I recently exited my $150MM annual revenue startup that’s raised $200MM in venture funding and discovered something shocking:

The way 90% of founders build companies is fundamentally broken.

For decades, we have been trapped in a false binary: bootstrap (and struggle for years) or raise VC (and give up control).

But in 2025, AI has changed everything.

I’m seeing a revolution in how companies are built, and the smartest founders are leveraging a new emerging model that almost nobody is talking about.

Here’s the insider view of all four approaches to building and funding a company, with hard numbers from the trenches. I have gathered them after chatting with 100+ founders and learning from the smart founders on the Lean AI leaderboard:

The Traditional Options (That Are Failing Most Founders)

Option 1: Bootstrapping

You fund everything yourself, maxing out credit cards and emptying savings accounts.

You retain 100% ownership but face a lot of challenges:

90% of startups fail within the first 3 years, and the failure rate is even higher for bootstrapped companies.¹ 8 out of 10 bootstrapped companies fail within 18 months due to cash constraints.

Your personal finances bleed red for years, with no guarantee of survival.

Even successful bootstrappers often take 5+ years to reach mere six-figure incomes (that too after working 80-hour weeks for less than minimum wage).

Option 2: Venture Capital

75% of VC-backed startups never return capital to investors.

Only 0.1% achieve the unicorn exits we read about in TechCrunch.

Yet the model forces ALL founders to operate as if they will be in that 0.1%.

Founders surrender chunks of equity at every round: 20% at Seed, 20% at Series A, 15-20% at Series B…and so on.

By Series C, founders typically own just 15% of their companies, and 99% never reach that milestone.

A founder who builds a $50M company with VC often walks away with less personal wealth than one who builds a $10M company via bootstrapping.

Option 3: Boot-Scaling

You self-fund until you demonstrate meaningful traction, then take a massive funding round (often from private equity).

This approach preserves early ownership but comes with hidden costs:

You endure the cash-strapped struggle of bootstrapping for years.

Then, you dilute massively in a single event (often 40-50% of your company). You also lose control to micromanaging private equity buyers, who often ruin the company culture.

The risk profile is high: You burn personal runway and then bet everything on a single scaling event that fails 72% of the time.

The New Model (That AI Has Made Possible)

Option 4: Seed-Strapping AI-Native

This model is why I’m so excited about the future of company building, especially for AI-native businesses.

You raise a modest seed round ($100K-$1MM) from investors who understand the smartest founders want control and ownership.

You focus on revenue and profitability from day one. You don’t care about the vanity metrics that impress VCs.

You compound revenue growth without further dilution. This allows you to focus 100% on your business without stressing about running out of money or chasing VCs.

With AI disrupting the economics of company building, you can quickly scale to a 7 or 8-figure ARR rapidly and profitably (more founders are scaling AI-enabled services and pricing based on outcomes, which was impossible before).

You take a consistent income from profits rather than waiting for some mythical exit.

Over time, you may be able to actually buy back equity and increase your ownership stake.

One of the most powerful aspects of this model is the ability to compound revenue early.

For example, $100k compounded today at 30% YoY growth for 5 years is much more powerful than $100k that only starts to grow and compound two years from now.

$100k x 1.3^5 = $371k

$100k x 1.3^3 = $219k

= 70% higher revenue

Why AI Has Made Seed-Strapping the Ultimate Model

The economics of building companies has fundamentally shattered in the AI era:

• Y Combinator revealed that 25% of YC W25’s codebases were almost entirely AI-generated. ⁵

• 15+ AI-native companies scaled to 8-figures ARR in 1-2 years with less than 50 employees.⁶

• Software development costs are moving toward zero as AI can generate entire functional systems.

This creates many interesting opportunities:

1. The $100MM solo founder is now possible: I know founders who are domain experts and are building $3-5M ARR businesses with zero employees by leveraging AI.
2. Capital efficiency has gone through the roof: Companies that required $3M to launch in 2020 can now launch with $100K.
3. Time-to-revenue has gone down: AI-native companies can reach the market in weeks, not months or years.
4. ACVs are much higher than traditional SaaS: AI-enabled services can be priced based on outcome instead of per seat. They are capturing the wages portion of a company’s budget, which is multiple times higher than the software budget.
5. The path to profitability has never been easier: Historically, salaries were the biggest expense for startups, consuming 70-80% of capital.

AI-native companies can now operate with minimal or even zero employees, achieving 80%+ margins from day one instead of burning cash for years hiring large teams.

Finally, with seed-strapping, you still maintain the flexibility and optionality to pursue different paths later (cashflow, sell, raise VC, etc), so there is literally little to no downside.

The Four Models Head-to-Head: A Brutally Honest Comparison

Let me break down exactly how these models perform across the metrics that actually matter to founders and investors.

1. Revenue Growth + Funding Trajectory

Why seed-strapping wins:

It combines the best of both worlds: initial capital to execute freely without the stress of running out of money or repeated funding rounds.

You get faster growth than bootstrapping with the sustainable economics VC-backed founders only dream about.

2. Founder Dilution & Ownership Control

Why seed-strapping wins:

It is the only model where founders may actually increase their ownership over time through consistent buybacks.

You get the capital advantages of investment without the endless dilution treadmill of VC.

You maintain strategic control of your company’s destiny.

It is a perfect balance of both ownership and leverage.

3. Founder Liquidity (Money in YOUR Pocket)

Why seed-strapping wins:

It is the only model that consistently prioritizes putting money in founders’ pockets, even from the early stages.

While other founders gamble years of their lives hoping for a unicorn exit that often never comes, seed-strappers build meaningful personal wealth year after year through profit distributions.

It’s financial freedom without needing to sell your company or depend on an external event.

4. Investor Returns & Liquidity

Why seed-strapping wins:

Seed-strapping creates a win-win alignment between founders and investors that other models can’t match.

Investors can get early, consistent liquid returns instead of waiting a decade for an illiquid and highly uncertain reward.

This alignment means investors support sustainable growth rather than pushing for premature exits or unnecessary fundraising rounds (their incentives actually match yours).

Summary of the four models:

The Psychological Reality

Beyond the numbers, there’s a psychological difference too:

Bootstrappers often feel trapped by their “success”. They have created jobs they can’t leave.

VC-backed founders report the highest stress levels, constantly chasing growth while fearing running out of money.

Boot-scalers describe a “roller coaster” of initial struggle followed by pressure to justify the large PE investment.

Seed-strappers consistently report the highest satisfaction, freedom, and control, while keeping the flexibility and optionality to pursue different paths later (cashflow, sell, raise VC, etc)

The AI-Native Path Forward

For domain experts building AI-native companies, seed-strapping offers the ideal balance:

1. Sufficient capital to leverage AI tools effectively
2. Minimal/no dilution preserving founder ownership
3. Fast path to personal profitability
4. Ability to compound growth without the VC treadmill
5. Opportunity to build a “1-person billion-dollar company” as barriers to scale collapse
6. Flexibility and optionality to pursue different paths later (cashflow, sell, raise VC, etc)

If you are a founder (or an aspiring founder), I highly encourage you to consider building AI-native companies and adopt the seed-strapping funding model.

If you are interested in learning more about such founders and the lean, profitable companies they are building, take a look at the Official Lean AI Leaderboard I created.

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