Bridge Rounds: When They Make Sense and When They Don't

You're six months from running out of cash. Your Series A isn't coming together as fast as hoped. An existing investor offers to lead a bridge round. Should you take it?

What Is a Bridge Round?

A bridge round is a small funding round designed to extend your runway until a larger financing event. Typically:

• $250K - $1.5M in size
• Led by existing investors
• Structured as convertible notes or SAFEs
• Converts into the next priced round
• Often includes a discount (15-25%) or valuation cap

When Bridge Rounds Make Sense

1. You're Close to a Milestone

The best bridges extend runway to a specific, achievable milestone that will unlock better terms:

• "3 more months gets us to $50K MRR, which changes the Series A conversation"
• "We're 60 days from launching the product that will prove the market"
• "One more quarter of data will show the unit economics work"

2. Market Timing Issues

Sometimes the market—not your company—is the problem:

• Raising during August or December (investor vacations)
• Market downturn that will recover
• Sector temporarily out of favor

3. Unexpected Opportunity

A bridge can help you capitalize on sudden opportunities:

• Major customer wants to pilot (needs investment to support)
• Key hire becomes available unexpectedly
• Competitor stumbles, creating market opening

When Bridge Rounds Are Dangerous

1. Delaying the Inevitable

The most common bridge mistake: buying time without a plan to change the outcome.

"If investors weren't excited at $30K MRR, why would they be excited at $35K MRR in 6 months?"

A bridge only makes sense if the additional runway changes something material about your story.

2. Toxic Terms

Desperate founders accept terms that cripple future raises:

• Very low valuation caps that create massive dilution
• Multiple liquidation preferences
• Aggressive anti-dilution provisions
• Board seats that give control to bridge investors

3. No Clear Path to Next Round

A bridge should be a bridge to something. If you don't know what the next round looks like, you're just burning money more slowly.

4. Existing Investors Won't Participate

If your current investors won't put in more money, that's a signal. New investors will ask why, and "our existing investors passed" is a red flag.

The Math of Bridge Rounds

Let's model two scenarios:

Scenario	Raise Now	Bridge + Later
Current metrics	$30K MRR	$30K MRR
Series A valuation	$8M	$15M (at $60K MRR)
Series A amount	$2M	$3M
Bridge (with 20% discount)	—	$400K (converts at $12M)
Total dilution	25%	23.3%

In this case, the bridge leads to less dilution and more cash raised. But this only works if you actually hit $60K MRR.

Questions to Ask Before Taking a Bridge

1. What milestone will we hit? Be specific: revenue target, product launch, customer count.
2. Why will that milestone change the fundraising outcome? Will it actually move the valuation needle?
3. What's the probability of hitting it? Be honest. Use your runway model.
4. What are the terms? Compare the dilution from bridge + later round vs. raising now.
5. Who's participating? Existing investors' participation is a credibility signal.
6. What's Plan B? If the milestone doesn't unlock the next round, then what?

Structuring a Good Bridge

If you decide a bridge is right:

• Keep it small: Raise only what you need to hit the milestone, plus a small buffer.
• Negotiate reasonable terms: 15-20% discount is standard. Push back on aggressive caps.
• Set a clear timeline: "This bridge gives us 6 months to hit X, then we raise Series A."
• Get commitment on the next round: If possible, get lead investors to indicate they'll lead or participate in the Series A.
• Have contingency plans: Know what you'll do if you miss the milestone.

The Runway Model Perspective

In RunwayModeler, we treat bridge rounds as one scenario in your probability distribution:

• What's the probability you close the bridge?
• What's the probability you hit the milestone?
• What's the probability the milestone leads to Series A?
• What's your runway if each step fails?

When you multiply these probabilities together, the expected outcome often looks different than the best-case scenario founders imagine.