Given the immense capital flowing into AI startups, it might seem like VCs only prioritize AI-driven companies. However, the reality is more nuanced, according to Insight Partners Managing Director Ryan Hinkle, who recently discussed the state of venture funding on the Equity podcast.
Insight Partners, with $90 billion in assets under management, invests across all startup stages and is known for both writing massive checks and leading large funding rounds. Notable deals include co-leading Databricks’ $10 billion round in December, participating in Abnormal Security’s $250 million Series D, and co-leading the $4.4 billion take-private deal for Alteryx.
Hinkle, who joined Insight Partners in 2003 as an intern, reflected on how investment volumes have grown dramatically.
“When I joined Insight, we had raised a cumulative $1.2 billion across four funds. We had invested only $750 million at that point. Today, we invest over a billion dollars per quarter,” he explained.
Despite the AI boom, non-AI startups—especially in SaaS—can still secure significant funding, but at lower valuations. Funding multiples are 30% lower than in 2019, according to Hinkle, with no comparison to the 2021 tech bubble highs.
Hinkle describes this phase as a “great reset”, which he believes is a healthy correction for the market.
How Startups Can Maximize VC Investment
Beyond having AI-driven products, Hinkle emphasized that financial infrastructure is the key differentiator in securing growth-stage funding. He explained that startups must go beyond annual recurring revenue (ARR) metrics and provide detailed financial visibility.
“Startups need to answer questions on margin influences, customer retention rates, and the entire quote-to-cash process,” Hinkle said.
He noted that many young companies still operate with fragmented financial systems, storing invoicing, contract details, and revenue booking data separately, leading to inefficiencies.
“If you can’t produce an anonymized customer record of all transactions with a click, where is your data stored? Why is it scattered?” he asked.
Startups often prioritize growth over financial governance, but failing to refine financial tracking can become a major hurdle when VCs conduct due diligence. Without proper financial transparency, startups risk smaller checks and lower valuations.
Hinkle emphasized that VCs, including Insight Partners, have tightened their diligence processes post-COVID and after the 2021 tech bubble collapse.
“We’re in a post-COVID reset. Many investors got burned, and now if I can’t verify financials with my own eyes, it doesn’t exist,” he said.
While some VCs may still bet on high-growth startups without thorough diligence, he warned that financial mismanagement will eventually catch up. As startups scale and take on more customers, tracking and reconciling transactions will become increasingly complex.
Beyond AI: Startup Success Depends on Talent and Market Fit
Hinkle also highlighted factors beyond AI that impact startup success, including:
- Access to skilled and loyal talent rather than relying on a single geographic hub.
- Challenges of Silicon Valley’s hiring culture, where abundant job opportunities create high employee turnover.
- Key differences between growing a startup in New York versus Silicon Valley, particularly regarding financial management and VC access.
While AI remains a dominant investment theme, non-AI startups can still thrive—if they demonstrate strong financial infrastructure and scalable business models.
