Bridge Financing

A bridge financing refers to any short term funding of a startup that will eventually be replaced or followed by a larger capital investment from later stage investors. For a startup, a bridge financing could mean either a convertible note raise with a short term note (i.e., 1 to 2 years) or a ‘weak preferred’ stock equity raise. The startup will raise a small portion of funding (in relation to a typical venture capital round of $1,000,000 or more) in order to extend the runway of the entity — or otherwise build a bridge to the next goal. The goal does not have to be a venture capital financing, but this is typically the case.