INSART CEO Declares VCs All In on AI. What Happens to Everyone Else?

VCs are excited to back AI companies at red-hot valuations, but everything else is really challenged.

Vasyl Soloshchuk, CEO of INSART
Vasyl Soloshchuk, CEO of INSART

AI has become the crown jewel of venture capital, driven by breakthroughs in generative AI. High-profile successes like OpenAI, alongside tangible business applications across industries, have fueled investor confidence.

In 2024, AI startups captured one-third of all U.S. VC investments, dwarfing allocations to other verticals. Some AI startups now command valuations exceeding 50x their revenue, with VC firms racing to get in on the action early. The narrative is straightforward: investors see AI as the next industrial revolution, leading to a fear of missing out (FOMO) that drives inflated valuations.

Startups outside the AI bubble are seeing reduced term sheets, often at valuations that fail to reflect their potential. With VCs dedicating disproportionate resources to AI, non-AI startups also face extended timelines to close rounds.

Many investors acknowledge this imbalance but remain drawn to AI's growth potential. Will this trend change in 2025? We discussed it with the CEO of INSART, Vasyl Soloshchuk, a tech entrepreneur and investor with 20 years of experience in scaling startups and delivering impactful software solutions.

Investor Myopia

The intense focus on AI risks creating a bubble while stifling innovation in other sectors. Many venture funds leave sectors like fintech, where Gen AI applications are limited and underserved. Fintech deal counts remain stable, averaging 110 deals per quarter in 2024 compared to 111 in 2023. However, seed-stage activity in this sector has slowed, with fewer than 40 new seed deals in Q2 and Q3 of 2024, the lowest levels since Q1 2019. Other industries, such as edtech, wellness, and logistics, are experiencing a steep decline in investment. For example, global investment in online education startups fell to $3 billion in 2024, the lowest in a decade.

Non-AI startups often face pressure to integrate AI into their offerings to attract investor attention, even when AI isn't a natural fit for their core business. The real challenge for them is to demonstrate that their markets are equally transformative in their own right.

The INSART startup accelerator gathered insights on the best ways to overcome investor fatigue today. One of them is to show high proven demand in the industry-specific niche, backed by real customer stories and results. Being focused on fintech startups, they advise focusing on use cases that need precision and use data to demonstrate that the target market is ripe for disruption and untapped opportunities. There are many such areas in fintech: regtech, predictive analytics, risk assessment, fraud detection, and high-frequency trading—namely, any application that isn't going to be commoditized within the near future.

Another opportunity is to reimagine how we work with data. As recent statements of Satya Nadella claim, in 2025, there will be far less SaaS, and AI agents will access the database directly to extract what a customer needs. That's why data quality and availability are the next oil.

Analytic Marketing startup that takes part in the INSART accelerator program works just on that – building a white-hot center of AI and ML insights. Their investor pitch contains all the essential parts a startup should have to win—well-known early adopters from the Fortune 100, clear and refined strategy, and strong partnerships, including software development, demand generation, and fundraising, to run operations and fit in the ecosystem seamlessly. Founders who worked in fintech before launching their startup are also a positive signal for investors—they already have a deep understanding of customer pains and their network of partners and customers who are ready to give the solution a try. In 2025, more startups like Analytic Marketing that have all these boxes ticked will get funding even despite the AI frenzy soaring.

Crawl, Then Run

It's always better to have a solid sales pipeline with real clients rather than faked AI. A report by Boston Consulting Group reveals that only 26% of companies have developed the necessary capabilities to move beyond proofs of concept and generate tangible value from AI. So, non-AI startups can adapt to the new reality by demonstrating tangible, near-term returns.

One strategy for this is to prioritize ideas that solve pressing problems and offer immediate value delivery. Concrete data on customer impact bolsters credibility needed for an initial push of the project. Starting a paid proof of concept development for some specific customers is also a great idea to test and refine the product before presenting it to investors or a bigger audience.

Locking in clients early is another no-brainer for founders. Even a pipeline filled with LOIs (letters of intent) or MOUs (memorandum of understanding) can tip the scales for early-stage investors. It's all about proving traction, even before the big contracts roll in.

It's 'Bring Your Own Money'

We stepped into an era when exploring alternative capital is not an option but a necessity. Early-stage investors still look for initial traction of at least $200,000 ARR. Grants, crowdfunding, and corporate partnerships offer viable paths outside traditional VC funding. Getting a bunch of small checks of $25,000 is often a great leverage for a new venture before closing an investment round.

Due to this new reality, services like Pipe or Capchase, which allow companies with recurring revenue streams to access capital by selling their future revenue to institutional investors, have been trending for several years in a row.

Helping other startups attract funding caused more of them to appear in the fundraising space. Smart Grant Solutions works on making it easier to get grants for various purposes, overcoming compliance issues. Being a seed startup themselves, MissionGranted closed the round and built an MVP, both with the help of the INSART accelerator. This firm helps fintech ventures find the right strategy to navigate the seas of getting funded and building cost-effective solutions in the ways that fit them most, whether it's introducing AI, reviewing value propositions, or industry-valuable introductions. For Smart Grant Solutions, their support in pitching investors resulted in their product being launched in the first quarter of 2025.

In a Nutshell

Let's face it—investors are zeroing in on startups with diverse, predictable revenue streams, giving AI, infrastructure, and subscription-based models a leg up in today's market. Still, while seed-stage activity has slowed, deal counts in fintech and other sectors are holding steady, with hot niches like embedded finance, regtech, and sustainable finance keeping investor interest alive.

Funding is changing, not closing. Startups are finding creative paths to secure capital, from small angel checks to alternative financing. Partners like INSART are stepping in to help refine strategies, polish pitches, and deliver proof-of-concept demos highlighting growth potential and scalability.

Getting funding isn't harder; it's just different. The rules have changed, but for founders who can adapt, this shift could unlock even bigger opportunities.

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