Bridge Round
A bridge round is interim financing designed to extend runway until a larger priced round or liquidity event. Allocators evaluate bridge rounds because they can either preserve optionality and prevent forced decisions—or mask weak fundamentals and worsen preference stacks through repeated short-term fixes.
Bridge rounds are common when companies need more time to hit milestones, when fundraising markets tighten, or when strategic opportunities require runway. Bridges can be raised via SAFEs, convertible notes, or structured preferred rounds. The key distinction is whether the bridge is a disciplined step toward a clear milestone—or a symptom of structural fragility.
From an allocator perspective, bridge rounds are not neutral. They change:
- cap table structure,
- dilution outcomes,
- signaling to future investors, and
- the probability of a clean next round.
How allocators define bridge round quality
They assess:
- Purpose: milestone-driven vs survival-driven
- Instrument choice: SAFE/note vs structured preferred
- Terms severity: caps, discounts, preferences, seniority
- Signaling: whether the bridge signals weakness to the market
- Use of proceeds: runway vs experimentation vs debt repayment
- Next-round path: credible plan to raise a clean priced round
Allocator framing:
“Is this bridge creating optionality, or compounding structural problems?”
Bridge round patterns
- Milestone bridge: extends runway to reach a specific target
- Market bridge: buys time during closed capital markets
- Rescue bridge: insider-led survival financing with heavy structure risk
- Pre-exit bridge: extends runway to a likely acquisition/liquidity event
How allocators evaluate VC managers
Conviction increases when managers:
- disclose bridges and rationale clearly
- keep terms clean unless risk truly warrants structure
- avoid stacking bridges repeatedly
- can show bridges that led to successful next rounds or exits
- treat bridges as a disciplined allocation decision, not mark defense
What slows allocator decision-making
- repeated bridges across portfolio (systemic fragility)
- bridges that increase preference stacks and block exits
- lack of clarity on how milestones are defined and tracked
- opaque marks that ignore structural deterioration
Common misconceptions
- “A bridge is always good” → it can worsen outcomes if it delays reality.
- “Bridges don’t change ownership much” → caps, discounts, and seniority can materially dilute.
- “If insiders bridge, it’s a positive signal” → sometimes, but it can also mean external capital won’t come.
Key allocator questions
- What milestone must be hit before the next financing?
- What terms are used and why are they justified?
- How does this affect the preference stack and exit waterfall?
- How often does this manager bridge companies, and what were outcomes?
- What is the plan if the next financing is not available?
Key Takeaways
- Bridge rounds can preserve optionality or compound structural risk
- Terms, signaling, and preference stacking determine real impact
- Strong managers use bridges sparingly and transparently