A bridge round is only rational when there is a specific, nameable event on the other side of it. A bridge to hope is the expensive version, and it's the one most founders take.
The mechanics, the real cost to the common stock, and the test worth applying before you sign. Companion to Andrew's essay, A Bridge Too Far.
Write down the event the bridge gets you to, in one sentence, with a date. Then ask two people who don't work for you whether they believe it.
Good answers look like: a signed enterprise contract that starts in March, a product launch already in beta with waitlist conversion, profitability at a headcount you've already modelled. Each of those is checkable and each has a date on it.
Bad answers look like: the market will recover, the pipeline will convert, we'll be more fundable in six months. Not because they're never true, but because they're not events. They're hopes with a runway attached, and they're the reason bridge rounds compound.
The second bridge is the tell. By then the money is expensive, the preference stack has grown, and the same conversation is happening again with less time and fewer options.
New preference stacks on top of the existing preference. Set the numbers and see what's left for the founders and the team at a sale, before and after.
Assumes 1x non-participating preferred and no accrued dividends. Bridge notes with a discount or a cap convert at better terms than the last round, which makes the effect larger, not smaller.
The bridge is the difference between something and nothing for the common stock. That's the conversation to have with your investors now, not after you've signed it.
A short-term financing between priced rounds, usually structured as convertible notes or SAFEs from existing investors. It's meant to bridge the company to a specific event: a larger round, profitability, or a sale.
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