Startups rarely grow in straight lines. Markets shift, timelines stretch, and sometimes, you just need more time to get to your next big milestone. That’s where a Bridge Round comes in.
But what exactly is a bridge round? When should startups consider it? Is it a sign of trouble or a strategic move?
Let’s break it down.
What is a Bridge Round?
A Bridge Round is an interim round of funding raised by a startup to extend its runway between two larger rounds, usually between Seed and Series A, or Series A and B.
It’s meant to “bridge the gap” when you’re not ready for the next priced round, but need cash to hit key goals like product-market fit, traction, or revenue milestones.
Key Features:
- Smaller cheque sizes than institutional rounds
- Often led by existing investors, angel syndicates, or friendly VCs
- Structured as convertible notes, SAFE notes, or sometimes as equity with discounts
Think of it as a pit stop. It’s not the big milestone, but a crucial pause to refuel and keep going.
When Do Startups Raise a Bridge Round?
Bridge rounds are common in these situations:
- To Extend Runway: You need 6–12 months more cash to hit the metrics needed for a larger round.
- Market Timing Isn’t Ideal: The funding environment is slow or valuations are under pressure, so you delay the next priced round.
- Unlocking a Key Milestone: You’re close to a product launch, large customer, or proof of revenue and need funds to cross the line.
- New Investor Wants More Data: You’re in talks with a lead investor, but they want more traction or customer proof before leading a round.
How Are Bridge Rounds Structured?
Most bridge rounds are done via convertible instruments. This means investors don’t get equity today, but convert their investment into equity in the next round.
Common Structures:
| Type | What It Means |
|---|---|
| Convertible Note | Debt that converts into equity in the next priced round, often with interest + discount |
| SAFE (Simple Agreement for Future Equity) | Cleaner than notes; converts later without interest or maturity |
| Equity with Discount | Priced round, but often with a lower valuation and fewer terms than a typical VC round |
Most rounds include a discount (10%–25%) or valuation cap to reward early belief.
Pros and Cons of Bridge Rounds
Pros:
- Fast to raise and close
- Avoids tough negotiations on valuation
- Keeps the company moving toward key milestones
- Shows investor confidence when insiders participate
Cons:
- Can signal financial trouble if not positioned right
- May cause cap table complexity with multiple notes/caps
- Founders risk dilution if bridge terms aren’t founder-friendly
- Might delay tough conversations about valuation and strategy
Real-World Case Study: A Smart Bridge That Paid Off
Startup Name: MedStack (Digital Health Platform)
Initial Round: ₹8 Cr seed round in 2022
Challenge: Market slowed in 2023, but product adoption in hospitals was accelerating
Solution: Raised a ₹3 Cr bridge round from existing angels + new healthcare-focused micro-VC
Structure:
- SAFE notes with a 20% discount
- Target runway extension: 9 months
Outcome:
- Signed 3 hospital chains, improved revenue visibility
- Raised a ₹20 Cr Series A at 2x the original seed valuation
- Early bridge investors got in at a strong discount and doubled their return in the next round
Lesson: A well-timed bridge can de-risk your next round, but only if paired with real execution progress.
What Founders Should Watch Out For
- Don’t Overuse: Multiple bridge rounds can signal instability or poor planning. If you need 2+ bridges, it’s time to rethink your roadmap.
- Be Transparent: Communicate clearly with existing investors. They’ll back you more if they see a clear use of funds and milestone plan.
- Avoid Uncapped Notes (Unless Absolutely Needed): Investors should get rewarded but protect your future dilution by avoiding open-ended caps.
- Focus on Outcomes, Not Optics: Don’t raise a bridge just to show momentum, raise it with a clear path to value creation.
Final Thought
A bridge round isn’t a shortcut, it’s a strategic pause to build what matters. If you use it wisely, it can help you turn a shaky timeline into a stronger story.
The key is creating and crossing the bridge with caution and purpose; not panic or pressure.