Glossary · Fundraising process · Updated
A bridge is interim financing raised between two rounds, meant to reach a milestone that will allow you to raise on better terms. It usually takes the form of convertible notes or warrants subscribed by investors already on the cap table.
A bridge is justified when there is an identifiable, reachable milestone that will move the valuation: an ARR threshold, a signed contract, a regulatory approval. It is not justified when it merely postpones the deadline without changing anything, a situation the ecosystem calls a bridge to nowhere.
The choice of instrument matters. A conventional priced round requires setting a valuation, which is exactly what you want to avoid while the numbers are not there yet. Convertible notes and warrants defer that question to the next round in exchange for a discount to subscribers.
It is almost always existing investors who fund a bridge. A newcomer will ask why the incumbents are not following, and their abstention is a negative signal that is hard to overcome. Conversely, a bridge fully subscribed by existing investors reassures the next round.
Example: bridging to an ARR milestone
A post-seed startup needs seven months to pass €1M of ARR but has only four months of cash.
| Cash remaining | €250,000 |
|---|---|
| Monthly net burn | €60,000 |
| Runway before the bridge | about 4 months |
| Milestone targeted | €1M ARR, reachable in 7 months |
| Bridge amount | €500,000 |
| Instrument used | Convertible notes, 20% discount |
| Subscribers | Existing investors on the cap table |
| Runway after the bridge | about 12 months |
Twelve months covers the seven needed to hit the milestone plus the five months of the raise that follows. That calculation, not the amount itself, is what makes a bridge defensible.
The common mistake
Raising a bridge with no specific milestone. If nothing changes during the funded months, the next round arrives on exactly the same terms, with convertibles to absorb into the cap table on top.
Frequently asked questions
When should you raise a bridge?+
When an identifiable, reachable milestone will materially change the terms of the next round and cash will not get you there. Without such a milestone, a bridge only postpones the problem while adding deferred dilution.
Is a bridge a bad signal?+
Not in itself. A bridge subscribed by existing investors to fund a specific milestone reads as a sign of confidence. What worries the next round is existing investors declining to participate, or there being no milestone at all.
Related terms
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