Price & valuation
Bridge round
Also called Bridge financing, Extension round
A short financing intended to carry a company from where it is to a larger round or to profitability, usually raised from existing investors on convertible paper.
In plain English
A bridge is money raised to reach something. The something is normally a priced round the company is not yet ready for, occasionally an acquisition in progress, sometimes breakeven. The defining feature is that the money is meant to last months rather than years, and is sized to a milestone rather than to a plan.
Bridges are almost always convertible — a note or SAFE, frequently with a discount to the round being bridged to and a cap for safety — because pricing a company mid-flight is exactly what the bridge exists to postpone. They are usually raised from people already on the cap table, because outsiders correctly read a bridge as a signal that the last plan did not work.
The industry distinguishes, with more optimism than evidence, between a bridge and a pier. A bridge reaches the other side. A pier runs out over the water and stops. From inside the company the two look identical at the time of raising, which is why the milestone the bridge is meant to reach deserves more scrutiny than the terms.
Bridges are not a sign of failure in themselves. Timing between rounds is genuinely hard, markets close unexpectedly, and a company that raises six months of runway to hit a metric that unlocks a much better round has done something sensible.
What it means for your cheque
Bridges are where angel money most often goes to die, and where it occasionally does its best work. The difference is almost entirely in the specificity of the milestone. "We need runway while we figure out the go-to-market" funds a pier. "We need five months to close the two contracts in late-stage procurement, which takes us to $1.2m of recurring revenue and a fundable Series A" is a bridge.
Insist on the terms improving relative to the last round, because the risk has. A bridge at the same cap as an eighteen-month-old round, from a company that missed its plan, is asking you to pay for the intervening disappointment. Insider bridges also tend to arrive quickly with pressure to sign — the pressure is a reason to read the documents more carefully, not less.
Do the arithmetic
A bridge that works and a bridge that does not
The same company, £600,000 of bridge money at a £8m cap with a 20% discount, six months of runway. Two outcomes.
| The bridge works — Series A at £20m pre-money | |
|---|---|
| Your £50,000 converts at the £8m cap | about 0.63% of the company |
| Value at the Series A price | about £125,000 — a 2.5× paper gain in six months |
| The bridge does not work — no round, cash exhausted | |
| Company sold in a distressed sale for £3m | |
| Preference stack ahead of you | £6m of preferred from earlier rounds |
| Your recovery | nil — the preference exceeds the sale price |
The upside was excellent and the downside was total. Bridge economics are binary in a way that ordinary rounds are not, which is why the milestone matters more than the cap.
At the table
What to negotiate
- Get the milestone in writing, with the metric and the date. Vagueness here is the reliable predictor of a pier.
- Ask for terms better than the last round — a lower cap, a larger discount, or both. The risk has increased and the price should reflect it.
- Ask for a repayment multiple on an acquisition — 1.5× or 2× of principal is common on bridges and materially changes the downside.
- Find out who else is participating. A bridge that existing investors decline to fund is a bridge you should think hard about.
- Check where the bridge sits in the preference stack. Bridge money is often, and reasonably, made senior to earlier rounds.
Bridge round: common questions
Is being asked to join a bridge a bad sign?
Should bridge investors get better terms than the last round?
What is the difference between a bridge and an extension round?
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