Bridge Financing Framework

BRIDGE PHILOSOPHY

Bridge Financing Fundamentals

BRIDGE FINANCING PHILOSOPHY

WHY BRIDGE FINANCING:
☐ Extends runway to reach milestones
☐ Bridges gap to next priced round
☐ Provides time for metric improvement
☐ Maintains operations during market downturns
☐ Enables strategic pivots
☐ Supports timing optimization

BRIDGE PRINCIPLES:

1. BRIDGE TO SOMEWHERE
   ☐ Know what you're bridging to
   ☐ Have a clear plan
   ☐ Milestones must be achievable
   ☐ Not just delaying the inevitable

2. EXISTING INVESTORS FIRST
   ☐ They know you best
   ☐ They have most to lose
   ☐ They can move fastest
   ☐ New money is hard in bridge

3. TERMS REFLECT RISK
   ☐ Bridge = higher risk
   ☐ Expect investor-friendly terms
   ☐ Don't over-optimize
   ☐ Close fast

4. BE HONEST ABOUT SITUATION
   ☐ Transparent with investors
   ☐ Realistic about challenges
   ☐ Clear on path forward
   ☐ No surprises

WHEN TO CONSIDER BRIDGE:
☐ 6-9 months runway and not ready for priced round
☐ Clear milestones that improve fundraising position
☐ Market conditions temporarily unfavorable
☐ Strategic reason to delay (e.g., big launch coming)
☐ Unexpected setback, but fundamentals intact

WHEN NOT TO BRIDGE:
☐ No clear path to next round
☐ Fundamental business problems
☐ Existing investors won't participate
☐ Just delaying inevitable shutdown
☐ Terms too punitive

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SITUATION ASSESSMENT

Comprehensive Bridge Assessment

BRIDGE FINANCING ASSESSMENT

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CURRENT SITUATION
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FINANCIAL POSITION:
Cash on hand: $_____
Monthly burn rate: $_____
Current runway: ___ months
Date cash runs out: _____

BUSINESS STATUS:
ARR/Revenue: $_____
Growth rate: ___%
Key metrics trend: ☐ Improving ☐ Flat ☐ Declining
Product status: _____
Team status: _____

FUNDRAISING READINESS:
Ready for priced round: ☐ Yes ☐ No
If no, what's missing?
☐ Revenue/traction milestone
☐ Product milestone
☐ Team completion
☐ Market conditions
☐ Other: _____

Time to achieve readiness: ___ months

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BRIDGE JUSTIFICATION
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WHY BRIDGE (vs. Other Options):
☐ Close to milestone, just need more time
☐ Market conditions will improve
☐ Priced round imminent but timing issue
☐ Strategic reasons (launch, partnership, etc.)

WHY NOT SHUT DOWN:
☐ Clear path to sustainability/next round
☐ Team committed
☐ Investor support
☐ Customers/traction worth preserving

WHY NOT PRICED ROUND NOW:
☐ Metrics not strong enough
☐ Market conditions unfavorable
☐ Would price at significant discount
☐ Better leverage after milestones

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MILESTONE PLANNING
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MILESTONES TO ACHIEVE DURING BRIDGE:

Milestone 1: _____________________
Target date: _____
Confidence: ☐ High ☐ Medium ☐ Low
Impact on fundraise: _____

Milestone 2: _____________________
Target date: _____
Confidence: ☐ High ☐ Medium ☐ Low
Impact on fundraise: _____

Milestone 3: _____________________
Target date: _____
Confidence: ☐ High ☐ Medium ☐ Low
Impact on fundraise: _____

BRIDGE SUCCESS SCENARIO:
"In ___ months, we will have achieved [milestones],
which will enable us to raise a $___M [Stage] round
at $___M valuation because [reason]."

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RUNWAY PLANNING
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BRIDGE SCENARIOS:

Minimum Bridge:
Amount: $_____
Runway added: ___ months
Total runway: ___ months
Enough for milestones? ☐ Yes ☐ Barely ☐ No

Target Bridge:
Amount: $_____
Runway added: ___ months
Total runway: ___ months
Buffer for unexpected: ___ months

Ideal Bridge:
Amount: $_____
Runway added: ___ months
Total runway: ___ months
Negotiating cushion: ___ months

BURN REDUCTION OPTIONS:
☐ Headcount reduction: Save $___/month
☐ Marketing reduction: Save $___/month
☐ Office/overhead: Save $___/month
☐ Pause hiring: Save $___/month
☐ Other: Save $___/month

Reduced burn rate: $_____/month
Extended runway at reduced burn: ___ months

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BRIDGE STRUCTURE OPTIONS

Structure Comparison

BRIDGE STRUCTURE COMPARISON

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CONVERTIBLE NOTE
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Structure:
Debt that converts to equity at next priced round

Key Terms:
☐ Interest rate: 6-8% (accrues, converts)
☐ Maturity: 12-24 months
☐ Conversion discount: 15-25%
☐ Valuation cap: Optional
☐ Conversion trigger: Next qualified financing

Pros:
☐ Simple documentation
☐ Quick to close
☐ Familiar to investors
☐ Clear conversion mechanics

Cons:
☐ Interest accrues (more dilution)
☐ Maturity creates pressure
☐ Cap table complexity until conversion
☐ May need to renegotiate at maturity

Best for:
☐ Bridge with defined next round timeline
☐ Existing investor participation
☐ 12-18 month bridge periods

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SAFE (Simple Agreement for Future Equity)
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Structure:
Agreement to issue equity at next priced round

Key Terms:
☐ Valuation cap
☐ Discount (sometimes)
☐ No interest
☐ No maturity

Pros:
☐ Simplest documentation
☐ No maturity pressure
☐ No interest accrual
☐ Fastest to close

Cons:
☐ Some institutional investors prefer notes
☐ No forcing mechanism to convert
☐ May stack with other SAFEs (complexity)

Best for:
☐ Early stage bridges
☐ Angel/individual investors
☐ Uncertain timeline to next round

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EXTENSION ROUND (Inside Round)
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Structure:
Existing investors invest more at same or similar terms

Key Terms:
☐ Same series terms as prior round
☐ May be flat or small increase to valuation
☐ Existing investor only (usually)
☐ Adds to existing preference stack

Pros:
☐ Clean (no new security type)
☐ Maintains relationship
☐ Clear terms
☐ Simple cap table

Cons:
☐ May require valuation discussion
☐ Signals not ready for outside round
☐ Increases preference stack

Best for:
☐ When existing investors very supportive
☐ Short bridge to clear milestone
☐ When you want to avoid note complexity

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REVENUE-BASED FINANCING
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Structure:
Non-dilutive loan repaid as % of revenue

Key Terms:
☐ Principal amount
☐ Repayment cap (1.3-2x)
☐ Revenue share %
☐ Minimum payments

Pros:
☐ Non-dilutive
☐ No board/governance
☐ Aligns with revenue growth
☐ No personal guarantee usually

Cons:
☐ Expensive (high effective rate)
☐ Cash drain during repayment
☐ May have covenants
☐ Requires revenue predictability

Best for:
☐ Companies with predictable revenue
☐ Founder doesn't want dilution
☐ Bridge for profitable growth

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INVESTOR APPROACH

Existing Investor Strategy

EXISTING INVESTOR BRIDGE STRATEGY

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PREPARATION
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BEFORE APPROACHING:
☐ Understand current investor sentiment
☐ Review investment agreements for provisions
☐ Know their follow-on capacity
☐ Prepare clear narrative

INVESTOR-BY-INVESTOR ANALYSIS:
| Investor | Reserves | Relationship | Likely? |
|----------|----------|--------------|---------|
| | $___M | Strong/OK/Weak | Y/N/? |
| | $___M | Strong/OK/Weak | Y/N/? |
| | $___M | Strong/OK/Weak | Y/N/? |

LEAD INVESTOR APPROACH:
Primary contact: _____
Relationship status: _____
Recent interactions: _____
Likely concerns: _____
Best approach: _____

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THE ASK
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BRIDGE PITCH STRUCTURE:

1. SITUATION (Honest Assessment)
   "Here's where we are..."
   ☐ Current metrics
   ☐ Runway status
   ☐ What's working
   ☐ What's challenging

2. OPPORTUNITY (Why Worth Bridging)
   "Here's why bridge makes sense..."
   ☐ Clear milestones
   ☐ Market opportunity
   ☐ Path to next round
   ☐ Why now is temporary

3. ASK (Specific and Clear)
   "Here's what we need..."
   ☐ Amount
   ☐ Structure
   ☐ Timeline
   ☐ Proposed terms

4. PLAN (Detailed Execution)
   "Here's what we'll do..."
   ☐ Milestone timeline
   ☐ Burn management
   ☐ Team commitments
   ☐ Success metrics

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NEGOTIATION
═══════════════════════════════════════

TERMS TO NEGOTIATE:
☐ Valuation cap (if applicable)
☐ Discount (if applicable)
☐ Interest rate (if note)
☐ Maturity date (if note)
☐ Conversion triggers
☐ Pro-rata rights in next round

WHAT TO ACCEPT:
☐ Investor-friendly but reasonable terms
☐ Higher discount/lower cap than typical
☐ Shorter maturity if confident

WHAT TO PUSH BACK ON:
☐ Punitive terms (2x+ caps, participation)
☐ Excessive board provisions
☐ Unreasonable covenants
☐ Milestone-based tranches (if too restrictive)

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COMMITMENT TRACKING
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| Investor | Ask | Commitment | Terms | Status |
|----------|-----|------------|-------|--------|
| | $___K | $___K | | ☐ Verbal ☐ Signed |
| | $___K | $___K | | ☐ Verbal ☐ Signed |
| | $___K | $___K | | ☐ Verbal ☐ Signed |
| Total | $___K | $___K | | |

Bridge Terms Template

BRIDGE FINANCING TERMS

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CONVERTIBLE NOTE TERMS
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Principal: $_____
Interest: ___% per annum (simple/compound)
Maturity: ___ months from close

Conversion:
☐ Automatic on Qualified Financing of $_____ or more
☐ Discount: ___%
☐ Cap: $_____M (pre-money)
☐ Conversion price: Lower of cap or discount

At Maturity:
☐ Converts at cap
☐ Payable at company's option
☐ Extends automatically

Other Terms:
☐ Board observer (if any): _____
☐ Information rights: _____
☐ Pro-rata in next round: ☐ Yes ☐ No

Bridge Checklist

Task	Owner	Due	Status
Prepare bridge memo	CEO		☐
Board alignment	CEO		☐
Lead investor conversation	CEO		☐
Other investor outreach	CEO		☐
Term sheet draft	Counsel		☐
Negotiate terms	CEO		☐
Execute documents	All		☐
Receive funds	Finance		☐

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