October 23, 2026
A bridge round is a short financing, usually a convertible note, a SAFE or an extension of your last round, that buys 6 to 12 months of runway to reach a milestone that sets up the next priced round. It makes sense when you can name the milestone and show the bridge gets you there. It's a warning sign when it only delays a decision about a business that isn't working. Insiders who lead a bridge typically ask for a discount, a cap at or below the last round's price and sometimes warrants or seniority, and because insiders are setting their own terms, the company should get the approvals that protect the deal from a fairness challenge. Model the conversion and the maturity date before you sign.
Key takeaways
A bridge works when you are close to a milestone that will change how investors value the company, such as a product launch, a revenue threshold or a key customer signing, and you need 6 to 12 more months to get there. It also works when a priced round is agreed in principle but won't close for a few months. Bridges are common. Carta's data showed bridge rounds made up 16.6% of all cash raised by startups on its platform in the second quarter of 2025 and 22.5% of Series A cash, and about a third of companies raise bridge capital before their next primary round.
A bridge is a warning sign when the company can't say what the money will achieve, when it follows a failed attempt to raise a priced round with no change in plan, or when it's the second or third bridge in a row. New investors will look at your history, and a run of bridges without progress makes the next round harder.
Insider bridges come from your existing investors. They are faster, because insiders already know the company and often use the same terms as an earlier instrument. They are also a signal: if your current investors won't put in more money, new investors will ask why.
New money bridges bring in an outside investor, often one who hopes to lead the next round. They take longer and carry more diligence, but they validate the company and can set the next round in motion.
Many bridges are a mix: insiders commit first, and the company uses that commitment to bring in new investors on the same terms.
| Instrument | How it works | When it fits |
|---|---|---|
| Convertible note | Debt that converts at the next round, with interest, a discount, a cap and a maturity date | Insiders want debt protections or the company already uses notes |
| SAFE | Converts at the next round with a cap, a discount or both; no interest or maturity | Seed-stage companies and investors comfortable with SAFEs |
| Extension of the last round | Sells more of the last round's preferred stock on the same terms, often at the same price | The last round's price still holds and investors agree |
| Priced extension at a new price | A new series or sub-series of preferred at a set price, sometimes lower | A down or flat round is the honest price and everyone wants clarity |
A convertible note is debt, usually with interest of 6% to 8% a year, a discount on the next round's price, a valuation cap and a maturity date. See Convertible Notes. A SAFE is simpler and has no maturity date, which is better for the company. See SAFE. An extension sells more of your last series of preferred stock at the same price, which avoids setting a new valuation but needs the existing investors' agreement and possibly an amendment to the charter. A priced extension at a new price settles the valuation question directly, and if the price is lower, it is a down round with all that follows. See What Is a Down Round? If you have meaningful revenue, venture debt can sometimes fill the same gap without dilution.
The common requests are a discount of around 20% on the next round's price, a cap at or below the last round's post-money valuation, and pro rata rights in the next round; see Pro Rata Rights. When the company has less leverage, investors may ask for warrants, the right to buy extra shares, often sized as a percentage of the note; a seniority provision so the notes are repaid before other creditors or equity in a sale; a multiple on repayment if the company is sold before conversion; or a pay-to-play provision that penalizes existing investors who don't participate, usually by converting their preferred stock to common.
The board must approve the bridge. Check your certificate of incorporation and investor agreements as well, because protective provisions commonly require the preferred stockholders to approve new debt above a threshold, new securities that are senior to or on par with the existing preferred, and any charter amendment. See Protective Provisions.
An insider bridge has a built-in fairness problem. The investors lending the money often control board seats and the preferred vote, so they are effectively setting their own terms. If the terms are aggressive and the company later does well, common stockholders can claim the insiders took advantage of the company. Delaware amended Section 144 of its corporate law in March 2025 to set out safe harbors for these transactions, built around approval by disinterested directors or by a majority of the votes cast by disinterested stockholders, with stricter requirements when a controlling stockholder is on the other side. In practice, companies protect an insider bridge by having it approved by directors who aren't participating, offering every major investor the chance to join on the same terms, and documenting why the terms were the best available. Talk to your lawyer about which approvals your situation needs.
Example. A company's last round valued it at $20,000,000 post-money. It raises a $1,000,000 bridge from insiders on convertible notes with 8% simple interest, a 20% discount, a $20,000,000 cap and a 24-month maturity. Fourteen months later, it closes a Series A at a $30,000,000 pre-money valuation, with 15,000,000 fully diluted shares before the new money, so the Series A price is $2.00 per share.
Interest. At 8% simple interest, the note accrues $80,000 a year. Over 14 months, that is $1,000,000 × 8% × 14 ÷ 12 = about $93,333. The notes convert principal and interest together, so $1,093,333 converts.
Discount price. 80% of $2.00 is $1.60 per share, which would give $1,093,333 ÷ $1.60 = about 683,333 shares.
Cap price. The $20,000,000 cap divided by the same 15,000,000 shares gives about $1.3333 per share, which would give $1,093,333 ÷ $1.3333 = 820,000 shares.
The noteholders take whichever price gives them more shares, so the cap applies and they receive 820,000 shares of Series A preferred, worth $1,640,000 at the $2.00 Series A price. That is 1.64 times their investment, of which about $93,333 came from interest. Had the notes used compound interest, or had the Series A taken longer, the number would be higher. The exact cap calculation depends on how the note defines the company's capitalization, so check that definition against your cap table.
At maturity, a convertible note is due, and noteholders can demand repayment of principal and interest. Most startups can't repay, so the practical options are an amendment extending the maturity, which many notes allow with the consent of holders of a majority of the principal; conversion at maturity into common or preferred stock at a valuation the note specifies; or a negotiated restructuring. Because notes are debt, noteholders rank ahead of stockholders if the company winds down. Choose a maturity of 18 to 24 months, longer than you think the bridge needs, and include a majority-amendment clause so one holder can't block an extension.
The real risk of a bridge is the bridge to nowhere: the company spends the money, the milestone slips and the next round doesn't come. Set a checkpoint halfway through the runway the bridge buys. If the milestone isn't in sight by then, start the conversation with your board about a sale, a smaller raise on worse terms or a wind-down while there is still cash to do it properly. See How Do I Shut Down My Startup?
Be direct with your board and investors throughout. Explain what the bridge is for, what it will achieve and what happens if it doesn't. Investors who hear bad news early tend to stay supportive, and investors who learn it late tend not to; see How Do I Update Investors in My Startup?
To go deeper, read our Founder Guide: Convertible Notes and Founder Guide: Seed Funding.
For more, see Convertible Notes, What Is a Down Round?, Venture Debt and Protective Provisions.
If you're considering a bridge, contact us before you agree to terms with your insiders.
