Bridge Round (Bridge Financing)
Short-term financing designed to help startups bridge the gap between major funding rounds or provide runway extension.
Definition
Bridge financing is interim funding provided to startups to sustain operations until they can secure a larger, more permanent financing round. It's typically structured as convertible debt or equity and is often provided by existing investors who want to protect their investment.
Key Characteristics
- • Short-term duration (6-18 months typically)
- • Often convertible to equity in next round
- • Usually provided by existing investors
- • Faster process than full funding rounds
- • May include conversion discount or cap
- • Designed to reach specific milestones
Real-World Example
Startup Scenario: A SaaS company raises $2M bridge round to extend runway for 8 months while preparing Series A
The bridge converts to Series A shares at a 20% discount, giving bridge investors better terms for taking the risk.