A bridge round is a smaller, faster fundraise used to extend a startup's runway until a larger milestone is achieved or a full financing round can be completed. It "bridges" the gap between where the company is and where it needs to be.
When companies do bridge rounds
Bridge rounds are most common when:
- A startup is close to a major milestone (product launch, first revenue) that would unlock a larger round
- The primary fundraise is taking longer than expected and cash is running low
- Existing investors want to support the company through a tough period
- Market conditions have temporarily closed the primary fundraising market
Structure of a bridge round
Bridge rounds are typically structured as convertible notes or SAFE agreements because they are faster to close than priced equity rounds. The conversion discount or valuation cap compensates bridge investors for the increased risk of lending at an earlier stage.
Common bridge round structures:
- Convertible note with 15–25% discount and 6–18 month maturity
- SAFE (Simple Agreement for Future Equity) with a valuation cap
- Priced bridge — less common, used when a down round is likely
Bridge round size
Bridge rounds are typically 20–40% of the company's last primary raise. A company that raised a $2M seed round might do a $500K–$800K bridge. Larger bridges can signal distress to future investors.
Risks of bridge rounds
- Dilution from conversion discounts
- Signaling risk if not framed carefully
- Cap table complexity from multiple convertible instruments
- The bridge may not be enough if the milestone takes longer than expected