Bridge Loan

TL;DR

A short-term loan that bridges a company between funding events, often from existing investors as a SAFE or note pending the next priced round.

A bridge loan provides cash to extend runway between rounds. It's most often structured as a SAFE or convertible note from existing investors and converts into the next priced round. Bridge loans are common when a company needs more time to hit milestones before the next financing.

The term is sometimes used interchangeably with 'bridge round'. The distinction is mostly contextual: 'bridge loan' emphasizes the short-term debt-like aspect; 'bridge round' emphasizes that it's a real financing.

Worked example

A Series B-priced company takes a $4M bridge loan from existing investors at 10% interest, 18-month maturity, with a 25% conversion discount at the next priced round. If the next round is at $300M post-money, the loan converts at $225M effective valuation.

Common pitfalls

• Drawing a bridge loan with no clear next round in sight.
• Failing to structure the bridge to convert cleanly into the next round.
• Allowing the bridge cap to interact badly with the next priced round.

When this shows up in a pitch deck

Bridges are negotiated with existing investors privately; they don't typically appear in the deck.

Related terms

• Bridge Round — A short-term funding round between priced rounds, often a SAFE or note from existing investors, used to extend runway to the next milestone.
• SAFE — Y Combinator's Simple Agreement for Future Equity — a contract that gives an investor the right to equity in a future priced round, with no debt or interest.
• Convertible Note — Short-term debt that converts into equity at a future priced round, typically with a discount, a valuation cap, and an interest rate.
• Runway — The number of months the current cash balance will last at the current net burn rate before the company runs out of money.
• Venture Debt — Debt financing extended to venture-backed startups, often used to extend runway between equity rounds with minimal additional dilution.

Use this in your next pitch deck

Deckmetric scores your pitch across 10 VC frameworks and against 8 investor types. Upload your deck for an instant analysis, or check the startup valuation calculator to benchmark your raise.