Two paths to an AI startup

Today, I spoke with a founder who’s at a crossroads.

He wants to build an AI-enabled software business but has two very different options for getting started.

Option 1: Bootstrap by starting a consulting business that develops custom AI tools for clients. This would generate immediate revenue and could help him discover a scalable product idea for the broader market.
​Option 2: Pursue VC funding, which would give him capital to scale quickly but cap his salary at $150K for the foreseeable future.

He leaned toward bootstrapping and wanted help understanding the economics of this path.

We reviewed his financial model together:

• He’s at $4K/month in MRR with one client.

• His goal is $500k in profit within a year.

• He’s offering several tiers of custom AI software, with estimated 50% margins.

To assess whether this is realistic, we broke it down:

• Unit economics: Are his pricing and margin assumptions achievable?

• Scalability: How many clients can he realistically take on with his current resources?

• Time to profitability: Is $1M in revenue within 12 months attainable—or a stretch goal?

This type of analysis is the cornerstone of decision-making for founders.

It’s not just about what sounds good but about mapping the numbers to the vision.

So, what would you do in his shoes?

Go revenue-first and bootstrap—or chase the big future payday with VC funding?

Enjoyed reading this article? Subscribe to receive more via email here. 

Know a Founder or Entrepreneur who'd love this content? Please share it!