Bridge financing

Sometimes companies need a short-term cash infusion to get them enough operating capital to get to a point where they can raise a successful financing round or sell the company on more favorable terms. Some companies will raise a “bridge financing” that provides a “bridge” between their current state and the desired outcome. Often this is in the form of a convertible note or a Safe that converts into the next round, commonly at a discount to the price of the next round. Investors will want to make sure that the company can materially increase its valuation or financing prospects, or else the funding might be considered a “bridge to nowhere.”