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The “Bank of Best Friends” is a headline phrase for raising startup money from a founder’s personal network—not a formal bank or a standard financial product. It reflects a wider choice some founders are making: take smaller amounts of capital, build toward revenue, and avoid treating successive venture rounds as the default path. That approach, often called seed-strapping, can preserve control and keep attention on customers, but it is not easy money or a fit for every business.
What does “Bank of Best Friends” mean?
It means financing a company through people who already know the founder: family, friends, and sometimes customers or members. In the case of Our Third Place, the report describes founders raising from family, friends, and members while choosing to grow a community without aiming for millions of members.
The phrase is informal shorthand, not a description of a bank account, lending program, or standardized investment. The central question is how a founder funds the business—and what they are willing to exchange for that money. Personal-network funding may be structured in different ways; the phrase alone does not tell you whether the money is a gift, a loan, or an investment.
What is seed-strapping?
Seed-strapping combines a smaller seed investment with a plan to build through revenue, rather than assuming that a company will raise a large seed round, then a Series A and Series B. It can be deliberate: a founder may want a durable, smaller business or a different growth and exit timetable. It can also happen because a follow-on round is hard to secure.
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Caroline Lewis, managing partner at Nura Ventures, described the shift this way: “You can go back to business fundamentals of building a product that customers want to buy, then you can raise some capital and get some decent traction, and don’t necessarily have to be beholden to the traditional venture train.” That is a case for prioritizing customers and revenue; it is not a guarantee that a startup can finance itself that way.
Why some founders choose it—and why others may be pushed toward it
More control and a growth target that fits the business
A company designed to serve a focused community or reach steady profitability may not need the scale that venture investors typically seek. Founders who raise less can avoid some dilution and investor-driven pressure to pursue rapid expansion. The trade-off is that they also have less outside capital available to hire, develop a product, or move quickly into a market.
Our Third Place illustrates the intentional version. Founder Katherine Naylor Pullman started the networking group as a part-time project. The report says it grew to 1,800 members in 40 cities. Pullman said, “If someone were to throw us millions of dollars, they would then want millions of members,” and added, “I firmly believe you cannot scale community by the millions.” CEO Ashley Preininger said the company did not feel it needed a huge influx of cash to do what it needed to do.
A difficult gap after seed funding
Some companies need more money to reach the next milestone but do not yet match the scale or growth profile that a large venture round is meant to finance. Precursor Ventures managing partner Charles Hudson called this “that little middle period”: “The biggest challenge is: how do you finance these companies through that little middle period?” For founders in that position, seed-strapping may be a choice, a necessity, or both.
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Outbyte Driver Updater FREEScan for outdated or missing drivers - takes under a minuteDriver Scan →Outbyte PC Repair FREEClear out junk files and repair common Windows errorsFree Scan →Figures attributed to Carta in Amanda Hoover’s October 5, 2026 report illustrate how many companies in one cohort did not proceed through conventional venture rounds. Carta reported that 41% of U.S.-based companies that raised a seed round in 2022 did not fundraise beyond it, while another 21% continued raising but did not pursue a Series A. Fewer than a third of the 2022 seed cohort had reached Series A by 2025, compared with about half of the 2018 seed cohort reaching Series A within three years. Carta also reported median headcounts of six to eight for companies that did not progress beyond seed, versus 22 for companies that raised more.
Those figures describe fundraising paths and company size, not why each founder stopped raising or whether the outcome was intentional. Carta insights manager Hamza Shad said, “The overall trend is that graduation rates have decreased,” and that seed-strapping “whether willingly or unwillingly” appeared to have become more common.
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Fewer deals and concentrated funding
Hoover’s report attributes a decline in global venture deal count to PitchBook: more than 17,000 deals in the first quarter of 2022 versus about 8,500 in the second quarter of 2026. It also attributes to Crunchbase the finding that AI startups captured at least half of venture funding from late 2024, with the share reaching 80% at the beginning of 2026. The report says total deal value was at an all-time high, driven largely by large deals, but gives no amount.
These are figures quoted second-hand in Hoover’s October 5, 2026 report, not independently verified here. Deal count, deal value, and a startup’s odds of raising are different measures; none alone proves that every non-AI or modest-growth company has been shut out. The report also says all-female leadership teams received 6.5% of venture deals in 2024, without identifying the underlying data publisher. That figure is a reported share of deals, not a measure of the quality or funding prospects of an individual company.
How seed-strapping compares with conventional venture fundraising
| Question | Seed-strapping or personal-network capital | Conventional venture path |
|---|---|---|
| How much capital? | Smaller investments; the amount depends on the founder’s network and company needs. No standard amount is established. | May involve successive rounds; the report does not establish a standard amount. |
| How does the business grow? | Emphasis on reaching revenue and using it to support growth, where the business model allows. | Outside capital can support faster expansion before revenue covers costs. |
| What growth is expected? | Can suit a focused, profitable, or less venture-scalable business. | Investors generally seek the possibility of very large returns, which can mean pressure for substantial growth. |
| What does the founder give up? | Potentially less ownership or control than with larger rounds, but personal relationships may be exposed to business risk. | Equity and influence are shared with outside investors; fundraising also takes time. |
| What is the main funding challenge? | Having enough capital to reach revenue without relying on a large follow-on round. | Convincing investors that the company can meet their return expectations and securing the next round. |
Examples show different paths, not a guaranteed playbook
Zapier: small early funding, unusually large later outcome
Hoover’s report says Zapier raised $1.3 million while seed-strapping and later reached hundreds of millions of dollars in annual revenue. It is an illustration of what can happen, not evidence that a typical seed-strapped company will reach comparable revenue.
Breaknine: a different timeline from venture expectations
Lauren Dines said, “It was never my dream to have a venture-backed business.” Hoover’s report describes her AI startup as founded late in 2025 and says Dines may target an exit in three to five years rather than the seven-to-ten-year venture timeline she contrasted it with. Those are her expectations, not a promised exit or a general timetable for startups.
Esker Beauty: bootstrapping before taking smaller seed investments
Founder Shannon Davenport bootstrapped Esker Beauty for about four years, then took smaller seed investments after deciding that venture-capital market theses did not align with her view of the product and customers. She said, “Instead of being super obsessed with your customer, you’re super obsessed with the investors. You have to pick what’s your priority.” Hoover’s October 5, 2026 report said the company was approaching profitability and targeting year-end; that was a reported target, not confirmation that it reached profitability.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How to decide whether this route fits your startup
Before taking money from personal contacts—or deciding to avoid institutional venture capital—work through the business needs and the relationship risks separately.
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- Estimate the capital required to reach a meaningful milestone. Include the time and costs needed to build, serve customers, and generate revenue. If the company needs substantial spending before it can earn revenue, a small personal-network raise may not bridge the gap.
- Test whether revenue can fund the next stage. Seed-strapping depends on a credible route to paying customers and a business that can grow without continual large rounds. Do not treat a hoped-for revenue stream as money already available.
- Choose the growth and exit scale you actually want. A focused company can be a valid goal, but it may not match an investor seeking a very large return. Decide whether those expectations fit before accepting capital.
- Price the ownership and control trade-off. Compare the value of outside capital with the ownership, decision-making influence, and growth pressure that may come with it. Money from friends or relatives can carry relationship costs even when the formal amount is modest.
- Be explicit with anyone considering an investment. Make sure they understand that a startup can fail and that they may lose the money. Clarify what kind of funding is being discussed and the expectations attached to it; do not rely on an informal understanding of what the money means.
- Account for founder time. Fundraising can pull attention from product and customers. But avoiding investors does not eliminate the work of finding enough capital, managing cash, and building a business that can support itself.
- Get transaction-specific advice before taking money. This feature does not establish legal, tax, or securities requirements for a particular raise. Those depend on the arrangement and jurisdiction, so consult an appropriately qualified professional before soliciting or accepting funds.
What the “Bank of Best Friends” does—and does not—tell founders
The phrase captures a visible financing choice, while the evidence describes several different realities: founders who intentionally want a smaller business, companies that can grow through revenue, and startups that may be unable to secure a follow-on round. The same outcome—no Series A—can arise from very different plans. Lauren Dines put the distinction plainly: “It was never my dream to have a venture-backed business.”
That is why the best question is not whether personal-network funding is “hot.” Hoover’s report offers examples and second-hand market figures, but no market-wide count establishing that it is the single hottest funding source. The useful question for a founder is whether the amount, growth plan, control trade-offs, and risk to personal relationships make this financing route workable for this particular company.
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