Bridge Round

A small funding round designed to provide short-term capital between major rounds. Usually structured as a convertible note that converts at the next priced round. Common between seed and Series A when the company needs more runway but is not ready for a full raise.

Why it matters

Bridge rounds keep companies alive during the gap between fundraising milestones. Many startups find themselves six to twelve months after their seed round with real traction but not quite enough to command the Series A terms they want. A bridge gives them the runway to hit those milestones without the pressure of a full fundraise.

However, bridges can also signal that a company is struggling to raise, which is why the terms and the source matter. A bridge from existing investors on friendly terms is very different from a bridge with aggressive terms from new investors who are betting on distress pricing. How you characterize a bridge — internally, to employees, and to future investors — requires honesty about what it represents.

From a cap table perspective, bridge rounds add convertible instruments that will dilute existing shareholders when they convert. Multiple bridges can create a complex cap table with several convertible instruments at different caps and discounts, which complicates the conversion math at the Series A and can create friction in negotiations.

How it works

Bridge rounds are typically structured as convertible notes or SAFEs that convert into the next priced round. The amount is usually smaller than a full round, often $200,000 to $1 million. Existing investors frequently participate to protect their position and signal confidence to future investors.

The conversion terms usually include a valuation cap and/or discount, similar to any other convertible instrument. For example, a startup that raised a $2 million seed might take a $500,000 bridge note with a $10 million cap and a 20% discount, giving the bridge investors favorable conversion terms at the Series A.

Some bridges include additional sweeteners like warrants or higher discounts to compensate investors for the added risk of investing in an uncertain situation. If the company never raises a follow-on round, a convertible note either becomes repayable debt or converts at a default valuation, depending on the terms. A SAFE, by contrast, has no maturity date — it simply remains outstanding until a qualifying event or liquidation.

Founders should be disciplined about bridge timing. Raise a bridge only when there is a clear milestone that will materially improve the next fundraise, and only for the specific amount needed to reach it. Raising too much or too little, or raising without a clear plan, often just delays a harder conversation.

History and origin

Bridge financing has existed in various forms throughout corporate finance history, wherever companies needed interim capital between planned financing events. In the startup context, bridge rounds became common in the late 1990s as the venture capital cycle lengthened and companies found themselves between their seed funding and Series A with insufficient runway.

The 2001 dot-com bust created the first major wave of startup bridge rounds, as companies that had expected to raise Series B or C rounds found institutional capital had dried up entirely. Founders and early investors improvised bridge financings to keep companies alive, and the convertible note structure — already familiar from corporate law — became the standard vehicle for these arrangements.

The rise of SAFEs (Simple Agreements for Future Equity) introduced by Y Combinator in 2013 gave bridge rounds a simpler alternative instrument — one without the maturity date pressure of a convertible note. Today, bridge rounds are most commonly structured as SAFEs in the US, while convertible notes remain more prevalent internationally. The 2022-2023 venture capital pullback created another significant wave of bridge activity, as companies raised bridges to survive until institutional investors returned.

Frequently asked questions

What is a bridge round?

A bridge round is a small, short-term fundraise designed to extend a startup's runway between major financing rounds. It is usually structured as a convertible note or SAFE that converts into equity at the next priced round. Bridge rounds are common between seed and Series A when a company needs more time to hit the milestones required to command favorable Series A terms.

How is a bridge round different from a seed round?

A seed round is typically a company's first significant external financing, used to build the initial product and team. A bridge round is smaller and intended to extend runway temporarily, not fund a new stage. Bridge rounds convert into the next major round rather than establishing their own valuation.

What are typical bridge round terms?

Bridge rounds are typically structured as convertible notes or SAFEs with a valuation cap and/or discount. Common terms include: amount of $200,000 to $1 million, interest rate of 4-8% (if a note), maturity of 12-18 months, and a 15-25% conversion discount. Some bridges include additional sweeteners like warrants for bridge investors.

Is a bridge round a bad signal?

Not necessarily. A bridge from existing investors who believe in the company and want to extend runway to hit a specific milestone is a positive signal — it shows investor conviction. A bridge raised from new investors with aggressive terms, or a company's second or third consecutive bridge, can signal that the company is struggling to raise a full round.

Who typically participates in a bridge round?

Existing investors most commonly lead or fully fund bridge rounds. They already know the company, have a financial incentive to protect their existing position, and can move quickly with minimal due diligence. Bringing in new investors for a bridge is possible but takes longer and often requires offering better terms to compensate them for the additional risk.

What happens if the company doesn't raise a follow-on round?

If a convertible note matures without a qualifying round, the investor can demand repayment, negotiate an extension, or convert at a pre-agreed price. If the company has no cash to repay, this can trigger default and potentially force a wind-down. A SAFE, by contrast, has no maturity date — it remains outstanding until a qualifying event.

How should founders think about taking a bridge?

Take a bridge only when you have a clear, specific milestone that will meaningfully improve your Series A prospects and a reasonable plan to hit it within the bridge timeline. The best bridges are targeted: "We need 6 months to reach $X ARR, at which point we can raise a Series A at Y valuation." Avoid bridges that simply delay an inevitable hard conversation.

Learn more

• Convertible notes vs. SAFEs
• SAFE notes explained
• What investors look for in cap tables

Related terms

• Convertible Note
• SAFE (Simple Agreement for Future Equity)
• Dilution
• Term Sheet
• Valuation Cap