What is “bridge financing”?
Bridge financing is short-term capital provided to a company to cover the runway between two funding rounds, financial events or strategic milestones. The bridge is intended to be temporary — it gives the company runway to reach the next priced round, exit, or operational milestone. Bridge financings are commonly structured as convertible notes or SAFEs with terms tied to the anticipated next round.
When bridges happen
- Between funding rounds: a Series A company nearing the Series B may need bridge capital if the round timing slips.
- Before exit: the company expects an acquisition or IPO and needs to cover runway through closing.
- Operational delay: a key product release or revenue milestone is approaching and the company needs runway to reach it before raising.
- Distress bridges: the company is running out of cash and existing investors provide a lifeline.
Bridge structure
- Size: typically 25-50% of the previous round size; designed to add 3-9 months of runway.
- Instruments: usually convertible notes or SAFEs with a discount to the next round and sometimes a cap.
- Conversion terms: auto-conversion at the next qualified financing.
- Pro-rata participation: existing investors typically lead bridges to defend ownership.
Signals when accepting a bridge
- Healthy bridge: short-term capital to optimise timing of the next round; existing investors lead willingly.
- Stressed bridge: existing investors pause, new investors absent, terms include aggressive discount and tight conversion mechanics.
- Distress bridge: last-resort capital with punishing terms — typically the precursor to a down round or shutdown.
Türk startup’larında bridge
Türk startup’ları için bridge financing özellikle 2022-2023 küresel daralma döneminde yaygınlaştı — yerel ve uluslararası lead’in eşleşememesi durumunda mevcut yatırımcılar köprü sağlayarak şirketi 6-12 ay daha uzatır. Yerel VC’ler (Inveo, Maxis) bridge’leri tipik olarak SAFE veya kısa vadeli convertible note ile yapar.
Do: raise the bridge before runway falls below 6 months; pair it with a clear story for the next round to close — investors fund bridges with milestones.
Don’t: use bridges to delay confronting the fundamental need for revenue growth or pivot — a bridge to nowhere just postpones the inevitable.