A British deep-tech start-up that promises to free AI-powered businesses from rising cloud bills has secured £1 million in pre-seed funding – a deal that highlights one of the most pressing margin issues in the SaaS sector.
Loc.ai, a London-based company that builds so-called “off-cloud” AI infrastructure, has closed the round led by Fuel Ventures, the prolific early-stage investor founded by Mark Pearson. The capital will be used to accelerate the go-to-market efforts of SaaS and desktop software companies that are currently losing margins to the per-call billing model imposed by hyperscale cloud providers.
The pitch is straightforward, although technically demanding. Instead of routing every user request through a remote data center and paying a fee to Amazon, Microsoft, or Google for each one, Loc.ai shifts the artificial intelligence workload directly to the customer’s own equipment, be it a laptop, workstation, or dedicated edge hardware. The result, the company argues, is faster performance, far stronger data protection and, crucially for CFOs, predictable fixed costs instead of variable cloud fees that adjust little to user growth.
Co-founder Joseph Ward didn’t mince his words. “For years, we have been handing over control of our most critical AI infrastructure to companies that we do not own or have any influence over,” he said. “Inference costs continue to rise. Services are shut down without warning. Loc.ai exists so that developers, governments and companies never have to accept these terms again.”
This message comes at a time when the economics of generative AI are under serious scrutiny. As AI is no longer an add-on feature but increasingly the product itself, embedded in meeting tools, writing assistants, customer support platforms and code co-pilots, every keystroke can trigger a billable event. For fast-growing software companies, the result is a cost curve that rises in lockstep with usage, eroding the margin economics that have long underpinned the SaaS model.
Loc.ai also capitalizes on the UK’s increasing push for sovereign AI. Sensitive material, from meeting minutes to customer conversations, is currently routinely sent via third-party cloud APIs that lie outside national jurisdiction. By keeping inference on-device, Loc.ai claims to completely eliminate this exposure, giving customers full control over where their AI runs and where their data resides.
The technology is becoming viable due to the rapid advancement of consumer hardware. Modern laptops can now comfortably run open source models in the seven to thirteen billion parameter range, which the company says is enough to power the majority of enterprise and SaaS use cases without ever calling home.
Loc.ai was selected for the first cohort of the Google for Startups Accelerator 2025, a program that gave the team early exposure to the highly efficient models Google is building for consumer devices. This approach has shaped the company’s roadmap and, the founders argue, positioned it for the architectures that will define the next decade, rather than those dominating headlines today.
Ward and his co-founder Saif Al-Ibadi are not first-time operators. The pair previously built a deep tech company applying generative design to defense and aerospace engineering and counted the Ministry of Defense among their clients, delivering the UK’s first generatively designed rocket engine and reportedly reducing design times by more than ninety percent. Their experience in resource-constrained AI has already been put to commercial use through a multi-year deal with B2Space, which has deployed Loc.ai’s agents at the edge of space and reduced bandwidth costs by a similar amount.
Mark Pearson of Fuel Ventures said the company is supporting a problem that is quickly becoming impossible to ignore. “Loc.ai solves a critical, margin-depressing challenge for SaaS as AI usage increases,” he said. “Their deep technical expertise and track record of deploying AI in constrained environments positions them to deliver confident AI at scale. We are excited to join Joe and Saif in helping companies take back control of their technology and costs.”
For the CTOs, technical leaders and founders that Loc.ai is courting, the proposal is simple: turn unpredictable variable costs into fixed costs, take back control of sensitive data and stop subsidizing hyperscalers’ growth with their own margin. With the pre-seed round now closed, the company believes an increasing proportion of the UK software industry is ready to listen.
