Bridge Round
A small funding round designed to keep a company alive until it can raise a larger round.
Definition
A bridge round is a short-term financing meant to provide just enough capital to reach the next major milestone or fundraise. It is often done via convertible notes or SAFEs and typically comes from existing investors. Bridge rounds signal that the company needs more time to hit targets required for a full round. They can be a yellow flag but are also sometimes strategic.
Why it matters
A bridge round can mean the company is struggling to raise a full round, which could indicate trouble. However, it also buys time. Watch for whether the bridge comes with harsh terms like high discount rates, which dilute existing shareholders more.
Example
A company expected to raise a Series B but missed its revenue targets. Existing investors provide a $3M bridge note with a 20% discount and 12-month maturity to give the company time to hit $5M ARR.