technologies to organically build profitable businesses early on, thereby maintaining control and maximizing personal equity. In this new playbook, customer revenue is becoming the cheapest form of investors and those interested in venture finance, seed-strapping raises fundamental questions about the venture capital model itself. As the IPO window narrows and M&A appetites become more selective, funds can no longer rely on follow-on rounds for paper mark-ups or quick exits. Instead, the game is shifting towards underwriting genuine cash-flow durability to an 'earn more, own more' model that favors profitability over investors, entrepreneurs, and observers grapple with the shifting landscape, one thing is clear: this is a return to financial fundamentals, signaling a future where profitability is the hallmark of a successful startup.
Forbes
02-05-2025
- Business
- Forbes
How To Outsmart Tariffs: Companies And Experts Share Their Top Advice
It almost goes without saying that the constantly-shifting tariff proposals coming out of the Trump administration over the last several weeks have thrown global supply chains into chaos. With new duties hitting imports and international trade tensions flaring, companies are facing spiking costs, vanishing vendors, and increased security risks that are already testing resilience across industries. Whether you're a small business owner, or just trying to keep your own budget and investments stable in a tumultuous market climate, here are 10 ways to rethink your vendor mix or money strategy. Each is inspired by a real-world innovator thriving amidst market upheaval and setting an example for what it means to weather the storm. Before reacting to headlines or inflation talk, take care of your own finances. That's rule number one, says Jason Tartick, bestselling author, host of the Trading Secrets podcast, and former banker turned financial strategist. 'Do not overspend trying to guess what you'll need down the road,' Tartick said. 'If demand is low or uncertain, don't panic buy. Focus on your financial wellbeing first and foremost.' Whether you're weighing a big purchase or watching prices rise, staying calm and grounded helps you make better financial decisions. 'All businesses operate for profit,' Tartick said. 'If tariffs drive up costs, those costs almost always get passed on to the consumer.' He added that investors and economists are watching closely. 'The higher the tariff percentage, especially by country, the greater the impact you'll see at checkout.' This rings especially true for perishables: Fruits, vegetables and other short-shelf-life goods will likely see price hikes first. With rising prices, holding onto idle cash isn't the answer. 'Make sure you have an emergency fund that covers three to 12 months of expenses,' Tartick said. 'But beyond that, don't let your money sit in a zero-percent account.' He recommends high-yield savings accounts paying 2% to 5%, which help your money work harder while staying accessible. SecurityPal, a customer assurance platform, is harnessing this moment by helping businesses seamlessly switch vendors–a task that is especially urgent for those working with international supply chains. Their AI-powered platform reduces the traditionally lengthy process of completing vendor security audits from as long as several weeks to just a few hours. CEO Pukar Hamal, bridging San Francisco and Nepal, told us, 'Tariffs demand speed, but security's non-negotiable.' For small businesses scrambling to swap vendors, SecurityPal's approach provides a reminder to complete a thorough assessment before signing new contracts. For individuals, the company's AI-driven approach is a reminder to use tech wisely in this moment. Automate your bills and leverage AI tools to help you streamline your budget and balance your investments so you can efficiently build a safety net that will help you ride out market jolts with as little damage as possible. In addition to vetting vendors for security, it's also important for businesses to be strategic when it comes to choosing the right one at the best price. SIB, an efficiency optimization firm trusted by some of the world's largest PE funds, specializes in procurement, auditing contracts and negotiating deals to keep new clients profitable. For companies replacing overseas SaaS or parts, SIB's expertise helps clients avoid expensive flubs. For individuals and small business owners, it's important to know when to call in help. Be sure to do your own vetting to find trusted vendors, financial advisors, or tax professionals who can save you from bad moves and help you be strategic with how you manage your spending and expenses. 'If tariffs hit fuel or airline parts, flight prices will go up,' Tartick said. 'You'll also see rising prices in tourist-heavy areas due to more expensive imported goods.' His advice? Book early, use your travel rewards wisely, and lean into road trips or domestic getaways when you can. 'Travel is still possible—you just need to be more strategic,' he added. One of the core ideas behind tariffs is to generate new demand for 'Made in America' products, and this applies to businesses as much as it does individuals. For tech firms that rely on chips to build their hardware, Positron, a Reno-based AI inference processor maker, helps firms reduce their reliance on overseas supply chains, which have traditionally dominated the market. Similarly, BBB, a biological computing company, builds their human-neuron based chips in the U.S., which are shown to reduce inference costs considerably in computer vision models and LLMs. In New York, a Founders Fund-backed startup called Nanotronics doubles down on American chip manufacturing with Cubefabs—AI-driven microchip factories that enable companies to make their own chips without complex foreign supply chains. Their chips are made from American-sourced gallium oxide, as opposed to China-sourced silicon. Similarly, Wrap Technologies–a public safety company– deliberately manufactures all of its solutions in the U.S. This includes BolaWrap, a non-lethal and painless compliance tool–an innovation that differentiates it from competitors that manufacture pain-complicance tools and rely heavily on foreign supply chains. They recently announced that their new global headquarters will be in Virginia— thousands of miles away from the now-tariffed places their competitors source their products from. While these companies operate within the 'B2B' and 'B2G' spaces, their choices to manufacture domestically serve as a reminder for small businesses and consumers to source and buy locally when you can–especially once the cost of imports goes up. And for investors, it may be wise to purchase domestic stocks that are less susceptible to losses that may result from trade wars. Forward-thinkers don't wait for the next tariff wave or major market event—they innovate regardless. WindBorne Systems, a planetary intelligence company operating a global constellation of AI weather balloons, builds adaptable supply chains by rethinking logistics to sidestep disruptions. a hub for open-source developers, taps a global talent pool to keep costs nimble and operations flexible. Both companies prove staying ahead beats scrambling. For investors, it's crucial to never bank on one income or stock. Whether it's starting a side gig to complement your day job, or spreading your 401(k) across sectors, by keeping your options—and portfolios—diversified, you're far less likely to find yourself in a panic any time there is a market shift. Tariffs unleash thousands of variables—cost surges, shipment delays, supplier shifts—but the most proactive companies stabilize early. Emergence AI is one company helping others do this. Their AI orchestration platform can help businesses anticipate and adapt to tariff-driven complexity by orchestrating models to perform any number of complex tasks — i.e. how things like steel price spikes might delay production, optimizing shipping routes and forecasting risks in real-time. Another player in the AI space, GenLayer, tackles tariff pressures with Intelligent Contracts, enabling AI-driven supply chains to negotiate and settle deals autonomously—bypassing slow human systems and maintaining trust when vendor reliability wanes. Meanwhile, in the healthcare sector, Aion BioSystems, with its TempShield device for remote patient monitoring, has already locked in their inventory and rates with suppliers — to ensure healthcare clients—hospitals or individuals—aren't hit by price surges. This proactive approach has helped ensure continued availability of a lifesaving technology that's in high demand nationwide, particularly for pediatric cancer patients whose health depends on real-time monitoring. Individuals and small businesses can take the same approach when managing finances–especiallty when it comes to stabilizing your fixed and recurring costs. Lock in a fixed-rate mortgage, negotiate a commercial lease for your small business storefront, or snag a discount on your cell phone bill. Much like larger corporations, you win by planning ahead. Whenever recessionary pressures loom, people tend to opt for DIY home edits and repairs, rather than hiring professionals. EndlessAI's Lloyd, a video assistant, helps businesses fix in-house gear—like factory chillers—cutting down on vendor reliance. For individuals, Lloyd can show you how to repair your fridge, pool pump, or car, slashing service costs. If you find yourself pinching pennies, try to DIY where it makes sense. Skip the $100 handyman or $500 mechanic when a $20 part and help from a tool like Lloyd can help you get the job done. Every dollar saved is a dollar to invest or pad your savings account. Tariffs are upending supply chains, but companies are already proving adaptation is possible. For you, the key is to remain agile and adaptable—automate, diversify, negotiate, DIY, innovate. Whether you're a business owner or juggling bills, the winners don't flinch in the face of uncertainty–they pivot, stabilize, and plan ahead.
