From Brink of Collapse to Profitable Growth: Founder Shuns VC Funding for Sustainable Success at SecurityPal AI

In the tech world, a familiar narrative prevails: conceive a startup concept, secure venture capital funding by selling a portion of your company, generate revenue, and subsequently seek additional investment, repeat until an initial public offering (IPO) or acquisition occurs. However, Pukar Hamal, CEO of SecurityPal AI, challenges this norm after raising a $21 million Series A round in 2021, only to find himself on the brink of financial collapse a year later.

Established in March 2020, SecurityPal AI is Hamal’s second venture. His earlier company, which experienced an acqui-hire exit, raised funds before achieving product market fit, a common practice among founders. Looking back, Hamal regards this decision as a significant mistake. For SecurityPal, he adopted an alternative approach: the company reached $1 million in annual recurring revenue (ARR) before seeking funding, and then only secured one round – the Series A.

SecurityPal leverages AI to expedite enterprise security due diligence, a critical process that occurs during large corporate transactions when entering new IT agreements. The platform promises to condense the security review from months to days or even hours, enabling businesses to save money and close deals more swiftly. Notable clients include Airtable, Figma, LangChain, Grammarly, and others.

However, in 2022, Hamal encountered a crisis as interest rates surged and the venture capital market collapsed. Securing additional funds proved challenging given the company’s high capital burn rate, which left only 14 months of remaining funds. This predicament served as a wake-up call. To extend their runway and strive for profitability, Hamal was forced to implement significant cost cuts, resulting in layoffs that he found deeply painful.

Despite the resurgence of VC funding in 2025, particularly for AI startups, SecurityPal has yet to secure another round. Hamal believes that accepting venture capital comes with its own set of drawbacks. “The more capital we raise,” he stated, “the higher the expectations will be, the more control we’ll lose over the company, and the more pressure we’ll feel to hire individuals who might not be the best fit.”

VCs prioritize growth above all else, often valuing rapid revenue expansion over improved gross margins. This approach can lead companies to operate at a loss while still experiencing increased sales, as VCs trust founders to eventually achieve profitability. However, if this goal remains unattainable, the company may not survive.

Hamal seeks sustainable and healthy growth for SecurityPal – slow and steady. By limiting sales to a select number of deployments at any given time, his team can ensure that all customers receive thorough onboarding, even addressing edge cases. He wants to avoid rapid sales followed by customer churn during renewal periods, a common occurrence due to the pressure to continually grow.

Instead, Hamal finds that slower ARR can lead to healthy gross margins and effective cash collection. While he is not against venture capital, he encourages founders to consider alternative paths to growth. “I raised venture capital,” he said, “and I haven’t raised it again because what I’m trying to do is position the business so that it doesn’t need venture capital repeatedly.”

In addition to discussing his experiences, Hamal offers suggestions for finding capital outside of venture funding in a broader conversation on the Equity podcast.