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One free scan finds every outdated or missing driver and matches the right update for your exact hardware.Free scan · exact hardware matchThe “Bank of Best Friends” is a nickname—not a bank or formal financing product—for raising startup money from personal networks such as family, friends, and a company’s members. It is one route into seed-strapping: raising less, then trying to build through customer revenue rather than relying on successive venture rounds. Some founders choose it to retain control or pursue a smaller business; others may end up on this path because follow-on funding is hard to secure.
What “Bank of Best Friends” means
The phrase describes a source of startup capital, not a standardized kind of loan or investment. In the October 5, 2026 report by Amanda Hoover, republished by Yahoo Finance from Business Insider reporting, it refers to founders raising from people already connected to them—including family, friends, and, in one example, members of a community.
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That approach can overlap with bootstrapping, but the terms are not identical. Bootstrapping generally means building with founders’ own resources and business income; friends-and-family money is outside capital, even if it is raised informally. The report uses seed-strapping for a broader strategy: taking smaller investments and aiming to grow through revenue without treating a conventional Series A and Series B as the inevitable next steps.
“Hottest” is a headline description, not a demonstrated market ranking. The report provides examples and market indicators, but no count showing that friends-and-family financing is Silicon Valley’s most common or fastest-growing funding source.
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Why some founders choose seed-strapping
For a founder who can reach customers and revenue without a large upfront investment, a smaller raise can reduce pressure to pursue growth at any cost. It may also leave founders with more control over the company’s direction and let them spend less time preparing for and pursuing institutional rounds. These are possible trade-offs, not guaranteed results: less outside capital also means less money available to hire, build, market, or withstand a slow path to revenue.
The founders in the report describe different reasons for choosing a less conventional path:
- Scale the business to fit its purpose. Our Third Place founder Katherine Naylor Pullman said, “If someone were to throw us millions of dollars, they would then want millions of members.” She also said, “I firmly believe you cannot scale community by the millions.” The company was reported to have 1,800 members across 40 cities, and was raising from family, friends, and members. Its CEO, Ashley Preininger, said, “We actually don’t feel like we need a huge influx of cash to do what we need to do.” Those membership and city counts are company figures reported by Hoover, not independently verified measurements.
- Build a good business without pursuing venture-scale returns. Breaknine founder Lauren Dines said, “It was never my dream to have a venture-backed business.” Hoover reported that she founded the AI startup late in 2025 and might aim for an exit in three to five years, rather than the seven-to-ten-year horizon she associated with venture-backed companies. That is her stated expectation, not a forecast or outcome.
- Keep customer priorities ahead of investor priorities. Esker Beauty founder Shannon Davenport 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 reported that she bootstrapped for about four years before taking smaller seed investments, after deciding that venture investors’ market theses did not match her view of the product and customers.
Seed-strapping can also be involuntary. A founder may prefer a larger round but fail to find investors willing to finance the next stage. Nura Ventures managing partner Caroline Lewis described the broader shift as “the rules are being rewritten,” and said founders can return to “business fundamentals of building a product that customers want to buy” before deciding whether to raise capital. Her view is a perspective on the market, not evidence that the route works for every company.
What reported funding data says—and does not say
Hoover’s October 5, 2026 report attributes the following figures to PitchBook, Crunchbase, and Carta. The original datasets or publications were not independently checked here, so these are second-hand reported figures rather than independently verified data.
| Reported indicator | What the report says | How to read it |
|---|---|---|
| Global venture deal count | PitchBook figures cited by Hoover show more than 17,000 deals in Q1 2022, compared with about 8,500 in Q2 2026. | A comparison of two quarters, not a continuous annual trend or a measure of friends-and-family fundraising. |
| Share of venture funding going to AI startups | Crunchbase figures cited by Hoover say AI startups captured at least half of venture funding from late 2024, with the share reaching 80% at the beginning of 2026. | A reported funding share that helps describe the competitive landscape; it does not establish that every non-AI startup has trouble raising. |
| Seed-stage companies’ subsequent fundraising | Carta figures reported by Hoover say 41% of U.S.-based companies that raised a seed round in 2022 did not fundraise beyond that round, while another 21% kept raising but did not pursue a Series A. | These figures distinguish stopping at seed from continuing to raise without pursuing a Series A. They do not say why each company followed that path. |
| Progression to Series A | Carta figures reported by Hoover say fewer than a third of the 2022 seed cohort reached Series A by 2025, versus about half of the 2018 seed cohort reaching Series A within three years. | A cohort comparison; it is not a prediction for any individual startup. |
| Headcount | Carta figures reported by Hoover put median headcount at six to eight for companies that did not progress beyond seed, compared with 22 for companies that raised more. | A difference in reported median company size, not proof that raising more caused hiring or improved outcomes. |
Hoover also reported that overall deal value was at an all-time high, driven largely by large deals, without giving a precise amount. That can coexist with fewer deals: the count and total dollars describe different aspects of a market. The article’s data, taken together, point to a funding environment in which capital is unevenly distributed and progression to a larger round is not assured. They do not show that a founder’s personal network can replace venture funding for a capital-intensive business.
Carta insights manager Hamza Shad told Hoover by email, “The overall trend is that graduation rates have decreased.” He added, “This suggests that seed-strapping — whether willingly or unwillingly — has become more common.” Graduation data can show that fewer companies reach a later round; it cannot by itself distinguish deliberate seed-strapping from an unsuccessful search for follow-on funding.
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Examples are not a recipe
Our Third Place: choosing a smaller scale
Pullman started the networking group as a part-time project. The report says it grew to 1,800 members in 40 cities and that the founders were raising from family, friends, and members. Their stated preference for a smaller community illustrates a business whose founders question whether mass scale is desirable—not a general argument against growth or investment.
Zapier: an unusually successful illustration
Hoover reported that Zapier raised $1.3 million while seed-strapping and later reached hundreds of millions in annual revenue. It is an example of what this route can look like for one company, not a typical result or a guarantee that a small raise will support comparable growth.
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Breaknine and Esker Beauty: different paths, different aims
Breaknine’s founder described a business that might target a shorter exit timeline than a conventional venture-backed company. Esker Beauty, by contrast, bootstrapped for about four years and then accepted smaller seed investments. At the time of Hoover’s report, it was approaching profitability and targeting year-end; that was a stated target, not confirmation that profitability was achieved.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How to decide whether this route fits
The useful question is not whether friends-and-family funding is fashionable, but whether the company can meet its goals with the capital and risk profile this path entails. Before choosing a fundraising plan, weigh:
- Capital needs: How much money is required before the business can sell, and what happens if the first estimate is too low?
- Revenue path: Can customers begin paying soon enough to fund a meaningful share of future operations, or does the business need substantial investment before revenue is realistic?
- Growth and exit goals: Is the aim a sustainable company at a chosen scale, or does the plan depend on rapid expansion and very large returns?
- Ownership and control: How much equity and decision-making authority are the founders willing to share in exchange for capital?
- Investor expectations: Do prospective investors’ timelines and return expectations match the company’s intended pace and size?
- Fundraising time: Would pursuing another round take attention away from product and customers, and is that trade-off acceptable?
- Downside capacity: Can the company and its founders absorb slower growth, additional dilution later, or the possibility that another round never arrives?
There is no implication that money from personal contacts is easy or risk-free simply because the relationship is informal. Anyone considering it should understand what is being offered and document the arrangement appropriately; Hoover’s report does not provide legal, tax, or securities guidance. The article also notes that AI tools can reduce labor needs for some founders, but it does not establish that AI makes startups cheaper to build across the board.
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The financing gap between seed and scale
For companies that need more than a small seed round but do not fit investors’ expectations for very large returns, the difficult stage may be the middle one: enough capital to reach the next proof point, without a clear match for a conventional institutional round. Precursor Ventures managing partner Charles Hudson summarized the problem: “The biggest challenge is: how do you finance these companies through that little middle period?”
That gap helps explain why seed-strapping can be both a deliberate business choice and a response to market constraints. The report also notes that all-female leadership teams received 6.5% of venture deals in 2024, but does not identify the underlying data publisher in the text it returned. That figure should be treated as a reported statistic with an unspecified underlying source, not as a complete account of founders’ access to capital.
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