Key facts
- Tech founders are increasingly seeking funding from friends and family as venture capital deals decline.
- Seed-strapping, a tactic where companies raise smaller investments and forgo traditional VC cycles, is gaining appeal.
- The number of global venture deals has dropped significantly since early 2022.
- AI startups are dominating venture funding, capturing a large majority of deals.
- Companies that do not pursue Series A funding tend to maintain smaller headcounts.
As venture capital funding becomes scarcer, tech founders are increasingly turning to alternative funding sources, such as friends and family, a strategy known as seed-strapping. This approach allows companies to grow without the pressure of traditional venture capital expectations.
Katherine Naylor Pullman, founder of Our Third Place, a networking group for women in media, has grown her company to 1,800 members without large investors. She and CEO Ashley Preininger are raising money from their network, believing that avoiding massive investor returns allows them to keep costs lower for members and maintain control over the company's growth.
This shift is occurring as venture capital funding has waned following a boom in the 2010s and the end of the zero-interest rate policy. The rise of single-person startups, aided by AI agents for various business tasks, also contributes to this trend. Founders are choosing this path, seeing that more money can come with more commitments, expectations, and less control.
Data from Pitchbook shows a significant drop in global venture deals, from over 17,000 in the first quarter of 2022 to about 8,500 in the second quarter of 2026. While deal values have been high, this is largely due to substantial investments in AI companies like OpenAI, Anthropic, and xAI. Since late 2024, AI startups have secured at least half of venture funding, with their market share climbing to 80% at the beginning of 2026.
Charles Hudson, managing partner at Precursor Ventures, notes a bifurcation in the market, with large funds seeking massive returns and fewer investors in the "middle period" for companies needing smaller, incremental funding. According to Carta, a significant percentage of companies that raised seed rounds in 2022 did not proceed to Series A, maintaining smaller headcounts compared to those that secured larger funding rounds.
Lauren Dines, founder of AI startup Breaknine, left a career in venture capital to pursue a less venture-scalable business model. She aims to grow her company and then make strategic decisions, potentially exiting in three to five years rather than the typical seven to 10, viewing it as less risky than seeking tens of millions in funding for hundreds of millions in returns.