What is a Bridge Round?
A bridge round is short-term financing meant to extend runway until a larger funding round closes. It bridges the gap between where you are and where you need to be for your next major raise.
Bridges are typically smaller amounts from existing investors, structured as convertible notes or SAFEs that convert into the next priced round at a discount.
When to Use Bridge Financing
Running low on runway but close to milestones that would improve next-round terms. Waiting for a lead investor to complete due diligence. Market conditions are temporarily unfavorable. Need more time to hit metrics for target valuation.
Bridge Round Risks
Bridges can become crutches. If you can't close the next round, you've just added more debt/obligations. Existing investors may lose confidence if bridges keep extending. Terms often favor investors (discounts, caps) since they're taking risk on uncertain timing.
Formula
Bridge Amount = Monthly Burn × Months Needed to Next Round
Usually structured as convertible notes or SAFEs with discount to next round.
Example
Bridge financing scenario:
- Runway remaining: 4 months
- Series B target: $10M at $40M valuation
- Bridge: $1M convertible note from existing investors
- Terms: 20% discount to Series B price
Bridge extends runway to 8 months, giving time to hit milestones and close Series B at target valuation.