Bridge round

A bridge buys a few more months of Runway, so a company can reach the number that lets the next round happen on better terms. Used well, it funds a clear, near-term proof point. Used badly, it signals that the business cannot reach that point on its own and is borrowing time.

Investors read a second or third bridge as a warning. The lever it moves is trust as much as cash.

• Name the exact milestone the bridge buys and the date it should be reached.
• Size the raise to that milestone, not to a comfortable cushion.
• Structure it as a convertible note or a SAFE instead of setting a valuation nobody believes yet. Both turn into shares at the next round, often at a discount.
• Tell existing investors first. A bridge they did not see coming reads worse than one they helped plan.
• Watch cash weekly once the money lands, since it is meant to be spent on the plan.

A bridge round is money raised between two larger rounds. It is usually smaller than a normal round and often comes from existing investors, who already know the business and can decide quickly. It is meant to run out on schedule, at the point where the business can show a result that justifies a proper raise.

Bridges are most often written as a convertible note or a SAFE, which turn into shares at the next round, rather than as a priced round with a new valuation. That saves legal cost and avoids arguing about a valuation when the numbers are not yet strong enough to support one. Sometimes a bridge is instead an extension of the previous round, with the same terms and a few more investors.

A bridge is not the same as a down round, which sets a lower valuation than before. It is also different from bank debt, which has to be repaid on a date whatever happens to the business. A bridge is a decision to buy time on purpose. If the time is bought without a clear target, it is only a delay.

• Using a bridge to delay a hard decision about costs or direction.
• Choosing a milestone that is vague, such as "more growth", instead of a number like a churn rate or a revenue figure.
• Ignoring Dilution. Convertible instruments still give up a share of the company when they convert.