Bridge financing is temporary capital that carries a company from one financing stage to the next. A startup may need it when cash is running low but product–market fit or customer traction is not yet strong enough for the next institutional round. The bridge buys time to reach that milestone rather than forcing a premature Series A. section 6.0 section 6.6
Angels are a practical source of bridge capital because they can move faster than venture capital firms:
- Individual angels often invest around $25,000 each and may invest before a company has raised much institutional capital. section 6.1
- A bridge can raise substantial operating capital: fifteen angels investing $25,000 each provide $375,000, while three such groups provide more than $1 million. section 6.1
- Bridge financings commonly use convertible notes, which generally convert into the next equity round at about a 20% discount. section 6.1 section 18.4
A runway problem
Suppose a five-person company burns $75,000 each month and cannot yet attract a Series A. Raising more than $1 million from angel groups could provide roughly fifteen months to improve traction and reach the next financing milestone. The uncomfortable alternative is waiting until the cash is nearly gone, when negotiating power is weakest. section 6.1 section 18.4
Bridge financing is not a substitute for financial discipline. Track net burn and runway continuously, then raise early enough to reach a meaningful milestone. If a planned Series A will not close in time to cover expenses, communicate the bridge promptly to investors. section 18.4 section 28.2.1
