---
title: "Bridge Financing"
url: "https://mahouse.world/glossary/bridge-financing"
type: "glossary term"
topic: "Venture funding"
author: "Ihor Vlasov"
reviewed: "2026-09-20"
published: "2026-08-10"
---

# Bridge Financing

Bridge financing is money raised to carry a company to its next round, a sale or profitability when the current runway will not — usually a convertible note or SAFE from existing investors, sized for six to twelve months, converting at a discount into the round it bridges to. A bridge from insiders who believe in the plan is ordinary; a bridge because nobody else will invest is the round before the down round.

**Also known as:** Bridge round, Bridge loan, Bridge note

## Key facts

- **Used at:** the gap between rounds when a milestone has slipped, a market has turned, or a licence has taken longer; before a sale, to keep the company alive through the process
- **Binding:** a note or SAFE, sometimes with warrants for the bridging investors and a "pay-to-play" clause that penalises investors who do not participate
- **Typical terms:** 20–30% discount to the next round's price, sometimes a cap; interest of 6–10% if a note; warrants of 10–25% of the bridge amount for the risk; a maturity of 12–18 months; conversion into the next qualified round or, failing that, into the last round's preferred shares
- **Typical size:** three to nine months of burn; a bridge larger than that is a round with a different name
- **Parties:** the existing investors (usually the only ones who will), the founders, and the future lead investor, who will read the bridge's terms and its reasons

## How bridge financing works in practice

A fintech planned to raise its Series B in month 18 on €8m of ARR; the licence took six months longer and ARR is €5m in month 20 with four months of cash left. The Series A investors offer a bridge: €3m on a convertible note, 25% discount to the B, 8% interest, warrants over €600,000 of shares, maturing in 15 months. The company reaches €8m of ARR in month 28 and raises the B at €40m pre-money; the note converts at €30m-equivalent, the interest converts too, and the warrants dilute the founders a little more. The bridge cost about 30% of its face value in dilution — dear money, cheaper than a down round or a closure.

The signal is the part founders underestimate. New investors ask why a bridge was needed and who provided it. Insiders bridging a plan that slipped for a reason they can explain — the licence — is a story the B lead accepts. Insiders bridging because the company missed its numbers, or a bridge that some insiders declined, is a story the B lead prices, or walks from. Pay-to-play terms — an investor who does not join the bridge loses its preferred rights — exist because the second story is common.

A bridge to a sale is different again: the buyer sees a company that will run out of cash on a date, and prices accordingly.

## Example

A lending fintech with €2.5m of monthly burn and five months of cash needs a bridge of €6m to reach the Series C metrics. Three of four existing investors commit €5m on a note at a 25% discount with a €60m cap and 15% warrant coverage; the fourth declines and, under the pay-to-play clause, its Series B preferred converts to common. The Series C closes nine months later at €90m pre-money: the note converts at the €60m cap — a 33% effective discount — and the warrants add €750,000 of shares at the cap price. The bridging investors turned €5m into shares worth €8.3m at the C price; the founders' stake is 2.4 points lower than a B-priced round would have left it; the investor that declined holds common shares behind two preference classes, which is what pay-to-play was for.

## Common mistakes

- A bridge sized to the next milestone as planned, not to the milestone as it will actually arrive.
- Terms that the next round's lead will have to unwind — a cap so low the bridge takes a fifth of the company.
- Bridging a company whose problem is the business, not the timing.
- Founders reading insider support as validation when it is the insiders protecting their earlier money.
- No plan for what the bridge converts into if the round never comes.

## Related terms

- [Convertible Note](https://mahouse.world/glossary/convertible-note.md)
- [Runway](https://mahouse.world/glossary/runway.md)
- [Burn Rate](https://mahouse.world/glossary/burn-rate.md)
- [Down Round](https://mahouse.world/glossary/down-round.md)
- [Series B](https://mahouse.world/glossary/series-b.md)
- [SAFE](https://mahouse.world/glossary/safe.md)

— Ihor Vlasov, M&A FinTech Expert. Last reviewed 2026-09-20. https://mahouse.world/authors/ihor-vlasov