Is VC funding losing its appeal for founders in the era of AI?
A few years ago, getting a VC check was the ultimate shortcut. The fastest way to scale. The signal that you'd "made it." But with AI is a little bit different.
Global VC funding declined 30% in Q1 2024. One of the lowest quarters since 2018. And bootstrapped startups are quietly catching up. Recent data shows bootstrapped businesses are growing as fast as VC-backed startups, while spending only about one-quarter as much on customer acquisition.
Meanwhile, AI is changing the math entirely. The resources a founding team needs to build, ship, and scale have dropped dramatically. You don't need a $5M seed round to build an MVP anymore.
And the examples speak for themselves:
Mailchimp: bootstrapped for 20 years, sold for $12B
Midjourney: $500M revenue, $0 raised
Zoho: 150M+ users, never took a dollar of VC
VCs still bring value beyond money: network, credibility, access. That's real. But is it worth the dilution and pressure that comes with it?
So I'm curious:
Are you actively trying to raise, or have you decided to bootstrap as long as possible?
What would actually make you take VC money today?
And if you've done both: which path would you choose again?
Replies
minimalist phone: creating folders
In my opinion, VCs for a while will be operating in the industries that are hardware-heavy (maybe robotics)? But maybe I am wrong.
Timelaps
@busmark_w_nika @harryzhangsfair point, Harry! But with an important nuance.
AI software is still the bigger market. $122B in 2024, heading toward $467B by 2030. That's not small.
But hardware and physical AI is growing faster. 30-40%+ CAGR, from ~$5-6B today to ~$68-70B by 2034. chips, robotics, data centers, edge compute, that's where the capex is going.
I would say: software is bigger. hardware is growing steeper. And if you're betting on the next 4 years, the physical world is just starting to get digitized.
minimalist phone: creating folders
@harryzhangs @byalexai we still need to take into account the geopolitical situation that influences the ownership and trade of resources. We can only predict how the situation is going to play out.
@busmark_w_nika agreed, you can't vibe code a robot but for pure software plays the VC value prop is getting harder to justify every quarter.
minimalist phone: creating folders
@curtis_swick Robotics will be more in the interest of big production companies.
@busmark_w_nika I partially agree Nika.
VCs care about scalability: basically, where invested resources can actually drive meaningful results, ideally within a reasonable timeframe. And software is still very relevant today. You know you can sell software at scale, to thousands (or more) of customers worldwide.
With robotics, the market is still pretty small. There’s a lot of progress needed before robots become truly mainstream and before there’s a big enough market for them. Maybe in a decade, sure, but as of today, I see them as a very small percentage overall.
With a lot of the startups I advise, or even those I build, bootstrapping is becoming a more appealing option. Some (I want to preface some not all!) of the VCs in the UK have started horrific round inflation. What would have been good enough for a Series A round 5 years ago is now the requirement for Seed - WAUs/MAUs/MRR etc.
There is also the consideration of the market as well that means VCs can be more choosy with who they invest in, making it harder.
I think with the tools that are out and about right now you can get to the idea validation stage in a short time for <$50k total investment (if you want a polished MVP) - much less if you are going for a POC.
@dr_simon_wallace I’m on the same page, Simon. Back in the day, it was harder for investors to assess a startup’s potential early on. Now it feels a lot easier.
There’s no need to wait years for an MVP and validation anymore. Teams should come in with an MVP before raising funds and just focus on validating.
The whole build–launch–market cycle is much faster now when it comes to turning an idea into software and getting it to market. That gives VCs the luxury to be more selective with their money and filter out the clearly unattractive opportunities.
I’m curious:what kind of teams do you usually work with or advise? What stage are they at? Which industries?
@byalexai True. I'm torn though, because it simultaneously opens up opportunities, and closes them off - you need to have the initial capital (no matter how small) yourself. Which can become exclusionary.
So, I typically advise from Start Up -> Series A (early stage businesses) who don't have a good support network around them - they are often the most interesting too. I also advise early stage investors with my familiarity in the space and the tech. Industry wise, the majority tend to be around products with a software offering - and i have worked with start ups who need some data analysis or early stage tech development outside of software too i.e. last mile delivery.
I jokingly say I'm like an early stage sherpa.
@dr_simon_wallace Oh, absolutely! For some products or teams, not having funding would definitely make even the very first phase difficult. It’s a small percentage, but yes, some would struggle.
Awesome! I’m really glad you shared your experience. Do you mind if I add you on LinkedIn?
My take, AI moved the threshold. Now you don't need capital to build (create) but to scale (distribute). Building got cheaper. Distribution didn't. If anything, it got harder. What changed the most is founder leverage.
The divide is on the type of startup, I think. Dev Tools, SaaS, Niche B2B, are increasingly bootstrappable. Not all of them, but many more than before. Marketplaces, deeptech (infra), fintech (regulated), still do.
Before founders needed VCs to exist, now only to accelerate something specific. the question is not "should I raise?" anymore but "What am I buying with dilution?", it's always been about the second but startupers "en masse" trended to the first.
The common knowledge usually associate Bootstrap to freedom & control, and VC to Speed & pressure.
Beyond "freedom", Bootstrap is also slower compounding (most of the time), more constraints on bets, less ability to brute-force distribution.
Beyond "pressure", VC is forced ambition, access to unfair advantages, and sometimes necessary for category leadership.
So in the end it not freedom vs pressure but control vs speed.
I've done both worlds, overall it's less a preference, more a property of the project itself. Something is certain "grow at all costs" got harder to justify and fund, trying to get funded for anything and everything too, and that is good.
Lower barriers create more startups. More startups create more noise. And suddenly distribution becomes the real bottleneck again. That's where capital still plays.
If we consider, AI might actually increase, funding, and the importance of VC at the top end.
@luuuc I agree. That’s actually why I think VCs are even more important today. Because they give you distribution. YC will feature you across their channels and social media, and guide you on what to focus on. These things are still done by people, or built on top of what accelerators/VCs have already created. So at least for me, it still makes a lot of sense today.
When was your experience with VCs, and when were you bootstrapped?
@byalexai Good point, VCs/YC do provide a real distribution layer, which is hard to replicate solo. It's a distribution, not the one. You still need to find what works for you. The best VCs amplify signals that already exist, YC is one of those.
I started bootstrapped (2002, then 2011), went the VC route from 2017–2025, and now bootstrapping again. I'll raise again when it makes sense.
That's why I see VC less as a starting point, more as an accelerator when something clicks.
Curious how you think about timing. Early for distribution, or later once signals are there?
As a VC scout and advisor to portfolio companies, I can chime in here.
VC interest has broadened beyond pure software to hardware-software combos, like laptop attachments or iPhone-connected controllers, where founders still need funding to build and ship.
You're spot on about software: development costs for teams, shipping, and scaling have plummeted thanks to AI tools. Marketing remains a challenge, though. Many VC-backed startups now lean on influencer campaigns, as creator marketing drives the fastest early adoption, much like the hype cycles in web3.
That said, if I had to rewrite your post, I would cite example of AI-first companies or companies that started in the AI era. Your examples (Zoho, MailChimp) don't quite fit the narrative. I'd expect AI-native bootstraps like Midjourney (still widely used and competitive, despite rivals).
I've advised bootstrapped founders hitting $1M–$10M ARR without funding; some of them do desire the networks and credibility that VC firms bring, but they have figured it is not always essential if the founder themselves are well-connected and / or well-known.
@rohanrecommends Great input Rohan!
Thank you so much for all the insights you’re sharing. For many AI-native bootstrapped companies, it’s still early to see what their ceiling really is. They’re growing so fast that I don’t want to include them just yet, since over the next 1–2 years they’ll likely reach much higher ceilings.
Regarding hardware + software: absolutely. I think software is becoming more of a lead magnet, while hardware is where the real value lies. That’s why software on its own won’t always be the core product, but rather a way to enable faster user scaling.
P.S. Could you explain what a VC scout actually is, what exactly you do, and how someone can become one?
I'd only raise if distribution is the bottleneck. Otherwise why dilute?
@maisie_eleanor because it's still a huge booster for a lot of companies.
AI basically gave solo founders and tiny teams the leverage that used to cost $2M in headcount. When you can build, ship, and iterate with a team of 3 doing the work of 15, the math on giving up 20-30% of your company just doesn't make sense for most products anymore.
The only scenario where VC money still clearly wins is when you need to buy distribution or move into a market where speed of spend matters more than speed of product. Think enterprise sales teams, regulatory moats, hardware.
For everything else? Bootstrap until the money would actually accelerate something you can't do with time alone.