Bridge Rounds Explained: Convertible Notes, SAFEs, and Dilution
Published 2026-08-02
TL;DR
Bridge size = extra runway needed × current burn. Effective valuation = min(cap, next_pre × (1 − discount)). Whichever gives investors more shares wins.
When to bridge
Yes: need 6-9 more months to hit a milestone that materially bumps valuation; existing investors willing to put more in; small amount (typically <50% of last round).
No: need 12+ months; existing investors won’t lead; amount would be a full round on its own; company hasn’t validated the milestone worth waiting for.
The mechanics
- Cap: the maximum pre-money valuation at which the note or SAFE converts. Investor upside protection.
- Discount: percentage below the priced-round price. Compensates for early risk.
- Conversion: at the next priced round, investor receives shares at the more favorable of (a) cap-based price, (b) discounted price.
Worked example
You need 6 months more runway at $100k monthly burn. Bridge size = $600k.
Assumptions:
- Expected next pre-money: $20M
- Note cap: $15M
- Discount: 20%
Discounted valuation: $20M × 0.8 = $16M. Cap: $15M. Effective valuation: min($15M, $16M) = $15M. Cap wins.
Post-money at conversion (bridge only): $15M + $600k = $15.6M. Dilution from bridge: $600k / $15.6M ≈ 3.85%.
That is separate from the priced round dilution. Total dilution at the priced round is priced-round dilution plus bridge conversion dilution.
Try scenarios in the bridge round calculator.
Where the math gets punishing
Cap much lower than the next round. A $10M cap when the next round happens at $50M pre gives investors a 5x price advantage; a $600k bridge can convert to 4-6% ownership.
Multiple bridges stacked. Each conversion dilutes the founder, and the effective valuations differ by tranche. Model each SAFE separately.
Interest accrual on notes. A 6% coupon on a $2M note over 18 months adds $180k to the conversion amount. Small but real.
The founder-side levers
- Higher cap. Every dollar of cap increase directly reduces conversion dilution.
- Lower discount. Investors resist below 15%; 25% is on the high end.
- Larger bridge from existing investors (they price for the follow-on).
- MFN clause: gives you the option to raise better terms later without repricing existing bridge investors.
Common mistakes
- Treating the bridge as free money because the price is “unpriced”. It converts at the priced round; the price is deferred, not absent.
- Signing an uncapped note thinking the discount protects you. It protects the investor.
- Not modeling total dilution (bridge + next round) before signing.
- Bridging without a clear milestone that justifies the higher next-round valuation.
- Missing a note’s maturity date. Notes can force conversion into a “qualified financing” or trigger repayment.
Related
- Bridge Round Calculator
- Cap Table Dilution
- Runway Calculator — first, know how much runway you need
FAQ
SAFE or convertible note?+
SAFE is simpler (no maturity, no interest). Note has interest and a maturity date, which creates leverage over the founder if the priced round is delayed.
What is a typical cap and discount?+
US early stage 2024-25: 15-25% discount and a cap 1.25-2x above the prior round or expected next pre-money.
Does an uncapped SAFE ever make sense?+
Only when you have extraordinary leverage (celebrity founder, previous exit). Otherwise no; investors are taking price risk with no ceiling.
How does a bridge affect existing investors?+
It dilutes them at conversion. Existing investors often insist on the bridge being pro-rata or push for a priced round instead.
When should I do a priced round instead?+
If the gap is larger than 12 months or the amount is more than half your last round. Bridge economics get punishing at scale.