What's the value of a bridge?

The goal is never to raise a bridge round - but when one is necessary, how useful are they?

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Quick definition: we consider a fundraising to be a bridge (or extension) round if it is in the same named series as the prior round. These typically involve insiders already on the cap table and they raise less capital than the recent primary.

(A big advantage of using our data set here is that we have the actual round documents, which makes this easier).

VC-backed companies raise all sorts of bridge rounds, but we examined two common ones: a priced equity bridge vs an extension using Convertible Notes or SAFEs.

Key Finding: companies that raised bridges on SAFEs or Notes after a priced Series A were 10x less likely to make it to the next primary round vs companies that bridged on priced equity.

Whoa. What's happening?

It could be that companies using convertibles as extensions are typically not great companies and do so because that's the only option they have.

It could be that many of these companies should probably just take a down round but are using convertible instruments to avoid that for both the founder and investors.

It could be that companies raising a convertible bridge after a priced Series A expect to exit in the near future and don't want to get to B at all.

Although we checked and only 3% of the 661 convertible bridge companies had gotten acquired to date.

I'm sure there are many other explanations. Convertible bridges do tend to be smaller than priced ones, so that's a factor. Perhaps the data above is simply a correlation to company quality rather than anything causal.

But the data suggests VCs should be skeptical when considering a convertible bridge.

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Peter Walker

Carta Insights